Corporate report

Accountability report

Published 18 November 2024

Purpose of the accountability report

The accountability report sets out how the department meets the key accountability requirement to Parliament. It comprises the 3 reports below.

The corporate governance report:

• provides names of ministers and directors with oversight for the department
• explains the governance structures in place and activities during the year

The staff and remuneration report:

• presents staff numbers and costs, and other employee matters
• discloses the remuneration of our ministers and directors

The Parliamentary accountability and audit report:

• presents the department’s expenditure against the budgets set by Parliament
• presents the auditor’s report and opinion on the financial statements

Corporate governance report

Statement of accounting officer’s responsibilities

Under the Government Resources and Accounts Act 2000 (GRAA), HM Treasury has directed the Department for Energy Security and Net Zero to prepare, for each financial year, consolidated resource accounts detailing resources acquired, held or disposed of, and the use of resources, during the year by the department and its sponsored non-departmental public bodies and other arm’s-length public bodies designated by order made under the GRAA by Statutory Instrument 2023 No. 1360 (together known as the ‘departmental group’, consisting of the core department and sponsored bodies listed in note 26 to the accounts).

The accounts are prepared on an accruals basis and must give a true and fair view of the state of affairs of the department and departmental group, and of the income and expenditure, statement of financial position and cash flows of the departmental group for the financial year.

In preparing the accounts, the accounting officer is required to comply with the requirements of Government Financial Reporting Manual and in particular to:

• observe the Accounts Direction issued by the Treasury, including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis
• ensure that the department has in place appropriate and reliable systems and procedures to carry out the consolidation process
• make judgements and estimates on a reasonable basis, including those judgements involved in consolidating the accounting information provided by non-departmental and other arm’s-length public bodies
• state whether applicable accounting standards as set out in the Government Financial Reporting Manual have been followed, and disclose and explain any material departures in the accounts
• prepare the accounts on a going concern basis
• confirm that the annual report and accounts as a whole is fair, balanced and understandable and take personal responsibility for the annual report and accounts and the judgements required for determining that it is fair, balanced and understandable

HM Treasury has appointed the permanent head of the department as accounting officer of the Department for Energy Security and Net Zero. The accounting officer of the department has also appointed the chief executives (or equivalents) of its sponsored non-departmental and other arm’s length public bodies as accounting officers of those bodies.

The accounting officer of the department is responsible for ensuring appropriate systems and controls are in place to ensure any grants the department makes to its sponsored bodies are applied for the purposes intended and that such expenditure and the other income and expenditure of the sponsored bodies are properly accounted for, for the purposes of consolidation within the resource accounts. Under their terms of appointment, the accounting officers of the sponsored bodies are accountable for the use, including the regularity and propriety, of the grants received and the other income and expenditure of the sponsored bodies.

The responsibilities of an accounting officer, including responsibility for the propriety and regularity of the public finances for which the accounting officer is answerable, for keeping proper records and for safeguarding the assets of the department or non-departmental or other arm’s length public body for which the accounting officer is responsible, are set out in Managing Public Money published by HM Treasury.

Accounting officer’s confirmation

As accounting officer, I have taken all the steps I ought to have taken to make myself aware of any relevant audit information and to establish that the Department for Energy Security and Net Zero’s auditors are aware of that information. So far as I am aware, there is no relevant audit information of which the auditors are unaware.

I also confirm that this annual report and accounts is fair, balanced and understandable.

Jeremy Pocklington
Permanent Secretary and Principal Accounting Officer
6 November 2024

Directors’ report

The directors’ report covers the period from the start of the year to 31 March 2024. It provides names and ministerial titles of those who served as ministers. It also provides names of non‑executive directors and executive directors.

Joiners and leavers refer to those who joined or left the relevant posts. In the case of executive directors, they may not have left the department, particularly if they served as interim executive directors.

Conflicts of interest

Board members are required to declare personal or business interests which may influence (or be perceived to influence) their judgement, when performing their duties.

DESNZ has an established conflicts of interest procedure, including declaring interests at the start of board meetings. No conflicts of interests were declared during board meetings in 2023-24.

Register of board members’ interests are published on GOV.UK.

Ministers

• The Rt Hon Claire Coutinho MP, Secretary of State for Energy Security and Net Zero – From 31 August 2023
• The Rt Hon Grant Shapps MP, Secretary of State for Energy Security and Net Zero – To 31 August 2023
• Lord Martin Callanan, Parliamentary Under Secretary of State (Minister for Energy Efficiency and Green Finance)
• Andrew Bowie MP, Parliamentary Under Secretary of State (Minister for Nuclear and Renewables)
• Amanda Solloway MP, Parliamentary Under Secretary of State (Minister for Affordability and Skills)
• Graham Stuart MP, Minister of State (Minister for Climate)

Non-executive directors

• Humphrey Cadoux-Hudson, Lead NEBM, Board and NomCo Chair – from 1 February 2024
• Mary Archer, Board – from 23 February 2024
• Peter Mather, Board, ARAC
• Vikas Shah, Board, ARAC chair
• Elaine Clements, ARAC
• Alison Rodwell, ARAC
• Andre Katz, ARAC – from 1 January 2024
• Anne Marie Millar, ARAC – from 1 January 2024
• David Scott, ARAC – from 1 January 2024
• Tristan Morgan, ARAC – from 1 January 2024
• Bryan Ingleby, ARAC – to 12 September 2023
• Andrew Jamieson, PIC

Executive directors

• Jeremy Pocklington, Permanent Secretary
• Clive Maxwell, Second Permanent Secretary
• Ashley Ibbett, Director General Energy Infrastructure
• Lee McDonough, Director General Net Zero, Nuclear and International
• Jonathan Mills, Director General Energy Markets and Supply
• Ben Rimmington, Director General Net Zero, Buildings and Industry
• Paul Monks, Chief Scientific Adviser
• David Thomas, Chief Financial Officer
• Simon Hulme, Director of Implementation and Delivery
• Alice Hurrell, Chief People Officer
• Donna Leong, Director of Analysis and Chief Economist
• Dan Micklethwaite, Director Strategy– to 23 August 2023
• Johanna Cowan, Director Strategy (From 5 September 2023, remains a member but on parental leave)
• Ben Golding, Director Strategy (covering Johanna Cowan, joined 20 February 2024)
• James Sorene, Director of Communications (Standing Member)
• Wendy Hardaker, Legal Director (Standing Member)

Governance statement

Our governance structure

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Governance structure: diagram data

Advisory:

Provide independent scrutiny and advice:

• Departmental Board: Advising on strategy, performance management and risk management
  • Audit & Risk Assurance Committee: Assurance of audit and risk control functions
  • Nominations & Governance Committee: Senior level remuneration and succession planning

Executive:

Set the strategic direction for the department’s work:

• Executive Committee: Responsible for the day-to-day running of the department’s resources, risks, policies and programmes. Supports the Permanent Secretary in leading the department and as Accounting Officer in line with ministers’ priorities
  • Shadow Executive Committee: Staff advisory body

Executive Sub-Committees:

Make decisions on delegated matters Steer and shape delivery and strategy:

• Portfolio & Investment Committee: Approval and monitoring of key investment proposals and projects
  • Keyholder Committee: Challenge function on performance and risk
• People & Operations Committee: Manages human resources, estates, operations, digital and people related issues
  • Shadow People & Operations Committee: Staff advisory body

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Departmental board

Meeting attendance

Total number of meetings held: 2

(x/x = number attended /number eligible to attend.)

Ministers:

Members	Number of meetings attended
Secretary of State, Claire Coutinho (from 31 August) - chair	1/1
Secretary of State, Grant Shapps (to 31 August) - chair	1/1
Minister Stuart	0/2
Lord Callanan	1/1
Minister Solloway	1/1

Non-executive directors:

Members	Number of meetings attended
Humprey Cadoux-Hudson (from 1 February 2024)	1/1
Peter Mather	2/2
Vikas Shah	2/2
Mary Archer (from 23 February 2024)	1/1

Senior officials/executive directors:

Members	Number of meetings attended
Jeremy Pocklington	2/2
Clive Maxwell	2/2
David Thomas	2/2
Jonathan Mills	2/2
Lee McDonough	2/2

Role

The Departmental Board (the Board) provides expert advice, support and challenge on the overall direction on strategy, performance and risk management. It is chaired by the Secretary of State and its members are Non-Executive Members, selected ministers and selected executives, including the Permanent Secretaries. Following the machinery of government change (MoG) in February 2023, the Departmental Board met for its inaugural meeting whilst a recruitment for a full set of Non-Executives took place. On 31 August 2023 there was a change in Secretary of State, which led to a pause in the recruitment whilst the SoS agreed on the structure of her existing Board. The delay to the recruitment meant that the Board did not take place again until March 2024.

Key areas of discussion

As both meetings were introductory, the key areas of discussion were around the strategic priorities of the department and how these would be delivered, namely:

• Departmental delivery of:
  • Climate Security
  • Consumer Security
  • Economic Security
  • Energy Security
• Departmental performance

Compliance with the corporate governance code

Our approach to governance is in line with ‘the code’ – ‘Corporate Governance in Central Government Departments: Code of Good Practice’. We were compliant with the Code in all areas except the requirement that the Board meets at least quarterly. The Board only met twice during the year due to ongoing Non-Executive Board Member recruitment. However, there was ongoing engagement between incumbent Non-Executive Board Members, ministers and the executive during the period.

Board appointments

Humphrey Cadoux-Hudson was appointed as Lead Non-Executive Board Member on 1 February 2024. Prior to this Peter Mather was Interim Lead Non-Executive Board Member. Mary Archer was appointed as a Non-Executive Board Member on 23 February 2024.

At end of 2023-24, the board’s gender diversity was at 27% and ethnic minority members at 18%.

Board effectiveness

An internal board effectiveness review was carried out in March 2024. This looked at

1. the effectiveness of the Departmental Board and its delegated Committees and
2. the effectiveness of the Executive Committee and its delegated Committees

The key findings were that the department’s top tier governance was well understood by its members, it was fulfilling its function, had the right membership and generated good discussion and actions. As the Departmental Board was in relative infancy it would benefit from clarification and development of its remit, including the type of information it receives, to ensure a fully effective operation. Recommendations will be delivered over the next financial year.

Quality of data used by the board

The papers received by the board have been of high quality. Meetings were held either virtually or as hybrid meetings and were efficiently chaired. Challenge and discussion were encouraged.

The DESNZ governance team provided a comprehensive secretariat service to the board and committees. This ensured the effective and efficient administration of the board and its activities.

Biographies of board members

Departmental board member biographies.

Nominations and Governance Committee

Meeting attendance

Total number of meetings held: 2

(x/x = number attended /number eligible to attend.)

Non-executive directors:

Members	Number of meetings attended
Humphrey Cadoux-Hudson (from 1 February 2024) - chair	0/0
Peter Mather (interim Chair from 30 April 2023, member from 1 February 2024)	2/2

Senior officials/executive directors:

Members	Number of meetings attended
Jeremy Pocklington	2/2
Clive Maxwell	2/2
Alice Hurrell	2/2

Role

The Nominations and Governance Committee is an advisory committee of the Departmental Board, providing assurance and input to key decisions and processes. Its purpose is to provide assurance on the department’s strategies and plans for talent management; succession planning; capability building; senior performance management and incentives & rewards.

Key areas of discussion

• Senior performance
• Organisational planning
• Directors General development
• Oversight of leadership

Audit and Risk Assurance Committee

Meeting attendance

Total number of meetings held: 6

(x/x = number attended /number eligible to attend.)

Non-executive directors:

Members	Number of meetings attended
Vikas Shah - chair	6/6
Peter Mather	6/6
Elaine Clements	6/6
Alison Rodwell	4/6
Andre Katz	1/2
Anne Marie Millar	2/2
David Scott	2/2
Tristan Morgan	2/2
Bryan Ingleby (to 13 September 2023)	3/3

Senior officials/executive directors:

Members	Number of meetings attended
Jeremy Pocklington	6/6
Clive Maxwell	5/6
David Thomas	6/6
Simon Hulme	4/6
National Audit Office representative	6/6
Government Internal Audit representative	6/6

Role

The Audit and Risk Assurance Committee (ARAC) is an advisory committee of the Departmental Board. It assures the quality of audit and risk control functions within the department.

Key areas of discussion

• The preparation of the annual report and accounts
• The work of internal and external audit
• The management of departmental risk and risk management framework
• Deep dives into each of the departmental risks covering:
  • Management of catastrophic or severe incidents
  • Security of energy supply
  • Cyber security attacks and information loss/compromise
  • Cost of energy bills and risk management in the energy affordability schemes, including fraud and error
  • Climate change commitments and international leadership
  • People/staff related risks
• Health and safety, arm’s length bodies, physical security and reputational risk management
• Transition arrangements following the machinery of government changes in February 2023
• The department’s move to a portfolio/sub-portfolio structure
• Integrated Corporate Services set up and Matrix programme, governance and risk management
• Corporate assurance including whistleblowing, functional standards and Director General group assurance process

Executive Committee

Meeting attendance

Total number of meetings held: 43

(x/x = number attended /number eligible to attend.)

Executive directors:

Members	Number of meetings attended
Jeremy Pocklington - chair	37/43
Clive Maxwell	38/43
David Thomas	40/43
Simon Hulme	39/43
Paul Monks	32/43
Jonathan Mills	39/43
Dan Micklethwaite (until 23 August 2023)	13/16
Johanna Cowan (joined 5 September 2023, remains a member but currently on parental leave)	22/22
Ben Golding (covering Johanna Cowan on parental leave, joined 20 February 2024)	4/5
Ashley Ibbett	39/43
Lee McDonough	35/43
Ben Rimmington	33/43
Alice Hurrell	36/43
Donna Leong	40/43
James Sorene (Standing Member)	40/43
Wendy Hardaker (Standing Member)	37/43

Role

The Executive Committee (ExCo) is responsible the day-to-day management of the department and the delivery of its strategic objectives. ExCo is the forum to discuss key cross cutting issues impacting the entire organisation. ExCo develops and delivers the department’s vision in line with Ministers’ priorities, oversees the delivery of departmental strategy, with particular emphasis on corporate delivery and cross cutting issues, as well as overseeing the monthly performance report review, regular risk review and discussion of ad hoc issues.

Key areas of discussion

ExCo has discussed a variety of items across its remit, including the change in portfolio management; London office move, pay case, Places for Growth, and other corporate issues; performance, delivery, and risk; and the department’s interaction with its stakeholders and investors. The items discussed can be broadly put into 5 groups:

• Portfolio Management – provides senior oversight on the department’s portfolio and strategic risks
• Change Management – sets direction of and manages any major change decision
• People Management – provides senior oversight on the department’s people policy
• Communication and Stakeholder Management – responsible for the department’s overall engagement strategy with stakeholders and setting the overall departmental communications strategy
• Operational Management – provides senior oversight of the department’s operational functions

Executive Committee sub-committees

Portfolio and Investments Committee

Chair – Clive Maxwell, Second Permanent Secretary

Role:
The Portfolio and Investment Committee (PIC) is a delegated Committee of ExCo and has responsibility for approving investments with a whole life cost of £50 million or above, or of any amount deemed as novel, contentious or repercussive. In addition, it reviews the departmental portfolio to assess project delivery and where interventions may be necessary.

Key areas of focus:
PIC has reviewed and appraised projects across the departmental portfolio acting as a formal gateway and to monitor progress and delivery.

People and Operations Committee

Co-Chairs – Ashley Ibbett and Alice Hurrell

Role:
People and Operations Committee (POpCo) is a delegated committee of ExCo and considers matters relating to human resources, accommodation, security, diversity and inclusion, and IT.

Key areas of focus:
The Committee’s specific responsibilities include:

• Monitoring the delivery, communication and direction of people/operational related strategies as agreed by ExCo
• Scrutinising and deciding the direction and communication of programmes, activities and workstreams delegated by ExCo. To this end, the Committee will have a specific responsibility of overseeing the London office move and Places for Growth
• Offer assurance through challenge and scrutiny of delivery of the main operational strategies & programmes
• Consider the people & operational related risks on the department’s risk register and the corporate risk register

The key areas of focus are:

• Places for Growth
• People Survey results and actions
• London office move
• Diversity and Inclusion, including DESNZ as a workplace
• Building capability
• Culture and Values

Net zero and energy governance

Our governance is designed to support successful delivery. Most of our work affects several of our priorities.

The department continued with the governance and controls in place prior to the machinery of government changes in February 2023 and managed its work through DG groups. This governance has been gradually updated during the year, including moving to a portfolio structure:

We look at our work in 2 ways:

• Portfolios: We group the actual activity we are doing into 12 portfolios. For example, ‘Renewables’ is one of these portfolios, represented by vertical bars.
• Cross-cutting Boards: We also have 5 strategy boards. These boards consider how the department’s programmes impact the relevant priorities. They are represented by horizontal bars.

Ministers and the Executive Committee (ExCo) can then review both pictures and decide whether any adjustments are needed for what the portfolios are delivering. This might involve changing ambition levels or available funding.

Net Zero Delivery Board

Oversees work within the department that contributes to the UK’s domestic, legally binding target of net zero emissions by 2050, bridging the gap between strategy and operational delivery.

Power Sector (Electricity Generation) Decarbonisation board

Monitors the decarbonisation of the power sector (by 2035) subject to security of supply.

Energy Security Board

Ensures the department has clearly defined objectives and strategy to maintain security of energy supply (gas, electricity, oil and fuels). It looks over the mid to long term and assess the risks and potential issues impacting security of supply.

Energy Affordability Board

Ensures the department has clearly defined objective and strategy for energy affordability for domestic and non-domestic consumers. It investigates the impact that policies and programmes are having on the cost of energy for consumers.

Energy Market Design Board

Considers the overall coherence and design of our interventions in the energy market and ensures that they are underpinned by a consistent and evidence-based approach.

Climate-related disclosures are addressed in the performance report above.

Management of outside interests

Register of interests for directors

See directors’ report on page 59.

Process for managing outside interests

The department has a policy in place for the management and declaration of outside interests for all staff, which provides a framework to deal with any actual, potential or perceived conflicts of interest between staff, suppliers, and other stakeholders.

All staff must ensure declarations are made at the earliest opportunity once they are aware that a conflict of interest may exist. Once a declaration is made, line managers must ensure they review and agree any mitigating actions, and if required escalate declarations that are particularly contentious or pose risk to the reputation of the department.

All senior civil servants (SCS) are required to complete a conflicts of interest declaration annually. Nil returns are also declared. The annual SCS conflicts of interest declaration process is conducted by HR and we have steps in place to ensure central examination of all SCS declarations.

The policy also provides guidance on employees holding any outside employment, work or appointment (paid or otherwise remunerated) to DESNZ.

DESNZ had no SCS with remunerated outside employment during the monitoring period 23/24. Details of remunerated outside employment held by SCS in previous years are published on GOV.UK.

Special advisers

In line with the current Declaration of Interests Policy for special advisers, all special advisers have declared any relevant interests or confirmed they do not consider they have any relevant interests. The Permanent Secretary has considered these returns and there are no relevant interests to be published.

Business Appointment Rules

The Business Appointment Rules are designed to uphold the core values in the Civil Service Code of integrity, honesty, objectivity, and impartiality.

Before accepting any new appointment or employment, individuals must consider whether an application under the rules is required. If it is required, they should not accept or announce a new appointment or offer of employment before it has been approved. Countersigned applications are sent to the Human Resources function for assessment and action. Human Resources have a process in place for handling business appointment applications. This involves completion of the application form and mitigations which are countersigned by an appropriate person within the line management chain. The outcome is also shared with the new employers HR function.

All SCS3 and above applications are referred to the Advisory Committee for Business Appointments.

In compliance with the Business Appointment Rules, the department is transparent in the advice given to individual applications for senior staff, including special advisers. Advice regarding specific business appointments has been published on GOV.UK.

To raise awareness, the department includes information on Business Appointment Rules in staff contracts, induction packs, leaver guidance and the departmental intranet pages.

• number of exits from the Senior Civil Service (SCS): 8
• number of BARs applications submitted to the department over the year (by grade -SCS2, SCS1, and delegated grades): 39
• number of BARs applications approved by the department over the year (by grade -SCS2, SCS1, and delegated grades): 39
• number of BARs applications where conditions were set by the department over the year (by grade - SCS2, SCS1, and delegated grades): 39
• number of applications that were found to be unsuitable for the applicant to take up by the department over the year (by grade - SCS2, SCS1, and delegated grades): 0
• number of breaches of the rules in the preceding year: 0

Governance statement

Overview

The governance statement sets out how the department was governed by management during the year and provides an outline of our risk management and internal control systems.

Risk management

Risk management responsibilities

The department is responsible for having a risk management framework and reviewing its effectiveness. The framework includes the standard process of - identify, assess, address, review and report risks. Effectiveness reviews take the form of regular engagement with group risk champions, programme risk leads, Heads of Risk for DESNZ arm’s length bodies, and an annual consultation on the framework’s drafting. This brings about continuous improvement and allows the framework to respond to changes in departmental structure and governance.

Processes and structure

Our principal risks in 2023-24, as owned and managed by ExCo on the Departmental Strategic Risk Register (DSRR), are disclosed under risks affecting delivery of our objectives in the Performance Report. The process to identify these risks involves horizon scanning by ExCo on an annual basis, and escalations from group or portfolio level, as appropriate throughout the year. Additionally each of the risks on the DSRR are reviewed through a deep-dive at ExCo and where this reveals gaps in our risk coverage, either new risks or new mitigations to the existing risks are added to the DSRR. Both the DSRR and the ExCo deep dives are discussed at the Audit and Risk Assurance Committee to provide additional independent assurance.

During the year, we updated our risk management framework and risk appetite statement to ensure consistency with government best practice in the Orange Book. Improvements have been made to both guidance documents to make them more accessible in terms of layout and language. Screen-reader accessible versions have also been produced.

Monitoring and assurance of risk

All risks, regardless of level, are evaluated and managed monthly using an online reporting system and the outputs from this are reported to key governance boards.

The information provided for risks on the DSRR is assured by the corporate risk team and this process is supported at group level by risk champions. They collectively review the group and DSRR risks and consider and flag potential escalations to the group and departmental leadership teams.

Risks at the programme level are managed locally through programme and portfolio management boards, with the corporate risk team and the group risk champions having a role to promote best practice.

Effectiveness reviews

ExCo have reviewed and monitored the risks on the DSRR on a monthly basis. They have also undertaken deep dives into each of the risks on the DSRR to ensure that they are correctly assessed and that they are mitigated robustly. During the year we continued to improve the online risk management tool to drive regular reporting, moving the system to a more stable platform architecture in September 2023. As part of the transition to the new department, GIAA undertook a review of governance and risk management in March 2024 and they have reviewed the evidence used to assess our Orange Book compliance.

Compliance

The department’s risk management practices are compliant with the requirements of the Orange Book’s 5 principles. A review of the Risk Control Framework, which supports the Orange Book principles, shows that we comply with 32 of the of the Framework’s 35 criteria, with partial compliance for the remaining 3. We will include activity to address these areas of partial compliance in our continuous improvement plan for 2024-25.

The department complies in full with the Principles of Integration, and Collaboration & Best Information. For the Principle of Governance and Leadership we meet 8 of the 9 criteria and we will work with the new Portfolio Management Offices to assess the needs of the programme risk teams within their portfolio, and to better target support and training to those teams with capability needs. For the Principle of Risk Management Processes, we comply with 11 of the 12 criteria. We will exploit the opportunity of our new portfolio structures to better identify the interaction between risks and to improve our use of risk aggregation. For the final Principle of Continuous Improvement, we will build on the recommendations from the 2023 GIAA audit of DESNZ’s approach learning lessons from past programme and policy delivery, as a mechanism to implement more effective mitigations to reoccurring risks.

Government Internal Audit Agency

The Government Internal Audit Agency (GIAA) provides the internal audit service for DESNZ. For 2023-24, the Group Chief Internal Auditor provided a Moderate annual opinion to the Accounting Officer on the departmental framework of governance, risk management and control. This incorporated 2 sub-opinions for the core department and the Integrated Corporate Services (ICS) function.

The sub-opinion for the core department was moderate which reflects the relatively stable transition that the delivery and policy teams have had since the MoG when many programmes directly moved from the previous Department for Business Energy and Industrial Strategy (BEIS) to DESNZ. GIAA reported that the department quickly put in place the Transition Programme Board and appropriate governance framework to provide oversight and direction, supported by clear and effective reporting arrangements enabling a focus on key risks and priorities. GIAA also concluded that the core governance and assurance processes carried over from BEIS were broadly effective. Further, GIAA recognised some of DESNZ’s major achievements against a challenging environment, including receiving Royal Assent for the Energy Act 2023 and publication of the Connection Actions Plan and the Civil Nuclear Roadmap.

GIAA noted that DESNZ faces an enormous delivery challenge with the need to achieve current objectives and pivot to new demands as well as having a large number of major projects and some very large Arm’s Length Bodies. GIAA also highlighted the work being done to build on and develop processes and systems inherited from BEIS, noting that the setting of departmental objectives, policies and procedures, roles and responsibilities, reporting arrangements, and setting the risk appetite continue to develop and will require time before they become fully effective.

The sub-opinion for the ICS was limited which reflects that this is a new organisation whose Governance and Assurance processes have evolved and been enhanced over the course of the year, but require further improvement. The development of Corporate Governance arrangements has moved at a fast pace since the MoG changes and continue to develop, although will require time to become fully operational, embedded, and effective.

For both core department and ICS, GIAA highlighted the increase in outstanding internal audit recommendations at the start of the year as management’s attention was focused on the MoG changes. This has improved in the second half of the year.

National Audit Office and the Public Accounts Committee

The National Audit Office (NAO) have shown continued interest in the work of the department, publishing 4 studies focusing on DESNZ-specific activities as well as one overview of the department between April 2023 and March 2024:

• 19 May 2023 – Support for innovation to deliver net zero
• 14 Jun 2023 – Update on the rollout of smart meters
• 24 Jan 2024 – The government’s support for biomass
• 16 Feb 2024 – DESNZ departmental overview
• 18 Mar 2024 – Decarbonising home heating

DESNZ has also been involved in the following cross-government studies published between April 2023 and March 2024:

• 15 Sep 2023 – Approaches to achieving net zero across the UK
• 27 Oct 2023 – Monitoring and responding to companies in distress
• 6 Dec 2023 – Government resilience: extreme weather
• 19 Dec 2023 – Investigation into whistleblowing in the civil service
• 21 Dec 2023 – Overcoming challenges to managing risks in government
• 8 Feb 2024 – Tackling fraud and protecting propriety in government spending during an emergency
• 15 Mar 2024 - Use of artificial intelligence (AI) in government

Given the significance of DESNZ priorities, there have been 3 Public Accounts Committee (PAC) hearings drawn from DESNZ value for money studies and involving DESNZ witnesses, whose hearings were held between April 2023 and March 2024:

• 25 May 2023 – Bulb Energy
• 15 June 2023– Support for innovation to deliver net zero
• 22 June 2023 – Update on the rollout of smart meters

DESNZ provides responses to the PAC after each hearing via the HM Treasury minutes process, and twice a year via the HM Treasury minutes progress updates. These are published on GOV.UK: HM Treasury Minutes and HM Treasury Minutes Progress Update.

DESNZ also provides responses to NAO recommendations twice a year through the recommendations tracker updates, which are published on the NAO website.

Project assurance

A project assurance review is a key requirement within the department before submitting a business case for approval. Timely and proportionate assurance reviews are conducted for projects/programmes throughout the lifecycle.

In 2023-24, programmes and projects continued to follow the department’s Integrated Assurance and Approvals Framework. During 2023-24, 62 assurance reviews were conducted. As at March 2024, the department had 18 projects/programmes on Government Major Projects Portfolio (GMPP). The department works closely with IPA to manage assurance requirements for GMPP projects/programmes.

Project teams review the assurance report recommendations and record actions against each to address these. The actions against recommendations are reviewed by the Portfolio Investment Committee (PIC) as part of the approvals process and post approvals by the Assurance Team. The Assurance Team conducts regular analysis of the DESNZ Assurance Reports, drawing key themes out and working with the wider department to identify initiatives to bring about improvements. Both the analysis and actions identified are reported to PIC on a bi-annual basis.

Quality assurance of analytical models

The department uses analytical models to inform its policy making, evaluation and operations. The models are assured to ensure they are fit for purpose and comply with the government’s Analytical Quality Assurance (AQUA) Book. Following the machinery of government change, the Modelling Integrity team’s active monitoring system refocussed to those 66 models in use in DESNZ as at March 2024. Over 90% had the required very high level of assurance, with plans in place to achieve the required level of assurance for all models. Plans are also in place to introduce a second line assurance programme to reinforce the established system of active monitoring.

The department also requires arm’s length bodies undertaking modelling to assure us that they have AQUA Book compliant quality assurance processes.

Data protection

Three personal data breaches were reported to the Information Commissioner’s Office (ICO). All 3 personal data breaches involved DESNZ data processors. No regulatory action was taken by the ICO against DESNZ.

We have evolved our services in response to the machinery of government change. This has included working with United Kingdom Vetting Services to realign vetting records across multiple departments as well as the continuity of secure services across Whitehall, whilst supporting a change in our London headquarter locations. We have provided GovPass to the majority of staff across our national estate, and we continue to work with the GPA to ensure adequate security at sites where we have staff. Looking forward, we will be launching a security culture programme to improve security compliance, as well as undertaking a review of security processes to create efficiencies for our shared services.

Ministerial directions

Ministerial directions are formal, technical instructions from the Secretary of State which allow the department to proceed with a spending proposal in a situation where the Accounting Officer has raised an objection.

The Accounting Officer is accountable to Parliament for ensuring that all expenditure meets the standards under Managing Public Money (MPM). They have a duty to seek a direction if they believe one of the 4 Accounting Officer standards cannot be met - regularity, propriety, value for money and feasibility.

There were no ministerial directions during 2023-24.

Effectiveness of our whistleblowing arrangements

Internal whistleblowing

We encourage our employees to speak up and raise any concerns they may have about a potential wrongdoing. We participated in the annual cross-Whitehall ‘Speak Up’ campaign this year, with reinforcing messages from our Chief People Officer on the importance of speaking up, the avenues for doing this and reassurance that concerns would be listened to, and action taken where appropriate.

Our procedures for raising concerns are accessible to all DESNZ employees and we offer 6 different routes for this including via an external whistleblowing hotline. To reinforce the importance that we place on people speaking up we now have a cadre of 7 Whistleblowing Nominated Officers who are members of our Senior Management Team and whose role is to provide confidential support and signposting to employees who raise concerns.

In 2023-2024 we had no whistleblowing concerns raised by employees working in DESNZ. The 2023 People Survey highlighted that 76% of employees had confidence that any concerns raised under the Civil Service Code would be properly investigated.

External whistleblowing

In 2023-2024 DESNZ received one whistleblowing allegation. We are in the process of updating our whistleblowing policies and procedures to reflect the new departmental structure.

Governance of DESNZ public bodies

DESNZ sponsors a range of public bodies, referred to as ALBs, which underpin the delivery of essential government schemes, services, and regulatory functions. Most ALBs are governed by their own independent boards, supported by appropriate governance and internal assurance structures. Details of these can be found in the annual reports and accounts for each ALB.

Since the creation of the department in February 2023, we have continued to review and evolve our arrangements for working with ALBs, to ensure these are fit for purpose and provide the optimum conditions for effective delivery as a departmental group. This includes the development of a new DESNZ sponsorship model, allowing for a proportionate approach to oversight and engagement. This takes account of the size, nature, funding, and risk of different ALBs, and aligns with the Cabinet Office Sponsorship Code of Good Practice.

Within the DESNZ sponsorship model each ALB has a designated senior sponsor at Director General level, responsible for overseeing strategic engagement and delivery. They are closely supported by policy sponsor teams leading the day-to-day relationship with ALBs. Their activities help to facilitate strategic alignment between the department and the ALB, as well as support regular oversight of ALB performance and delivery.

For the 2023-24 reporting year, central assurance on DESNZ ALBs was provided by:

• an annual assurance exercise looking at the governance and accountability arrangements in place for each ALB
• a review of ALB governance statements, to ensure that the essential criteria were met and to identify any significant risks and issues that should be included in the consolidated DESNZ governance statement
• an annual self-assessment of the department’s alignment with the principles and standards of the Sponsorship Code
• a GIAA strategic review of DESNZ sponsorship arrangements. This concluded that good progress was being made in the design and implementation of a sponsorship model that met DESNZ requirements, and which aligned with Cabinet Office guidance
• an annual audit for 2023-24 by the Office for the Commissioner for Public Appointments. This confirmed that all appointments by DESNZ ministers to the boards of public bodies were made in accordance with the government’s Principles of Public Appointments and Governance Code
• a review of ALB risk by the departmental ExCo
• reviews of the UK Atomic Energy Authority and the Coal Authority, carried out as part of the Cabinet Office and HM Treasury Public Bodies Reform Programme
• ongoing support and advice provided to DESNZ policy teams in setting up new public bodies in accordance with Cabinet Office and HMT policy and controls, including Great British Nuclear and the National Energy System Operator

DESNZ was alerted to a potentially irregular payment to a grant recipient by Salix due to the use of an Advance Payment Bond (APB) in reference to the Public Sector Decarbonisation Scheme (PSDS). Upon investigation requested by DESNZ, Salix uncovered 3 further instances, with the total value of these APBs amounting to £26m. Salix are in the process of recovering £1.2m from one of the grant recipients. Two (£2.7m) have since been utilised with no further action being taken and Salix are checking details on the fourth to ascertain whether funds should be recovered. The following assurances have taken place:

• DESNZ instructed Salix to obtain confirmation from all grant recipients that the use of APBs or similar financial instruments has not occurred. This consisted of 171 issued letters covering grants issued in 2023-24 plus an additional 261 letters covering current and earlier years. The Salix accounting officer wrote to our principal accounting officer to confirm that as of 23 October 2024, over 70% of grant recipients had replied, confirming that they had not used APBs. As of 1 November 2024, this was 86%. Extrapolating from this sample would indicate that the total sum of potentially irregular payments would not exceed £30m, which is well below the threshold for material irregularity
• The PSDS Phase 4 Terms and Conditions have been updated to make the rules on eligible expenditure clearer
• The document which grant recipients must submit to claim payment has been updated, so they will need to sign every request stating expenditure being claimed for has been incurred prior to payment
• DESNZ will collaborate with Salix and their internal audit team to explore options for additional scrutiny of payment claims to ensure any use of APBs can be identified before payment

For 2024-25, our focus will be on completing public body reviews committed to in the final year of the Cabinet Office review programme. We will also be addressing priority areas for capability building identified from the end of year annual assurance exercise and the review of the Sponsorship Code. This will include how we can support ALB boards with future succession planning, as well as ways we can further enhance outcome assurance around ALBs’ delivery.

Governance assurance exercise

A governance assurance exercise took place at the end of the financial year to reflect on the effectiveness of governance arrangements, internal controls and risk management.

Governance assurance panels held for each director general-led group examined the evidence from the groups of their governance, risk, performance and financial management, oversight of the ALBs, implementation of NAO/PAC/GIAA recommendations, and internal control failures. Each panel was chaired by the ARAC Chair, supported by other Non-Executive Directors and our internal auditors. The outcomes of the panels have been presented to ARAC. In addition, ARAC have been provided with a self-assessment conducted by the functions within DESNZ against the relevant Government Functional Standards, and further evidence demonstrating various aspects of internal control of the department as a whole.

ARAC agreed that based on the evidence gathered through the governance assurance exercise and other inputs gathered by ARAC throughout the financial year 2023-24, in the committee’s opinion the department overall had a sound system of governance, assurance and internal control.

Key development opportunities flagged through the Governance Assurance Exercise included improved articulation of departmental risk appetite, 6 monthly reviews of functional compliance and capability, which will be supported by ARAC deep dives into key functional standards, and regular reporting on the Governance Assurance Panel’s recommendations implementation.

Accounting Officer’s conclusion

I have considered the evidence provided regarding the annual governance statement and the independent assurance provided by ARAC in support of my conclusion on the department’s system of governance, assurance and internal control.

It has been a challenging year for the department as it focussed on progressing delivery of its complex portfolio while also developing its internal governance and control processes following the machinery of government changes in February 2023. The department’s success establishing strong and effective arrangements is reflected by GIAA’s overall ‘moderate’ opinion on the framework of governance, risk management and control for 2023-24 despite the scale of changes. This included a ‘moderate’ sub-opinion for the core department, and ‘limited’ sub-opinion for the ICS function. The latter reflects that ICS is a new organisation whose governance and assurance processes have evolved and been enhanced over the course of the year but require further improvement.

The GIAA have flagged some areas for development which the department will focus on in 2024-2025. These include continued development of departmental objectives, policies and procedures, roles and responsibilities, reporting arrangements and setting the risk appetite, continued implementation of the internal audit recommendations and improvements to the governance arrangements of ICS to ensure a sustainable and scalable entity.

Overall, I am satisfied that the department has made good progress to embed an appropriate system of internal control and risk management during this reporting period and to improve and adapt its governance arrangements in light of the risks being managed. The department will continue to develop and embed processes to further facilitate and strengthen assurances to enable it to deliver its priorities and respond to current and emerging challenges.

Jeremy Pocklington
Permanent Secretary and Principal Accounting Officer
6 November 2024

Staff report

Number of senior civil service staff by band

The table below shows the number of senior civil servants grouped by their salary bands. Salary bands represent actual salary rates. Bonuses are not included.

The numbers are based on the full year equivalent as at 31 March 2024. They include both permanent and fixed term contracts. It includes active workers only, and exclude inactive workers such as those on maternity leave, outward loans etc.

	As at 31 Mar 2024	As at 31 Mar 2023
£65,000 - £69,999	-	1
£70,000 - £74,999	3	85
£75,000 - £79,999	54	94
£80,000 - £84,999	63	36
£85,000 - £89,999	21	18
£90,000 - £94,999	13	11
£95,000 - £99,999	3	35
£100,000 - £104,999	18	12
£105,000 - £109,999	9	3
£110,000 - £114,999	2	3
£115,000 - £119,999	3	2
£120,000 - £124,999	-	2
£125,000 - £129,999	1	4
£130,000 - £134,999	1	1
£135,000 - £139,999	4	5
£140,000 - £144,999	1	2
£145,000 - £149,999	3	2
£150,000 - £154,999	1	2
£155,000 - £159,999	1	1
£160,000 - £164,999	1	-
£165,000 - £169,999	1	2
£170,000 - £174,999	1	-
£185,000 - £189,999	-	1
Total	204	322

2022-23 calculations have been disclosed as published for BEIS, given all DESNZ staff were formerly from BEIS. Rather than re-calculating restated comparatives for DESNZ, we have disclosed the 2022-23 calculations from BEIS. These prior year figures for BEIS were based on an established employee list at the 31 March 2023 and therefore will allow readers to compare DESNZ’s SCS by pay band disclosures against more robust comparatives.

Staff numbers (audited information)

The table below shows numbers based on the full year equivalent average. The figures include both permanent and fixed term contracts. It includes active workers only, and excluded inactive workers such as those on maternity leave, outward loans etc.

	Permanent employed staff	Others	Ministers	Special advisers	2023‑24 Total	2022‑23 Total
Core department	4,124	141	5	4	4,274	3,757
Non-departmental public bodies (NDPBs)	3,916	646	-	-	4,562	5,087
Total	8,040	787	5	4	8,836	8,844

Staff costs (audited information)

	Permanent employed staff £m	Others £m	2023‑24 Total £m	2022‑23 Total £m
Wages and salaries	417	73	490	422
Social security costs	51	-	51	43
Other pension costs	96	-	96	80
Sub total	564	73	637	545
Less recoveries in respect of outward secondments	(2)	-	(2)	(2)
Total net costs	562	73	635	543
Core department	309	15	324	242
NDPBs and other designated bodies	253	58	311	301
Total net costs	562	73	635	543

In the departmental group, £4,448,432 of staff costs were capitalised (2022-23: £9,437,399). 67 employees were engaged on capital projects (2022-23: 71 employees).

Staff severance costs are included in wages and salaries. For further details on staff severance costs, see exit packages in the staff report.

Total net costs of ‘others’ includes ministers’ total net costs of £229,076 (2022-23: £152,572).

Staff numbers and costs included in utilisation of provisions - Nuclear site licence companies, Civil Nuclear Police Authority and UK Atomic Energy Authority (audited information)

Staff costs of nuclear site licence companies (SLCs) and partially for Civil Nuclear Police Authority and UK Atomic Energy Authority for staff that are engaged in decommissioning activities for which provisions were recognised in prior periods are disclosed separately. They are included in the amounts shown for utilisation in the Nuclear Decommissioning Authority’s (NDA) and UK Atomic Energy Authority nuclear decommissioning provisions in note 18, rather than being reported as staff costs in the Statement of Comprehensive Net Expenditure (SoCNE).

	Permanent employed staff	Others	2023‑24 Total	2022‑23 Total
Number of staff (full time equivalent)	16,358	881	17,239	15,727
Costs: Wages and salaries (£m)	1,074	65	1,139	999
Costs: Social security costs (£m)	123	-	123	114
Costs: Other pension costs (£m)	198	-	198	189
Total costs (£m)	1,395	65	1,460	1,302

Principal Civil Service Pension Scheme

Nuclear site licence companies are not included in these pension schemes. Details of those are provided in note 19.

The Principal Civil Service Pension Scheme (PCSPS) and the Civil Servant and Other Pension Scheme (CSOPS), known as ‘alpha’, are an unfunded multi-employer defined benefit scheme in which the department is unable to identify its share of the underlying assets and liabilities. The scheme actuary valued the PCSPS as at 31 March 2020. Further details can be found in the resource accounts of the Cabinet Office Civil Superannuation.

2022-23 calculations have been disclosed as published for BEIS, given all DESNZ staff were formerly from BEIS. Rather than re-calculating restated comparatives for DESNZ, we have disclosed the 2022-23 calculations from BEIS. These prior year figures for BEIS were based on an established employee list at the 31 March 2023 and therefore will allow readers to compare DESNZ’s employer contributions to PCSPS disclosures against more robust comparatives that were also subject to audit in 2022-23.

For 2023-24, employer contributions of £79,147,894 were payable to the PCSPS (2022-23: £169,192,669) at one of 4 rates in the range 26.6% to 30.3% (2022-23: 26.6% to 30.3%) of pensionable pay, based on salary bands.

The scheme’s actuary reviews employer contributions usually every 4 years following a full scheme valuation. The contribution rates are set to meet the cost of the benefits accruing during 2023-24 to be paid when the member retires and not the benefits paid during this period to existing pensioners.

Employees can opt to open a partnership pension account, a stakeholder pension with an employer contribution. Employers’ contributions of £537,421 (2022-23: £3,240,867) were paid to one or more of the panel of 3 appointed stakeholder pension providers. Employer contributions are age-related and range from 8% to 14.75%. Employers also match employee contributions up to 3% of pensionable earnings. In addition, employer contributions of £16,679 (2022-23: £19,635), 0.5% (2022-23: 0.5%) were payable to the PCSPS to cover the cost of the future provision of lump sum benefits on death in service and ill-health retirement of these employees.

Contributions due to/(from) the partnership pension providers as at 31 March 2024 were £7,470 (2022-23: £50,842). Contributions prepaid at that date were £nil (2022-23: £nil).

Ill-health retirement

In 2023-24, 24 persons (2022-23: 36 persons) across the departmental group retired early on ill-health grounds; the total additional accrued pension liabilities in the year amounted to £2,161,240 (2022–23: £2,507,360).

Other pension schemes

Employer contributions to other pension schemes in 31 March 2024, amounted to £33,011,611 (2022–23: £302,566,449). Employer contributions include employers’ contributions, current service costs and where appropriate past service costs of funded pension schemes. Further details can be found in the accounts of the department’s NDPBs and other designated bodies. A list of these bodies is provided in note 26.

Staff composition

The table below shows staff composition as at 31 March 2024.

The numbers are based on headcount and include both permanent and fixed term contracts. It includes active workers, and inactive workers such as those on maternity leave and outward loans. It excludes all contingent labour.

Gender, 2023-24

All employees:

Total: 4,356

Gender	Percentage
Men	50%
Women	50%

Senior civil servants:

Total: 212

Gender	Percentage
Men	57%
Women	43%

Executive committee:

Total: 16

Gender	Percentage
Men	69%
Women	31%

Disability, 2023-24

Declaration rate: 79%

Representation:

Response	Percentage
No	82%
Yes	12%
Prefer not to say	6%

Ethnicity, 2023-24

Declaration rate: 85%

Representation:

Response	Percentage
White	74%
BAME	22%
Prefer not to say	4%

Sexual orientation, 2023-24

Declaration rate: 85%

Representation:

Response	Percentage
Straight	81%
LGBO	10%
Prefer not to say	9%

Note:

• Prior year comparisons have not been provided as these relate to the previous department. Some responses are provided anonymously, therefore restatement for the new department is not possible.

Sickness absence data

The table below shows average working days lost to sickness absence.

	2023‑24
Core department	3.7%

Staff turnover percentage

The table below shows the staff turnover percentage in 2023-24 for the core department as defined for the Civil Service statistics collection.

Departmental turnover includes employees who left the department. Turnover refers to those who also left the Civil Service.

Turnover figures are an estimate based on average workforce and leavers since the creation of DESNZ ledgers in September 2023. The methodology requires a full 12 months of data leavers, so leavers between September 23 and March 24 have been used to estimate a full year position.

	2023‑24 Departmental turnover	2023‑24 Turnover
Core department	15.3%	6.2%

Civil service people survey staff engagement scores

	2023
Engagement score	61%

The Civil Service People Survey ran from September to October 2023. The department achieved a response rate of 82% and an engagement index of 61%. As a new department this is the first people survey result, and it will be used as a baseline for future annual people surveys. Compared to the wider Civil Service results, 2 engagement themes were above the benchmark (leadership and change and inclusion and fair treatment) and 2 areas were significantly below the benchmark (pay and benefits, and organisational objectives).

A full analysis of the results has been undertaken and a Departmental Action Plan has been agreed. The 4 focus areas of the departmental response will be to increase understanding of our departmental priorities, enhance the understanding of our employee offer, provide managers with support to build capability and confidence and break down barriers to ensure we are a truly inclusive workplace.

Staff policies applied for disabled persons

Supporting disabled people at recruitment and throughout their employment is important to DESNZ.

Applications for employment

We are accredited under the Disability Confident Leader scheme. The department welcomes applications from disabled candidates and candidates with long-term health conditions, and fully supports reasonable adjustments throughout the recruitment process.

Continuing employment

We offer reasonable adjustments where practical for both office and home working environments. We support disabled staff or staff with long-term health conditions by carrying out assessments, providing equipment and training. We work closely with our ‘CAN’ disability staff network to ensure our policies and processes are as inclusive as possible for disabled staff. We also support the mental health and wellbeing of staff through our Employee Assistance programme, the Mental Health and Wellbeing staff network, and trained Mental Health First Aiders.

Training, career development and promotion

Disabled participants of the Future Leaders Scheme (FLS) are offered additional support through the Disability Empowers Leadership Talent (DELTA) scheme. DELTA is an accelerated development programme aimed at supporting disabled participants. A percentage of places on internal talent programmes are ring-fenced for those declaring a disability.

Trade union facility time

Facility time is time off for employees who are trade union (TU) representatives to carry out their TU roles. TU roles may be duties or activities. Reps are entitled to paid time off to carry out trade union duties. They are not entitled to paid time off for trade union activities. However, an employer can choose to pay for time off for activities.

Relevant union officials, 2023‑24

	Core department	Total
Number of trade union representatives employed	22	22
Full-time equivalent	22	22

Percentage of time spent on facility time, 2023‑24

Working hours each representative spent on facility time.

	Core department	Total
0% of working hours	9	9
1 - 50% of working hours	13	13

Percentage of pay bill spent on facility time, 2023‑24

Pay bill refers to the total for all employees, not union representatives only.

	Core department	Total
Total cost of facility time (£)	£49,977	£49,977
Total pay bill (£m)	£303	£303
Facility time as a % of pay bill	0.01%	0.01%

Paid trade union activities, 2023‑24

	Core department	Total
(Hours spent on paid trade union activities ÷ total paid facility time hours) * 100	0%	0%

Health, safety, and wellbeing

Building on the experience of the previous departments, we continued to provide a safe work environment. We ensured staff had the correct equipment and training to carry out their duties safely, both in the office and working from home.

In 2023-24, there were no reported accidents within ‘Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013’.

The wellbeing offers during the year included:

• stress management guidance
• resilience and mental health training
• health, wellbeing and disability campaigns
• access to the Employee Assistance Programme for confidential counselling
• over 200 trained Mental Health First Aiders
• staff networks to provide peer support

Diversity and inclusion

Diversity and Inclusion matter to DESNZ. We want to draw on a diverse range of skills, experiences, and backgrounds, embed an inclusive workplace culture, and deliver the best possible outcomes for the public. During the year we have:

• established our departmental values – Bold, Collaborative, Inclusive, and Learn
• developed a Diversity & Inclusion Action Plan
• supported the development of staff networks following machinery of government changes
• achieved a high ‘inclusion and fair treatment’ score in the 2023 people survey at 83%
• continued to embed Public Sector Equality Duty obligations through implementing clear guidance and standards, incorporating equalities risks and issues into departmental governance arrangements, working strategically across the department on shared challenges, and providing regular training and bespoke support across policy areas

Staff redeployments

The table below shows the number of staff loaned and hosted as at 31 March 2024.

Staff loaned (outward staff loans) were staff permanently employed by the core department, who were on loan to another organisation. Staff hosted (inward staff loans) were those attached to the core department, who were on loan from other organisations.

As the home department, short-term costs relating to outward staff loans were charged to the administration budget, if the core department paid the cost.

The department does not currently hold information centrally to support the disclosure of average likely durations of redeployments.

Loans in

	Non‑Payroll Short term	Non‑Payroll Long term	Payroll Short term	Payroll Long term	Total Short term total	Total Long term total
EO	1	1	-	-	1	1
G6	3	-	-	11	3	11
G7	5	-	-	21	5	21
HEO	-	2	-	3	-	5
SCS1	2	1	-	2	2	3
SCS2	1	-	1	-	2	-
SEO	1	-	1	5	2	5
Total	13	4	2	42	15	46

Loans out

	Loan Out - Non Pay Short term	Loan Out - Non Pay Long term	Loan Out - Payroll Short term	Loan Out - Payroll Long term	Total Short term total	Total Long term total
EO	-	2	-	-	-	2
G6	-	8	-	-	-	8
G7	-	22	-	-	-	22
HEO	-	15	-	1	-	16
SCS1	-	3	-	-	-	3
SEO	-	17	-	-	-	17
Total	-	67	-	1	-	68

Consultancy and temporary staff expenditure

The departmental group’s expenditure on consultancy in 2023–24 was £122.9 million (2022–23: £70.5 million). The consultancy expenditure relating to arm’s length bodies was £23.5 million (2022–23: £37.5 million) of which £12.5 million (2022–23: £32.3 million) was related to Site Licence Companies (SLCs).

Consultants are hired to work on projects in a number of specific situations:

• where the department does not have the skill set required
• where the requirement falls outside the core business of civil servants
• where an external, independent perspective is required

When used appropriately, consultancy can be a cost effective and efficient way of getting the temporary and skilled external input that the department needs.

The departmental group’s expenditure on temporary staff in 2023–24 was £73.0 million (2022–23: £70 million), as detailed in the staff costs note below.

Off-payroll engagements

Off-payroll engagements refer to workers paid off-payroll, without deducting tax and national insurance at source, typically contractors.

SLCs are subsidiaries of the NDA and fall within the departmental accounting boundary, but they operate with a high degree of autonomy. SLCs high number of off-payroll workers, represent a small proportion of the overall workforce. There is a need to bring in unique skills and experience which cannot be found in-house, due to the specialised, project driven nature of their work. Further information about the NDA can be found within their annual report and accounts.

Table 1: Highly paid off-payroll worker engagements as at 31 March 2024, earning £245 per day or greater

	Core department	Others in the departmental group (no SLCs)	Others in the departmental group (SLCs only)	Entities outside the departmental group
No. of existing engagements as of 31 Mar 2024	187	224	423	-
Of which, no. that existed for
– less than 1 year	121	57	32	-
– between 1 and 2 years	24	51	35	-
– between 2 and 3 years	10	49	226	-
– between 3 and 4 years	28	26	70	-
– 4 or more years	4	41	60	-

Table 2: All highly paid off-payroll workers engaged at any point during the year ended 31 March 2024, earning £245 per day or greater

	Core department	Others in the departmental group (no SLCs)	Others in the departmental group (SLCs only)	Entities outside the departmental group
No. of temporary off‑payroll workers engaged during the year ended 31 March 2024	187	287	517	-
Of which
Not subject to off-payroll legislation	-	232	313	-
Subject to off-payroll legislation and determined as in-scope of IR35	145	34	108	-
Subject to off-payroll legislation and determined as out-of-scope of IR35	42	21	96	-
No. of engagements reassessed for compliance or assurance purposes during the year	-	9	61	-
Of which: No. of engagements that saw a change to IR35 status following review	-	-	32	-

Table 3: For any off-payroll engagements of board members, and/or, senior officials with significant financial responsibility, between 1 April 2023 and 31 March 2024

	Core department	Others in the departmental group (no SLCs)	Others in the departmental group (SLCs only)	Entities outside the departmental group
No. of off-payroll engagements of board members, and/or senior officials with significant financial responsibility, during the financial year	-	2	-	-
Total no. of individuals on payroll and off-payroll that have been deemed ‘board members and/or senior officials with significant financial responsibility’, during the financial year. This figure should include both on payroll and off-payroll engagements.	-	40	9	14

Details of the exceptional circumstances that led to the off-payroll engagement of board members/senior officials with significant financial responsibility

AEA Insurance Ltd: AEA Insurance Ltd (AEAIL) is a captive insurance company registered in the Isle of Man and subject to their tax and NI legislation. AEAIL does not employ anyone, so directors are off‑payroll by default.

Dounreay Site Restoration Ltd: Dounreay employ one person who is hired on a quarterly basis, to work as an independent member of their Nuclear Safety Board.

Exit packages - Civil Service and other compensation schemes (audited information)

Redundancy and other departure costs have been paid in accordance with the provisions of the Civil Service Compensation Scheme (CSCS), a statutory scheme made under the Superannuation Act 1972.

Where the department has agreed early retirements, the additional costs are met by the department and not by the Civil Service pension scheme. Ill-health retirement costs are met by the pension scheme and are not included in the table.

The table below shows the total cost of exit packages agreed and accounted for in 2023-24. £2,145,285 exit costs were paid in 2023-24, the year of departure (2022-23: £1,048,695).

	2023‑24 Number of other departures agreed	2023‑24 Total number of exit packages by cost band	2022‑23 Number of compulsory redundancies	2022‑23 Number of other departures agreed	2022‑23 Total number of exit packages by cost band
Less than £10,000	20	20	1	31	32
£10,000 - £25,000	8	8	-	12	12
£25,000 - £50,000	3	3	-	5	5
£50,000 - £100,000	7	7	-	18	18
£100,000 - £150,000	-	-	-	3	3
£150,000 - £200,000	1	1	-	-	-
Total number	39	39	1	69	70
Of which
– Core department	4	4	-	29	29
– NDPBs and other designated bodies	35	35	1	40	41
Total number	39	39	1	69	70
Total cost (£)	960,785	960,785	-	2,254,353	2,254,353
Of which
– Core department	226,235	226,235	-	1,842,028	1,842,028
– NDPBs and other designated bodies	734,550	734,550	-	412,325	412,325
Total cost (£)	960,785	960,785	-	2,254,353	2,254,353

Remuneration report

Overview

The remuneration report sets out the remuneration policy and the amounts awarded to DESNZ ministers and directors. Just like the staff report, it is fundamental to demonstrating transparency and accountability to Parliament.

Service contracts

The Constitutional Reform and Governance Act 2010 requires Civil Service appointments to be made on merit on the basis of fair and open competition. The Recruitment Principles published by the Civil Service Commission specify the circumstances when appointments may be made otherwise.

Unless otherwise stated below, the officials covered by this report hold appointments which are open-ended. Early termination, other than for misconduct, would result in the individual receiving compensation as set out in the Civil Service Compensation Scheme.

Further information about the work of the Civil Service Commission can be found at: Civil Service Commission website.

Remuneration policy

Ministers

Remuneration of ministers is determined in accordance with the provisions of the Ministerial and other Salaries Act 1975 (as amended by The Ministerial and other Salaries Order 1996) and the Ministerial and other Pensions and Salaries Act 1991.

Executive directors

The Senior Salaries Review Body provides independent advice to the Prime Minister on the remuneration of senior civil servants. The review body considers economic considerations such as local variations in labour markets and funds available to departments. Further information about the work of the review body can be found at Review Body on Senior Salaries (GOV.UK).

Ministers – single total figure of remuneration (audited information)

The table below shows each component, and the single total figure of remuneration for each minister in 2023-24.

Where ministers have moved to or from another department during the year, details of any remuneration relating to their subsequent or prior roles will be in that department’s remuneration report. Ministers who transfer from another department continue being paid at the appropriate rate of pay with effect from the first day of the month following the date of appointment. Former ministers who transfer to other departments are paid at their current rate of pay up to the end of the month. Any increase in ministers’ salaries on transfer from the date of appointment is paid by their new department.

Ministers – single total figure of remuneration (audited information)

The table below shows each component, and the single total figure of remuneration for each minister in 2023-24.

Where ministers have moved to or from another department during the year, details of any remuneration relating to their subsequent or prior roles will be in that department’s remuneration report. Ministers who transfer from another department continue being paid at the appropriate rate of pay with effect from the first day of the month following the date of appointment. Former ministers who transfer to other departments are paid at their current rate of pay up to the end of the month. Any increase in ministers’ salaries on transfer from the date of appointment is paid by their new department.

Secretary of State

	2023‑24 Salary [Note 1] £	2023‑24 Full year equivalent salary if different £	2023‑24 Pension benefits [Note 2] to nearest £1,000	2023‑24 Total to nearest £1,000	2022‑23 Salary [Note 1] £	2022‑23 Full year equivalent salary if different £	2022‑23 Pension benefits [Note 2] to nearest £1,000	2022‑23 Total to nearest £1,000
The Rt Hon Claire Coutinho MP (from 31 Aug 2023) [Note 3]	39,559	67,505	10,000	50,000	-	-	-	-
The Rt Hon Grant Shapps MP (to 30 Aug 2023)	28,127	67,505	7,000	35,000	29,397	67,505	7,000	36,000

Ministers of State

	2023‑24 Salary [Note  1] £	2023‑24 Full year equivalent salary if different £	2023‑24 Pension benefits [Note 2] to nearest £1,000	2023‑24 Total to nearest £1,000	2022‑23 Salary [Note 1] £	2022‑23 Full year equivalent salary if different £	2022‑23 Pension benefits [Note 2] to nearest £1,000	2022‑23 Total to nearest £1,000
The Rt Hon Graham Stuart MP	31,680	-	8,000	40,000	15,840	31,680	9,000	25,000

Parliamentary Under-Secretaries of State

	2023‑24 Salary [Note 1] £	2023‑24 Full year equivalent salary if different £	2023‑24 Pension benefits [Note 2] to nearest £1,000	2023‑24 Total to nearest £1,000	2022‑23 Salary [Note 1] £	2022‑23 Full year equivalent salary if different £	2022‑23 Pension benefits [Note 2] to nearest £1,000	2022‑23 Total to nearest £1,000
Lord Callanan [Note 4]	107,335	-	19,000	126,000	107,335	-	20,000	127,000
Andrew Bowie MP (from 7 Feb 2023) [Note 5]	22,375	-	6,000	28,000	-	-	-	-
Amanda Solloway MP (from 7 Feb 2023) [Note 6]	-	-	-	-	-	-	-	-

Notes:

1. Salary information excludes employer national insurance contributions. No ministers of the department received benefits in kind during the year. Minsters in the House of Commons are remunerated on a different basis to those in the House of Lords as explained in notes to the remuneration report.
2. The value of pension benefits accrued during the year is calculated as (real increase in pension multiplied by 20) less (contributions made by the individual). Real increase excludes increases due to inflation or any increase or decrease due to transfer of pension rights.
3. The Rt Hon Claire Coutinho MP for Department for Energy Security and Net Zero (DESNZ) from 31 August 2023. Previously Parliamentary Under Secretary of State at the Department for Education, prior to joining DESNZ.
4. Lord Callanan salary includes £36,366 Lords Office Holders Allowance.
5. Andrew Bowie MP’s remuneration for 7 February 2023 to 31 March 2023 is disclosed in the Department for International Trade (DIT) Annual Report and Accounts 2022-23.
6. Amanda Solloway MP was not remunerated for the Parliamentary Under Secretary of State DESNZ role. Government Whip, Lord Commissioner of HM Treasury role was paid by HM Treasury.

Ministers – pension benefits (audited information)

The table below shows the pension entitlements for each minister.

Secretary of State

	Pension benefits at age 65 as at 31 March 2024 £’000	Real increase in pension at age 65 £’000	CETV at 31 March 2024 [Note 1] £’000	CETV at 31 March 2023 [Note 1] £’000	Real increase in CETV £’000
The Rt Hon Claire Coutinho MP (from 31 Aug 2023)	0-5	0-2.5	14	5	4
The Rt Hon Grant Shapps MP (to 30 Aug 2023)	5-10	0-2.5	147	135	5

Ministers of State

	Pension benefits at age 65 as at 31 March 2024 £’000	Real increase in pension at age 65 £’000	CETV at 31 March 2024 [Note 1] £’000	CETV at 31 March 2023 [Note 1] £’000	Real increase in CETV £’000
The Rt Hon Graham Stuart MP	5-10	0-2.5	115	97	7

Parliamentary Under-Secretaries of State

	Pension benefits at age 65 as at 31 March 2024 £’000	Real increase in pension at age 65 £’000	CETV at 31 March 2024 [Note 1] £’000	CETV at 31 March 2023 [Note 1] £’000	Real increase in CETV £’000
Lord Callanan	10-15	0-2.5	198	160	17
Andrew Bowie MP (from 7 Feb 23)	0-5	0-2.5	7	2	3
Amanda Solloway MP (from 7 Feb 2023) [Note 2]	-	-	-	-	-

Notes:

1. Where ministers joined or left during the year, their CETV opening or closing amounts are as at their joining or leaving dates. See Notes to the Remuneration report for explanation of CETV.
2. Does not draw salary or pension benefits from DESNZ.

Senior officials – single total figure of remuneration (audited information)

The table below shows each component, and the single total figure of remuneration for each senior official in 2023-24. Senior officials comprise members of the departmental board.

Where officials have moved to or from a similar senior role in another department during the year, details of any remuneration relating to their subsequent or prior roles will be in that department’s remuneration report.

Permanent secretary

	2023‑24 Salary [Note 1] £’000	2023‑24 Full year equivalent salary if different £’000	2023‑24 Bonus £’000	2023‑24 Pension [Note 2] to nearest £1,000	2023‑24 Total £’000	2022‑23 Salary [Note 1] £’000	2022‑23 Full year equivalent salary if different £’000	2022‑23 Bonus £’000	2022‑23 Pension [Notes 2, 3] to nearest £1,000	2022‑23 Total £’000
Jeremy Pocklington (from 7 Feb 2023) [Note 4]	170‑175	-	15‑20	112	300‑305	20‑25	165‑170	-	(4)	20‑25
Clive Maxwell [Note 5]	165‑170	-	-	43	210‑215	60‑65	165‑170	-	27	85‑90

Director general

	2023‑24 Salary [Note 1] £’000	2023‑24 Full year equivalent salary if different £’000	2023‑24 Bonus £’000	2023‑24 Pension [Note 2] to nearest £1,000	2023‑24 Total £’000	2022‑23 Salary [Note 1] £’000	2022‑23 Full year equivalent salary if different £’000	2022‑23 Bonus £’000	2022‑23 Pension [Notes 2, 3] to nearest £1,000	2022‑23 Total £’000
Lee McDonough [Note 6]	145‑150	-	5‑10	51	205‑210	135‑140	-	5‑10	(62)	80‑85
Jonathan Mills [Note 7]	150‑155	-	5‑10	60	220‑225	115‑120	140‑145	0‑5	(6)	110‑115

Director

	2023‑24 Salary [Note 1] £’000	2023‑24 Full year equivalent salary if different £’000	2023‑24 Bonus £’000	2023‑24 Pension [Note 2] to nearest £1,000	2023‑24 Total £’000	2022‑23 Salary [Note 1] £’000	2022‑23 Full year equivalent salary if different £’000	2022‑23 Bonus £’000	2022‑23 Pension [Notes 2, 3] to nearest £1,000	2022‑23 Total £’000
David Thomas (20 Mar 2023) [Note 8]	120‑125	130‑135	15‑20	195	330‑335	-	-	-	-	-

Notes:

1. Salary information excludes employer national insurance contributions. Departure costs have been paid in accordance with the provisions of the Civil Service Compensation Scheme, a statutory scheme made under the Superannuation Act 1972. Exit costs are accounted for in full in the year of departure. Where officials have moved to or from a similar senior role in another department during the year, details of any remuneration relating to their subsequent or prior roles will be in that department’s remuneration report.
2. The value of pension benefits accrued during the year is calculated as (the real increase in pension multiplied by 20) plus (the real increase in any lump sum) less (the contributions made by the individual). The real increases exclude increases due to inflation or any increase or decreases due to a transfer of pension rights.
3. The pension benefits of any members affected by the public service pensions remedy which were reported in 2022-23 on the basis of alpha membership for the period between 1 April 2015 and 31 March 2022 are reported in 2023-24 on the basis of PCSPS membership for the same period.
4. Jeremy Pocklington’s 2022-23 disclosure relates to his role as Permanent Secretary for Department for Energy Security and Net Zero (DESNZ).
5. Clive Maxwell’s 2022-23 disclosure relates to his role as Second Permanent Secretary for BEIS.
6. Lee McDonough’s 2022-23 disclosure relates to her role as a Director General for BEIS.
7. Jonathan Mills’ 2022-23 disclosure relates to his role as a Director General for BEIS.
8. David Thomas, Director and Chief Financial Officer for DESNZ: Salary in 2023-24 includes arrears paid in April 2023 in respect of his work since joining the department in March 2023 and bonus includes an amount paid on behalf of his previous employer, the Department of Levelling Up, Housing and Communities.

Senior officials – pension benefits (audited information)

The table below shows the pension entitlements for each senior official for the year ending 31 March 2024. Senior officials comprise members of the departmental board.

Permanent secretary

	Accrued pension at pension age as at 31 March 2024 and related lump sum £’000	Real increase in pension and related lump sum at pension age £’000	CETV at 31 March 2024 [Note 1] £’000	CETV at 31 March 2023 [Notes 1, 2] £’000	Real increase in CETV £’000	Employer contribution to partnership pension account Nearest £100
Jeremy Pocklington (from 7 Feb 2023)	75 - 80 plus a lump sum of 30 - 35	5 - 7.5 plus a lump sum of 0 - 2.5	1,515	1,305	86	-
Clive Maxwell	70 - 75 plus a lump sum of 185 - 190	2.5 - 5 plus a lump sum of 0	1,549	1,395	22	-

Director general

	Accrued pension at pension age as at 31 March 2024 and related lump sum £’000	Real increase in pension and related lump sum at pension age £’000	CETV at 31 March 2024 [Note 1] £’000	CETV at 31 March 2023 [Notes 1, 2] £’000	Real increase in CETV £’000	Employer contribution to partnership pension account Nearest £100
Lee McDonough	65 - 70 plus a lump sum of 160 - 165	2.5 - 5 plus a lump sum of 0	1,545	1,426	40	-
Jonathan Mills	50 - 55 plus a lump sum of 125 - 130	2.5 - 5 plus a lump sum of 0 - 2.5	1,006	882	37	-

Director

	Accrued pension at pension age as at 31 March 2024 and related lump sum £’000	Real increase in pension and related lump sum at pension age £’000	CETV at 31 March 2024 [Note 1] £’000	CETV at 31 March 2023 [Notes 1, 2] £’000	Real increase in CETV £’000	Employer contribution to partnership pension account Nearest £100
David Thomas (from 20 Mar 2023)	50 - 55	10 - 12.5	949	721	158	-

Notes:

1. Where senior officials joined or left during the year, their CETV opening or closing amounts are as at their joining or leaving dates. See Notes to the Remuneration report for explanation of CETV.
2. The pension benefits of any members affected by the public service pensions remedy which were reported in 2022-23 on the basis of alpha membership for the period between 1 April 2015 and 31 March 2022 are reported in 2023-24 on the basis of PCSPS membership for the same period.

Non-executive board members – fee entitlements (audited information)

The table below shows fee entitlements for non-executive directors who were members of the departmental board.

	2023‑24 Fee entitlement £’000	2023‑24 Full year equivalent if different £’000	2022‑23 Fee entitlement £’000	2022‑23 Full year equivalent if different £’000
Humphrey Cadoux-Hudson (from 01 Feb 2024) [Note 1]	0‑5	20‑25	-	-
Vikas Shah [Note 2]	25‑30	-	20‑25	-
Peter Mather [Note 3]	30‑35	-	20‑25	-
Dame Mary Archer (from 23 Feb 2024)	0‑5	15‑20	-	-

Notes: 1. Lead Non-Executive Board Member for Department for Energy Security and Net Zero (DESNZ). 2. Audit Risk and Assurance Committee Chair for DESNZ. 3. Interim Lead Non-Executive Board Member for DESNZ, from 28 March 2023 to 31 January 2024.

Fair pay disclosure (audited information)

The narrative below shows the relationship during the year ending 31 March 2024 between the remuneration of the highest-paid director and the median remuneration of the workforce across DESNZ. Remuneration figures include salary, non-consolidated performance-related pay and benefits-in-kind. They do not include severance payments, employer pension contributions and the cash equivalent transfer value of pensions.

Reporting bodies are required to disclose the relationship between the remuneration of the highest-paid director in their organisation and the median remuneration of the organisation’s workforce.

As of 31 March 2023, the exact split of employees forming DESNZ from the predecessor department BEIS had not been finalised. The Cabinet Office Statement of Practice (COSOP) governing the process to achieve the departmental split was under consideration and completed in May 2023. Staff turnover was another factor between the machinery of government (MoG) announcement and the finalisation of the split. The formation of the ICS (Integrated Corporate Services) within DESNZ comprising former BEIS Corporate Services staff also required formal setup and agreement. ICS provides agreed Corporate Services to DESNZ. These circumstances mean that any attempt to re-calculate prior year comparatives for DESNZ could be imprecise and therefore could be misleading to a reader of these disclosures.

2022-23 calculations have been disclosed as published for BEIS, given all DESNZ staff were formerly from BEIS. Rather than re-calculating restated comparatives for DESNZ, we have disclosed the 2022-23 calculations from BEIS. These prior year figures for BEIS were based on an established employee list at the 31 March 2023 and therefore will allow readers to compare DESNZ’s fair pay disclosures against comparatives that were subject to audit in 2022-23.

The banded remuneration of the highest-paid director in DESNZ in 2023-24 was £190,000 - £195,000 (2022-23 BEIS: £185,000-£190,000). This was 3.66 times (BEIS 2022-23: 4.4) the median remuneration of the workforce, which was £52,655 (2022-23 BEIS: £42,351).

In 2023-24, 18 (2022-23 BEIS: 97) employees received remuneration in excess of the highest-paid director. Remuneration ranged from £17,973 to £268,180 (2022-23 BEIS: £16,090-£430,100).

The median pay ratio for the relevant financial year is consistent with the pay, reward and progression policies for the entity’s employees taken as a whole. The minor increase in median remuneration of the workforce is due to a pay increase in year for employees in the lowest pay scale.

The tables below show the percentage change from previous year in total salary and allowances and performance pay and bonuses for the highest paid director and for staff average.

DESNZ 2023‑24

	Highest paid director	Staff average
Salary and allowances	3%	7%
Performance pay & bonuses	100%	11%

BEIS 2022‑23

	Highest paid director	Staff average
Salary and allowances	3%	2.39%
Performance pay & bonuses	(85.91)%	2.34%

Notes:

1. Highest paid director received a bonus of £17,500 in 2023-24.

The table below shows the ratio between the highest paid directors’ total remuneration and the lower, median, and upper quartile for staff total pay and benefits for 2022-23. The slight decrease in ratio results from the use of BEIS in the comparatives as total number of staff included in DESNZ has fallen compared to BEIS. Pay Award also had not been fully implemented for DESNZ as at 31 March 2024.

	DESNZ 2023‑24 Lower quartile	DESNZ 2023‑24 Median	DESNZ 2023‑24 Upper quartile	BEIS 2022‑23 Lower quartile	BEIS 2022‑23 Median	BEIS 2022‑23 Upper quartile
Total pay & benefits	39,793	52,646	61,125	32,290	42,531	57,005
Ratio	4.84:1	3.66:1	3.15:1	5.70:1	4.41:1	3.29:1
Salary	38,405	46,704	56,500	31,457	41,363	51,120

Notes to the remuneration report

The information in the remuneration report relates solely to the core department. Similar information relating to chief executives and most senior managers of other bodies of the departmental family is given in the individual annual reports and accounts of the relevant bodies.

Single total figure of remuneration

Salary

‘Salary’ includes gross salary; overtime; reserved rights to London weighting or London allowances; recruitment and retention allowances; private office allowances and any other allowance to the extent that it is subject to UK taxation. This report is based on accrued payments made by the department and thus recorded in these accounts.

In respect of Ministers in the House of Commons, departments bear only the cost of the additional Ministerial remuneration; the salary for their services as an MP £86,584 (from 1 April 2023) and various allowances to which they are entitled are borne centrally. However, the arrangement for Ministers in the House of Lords is different in that they do not receive a salary but rather an additional remuneration, which cannot be quantified separately from their Ministerial salaries. This total remuneration, as well as the allowances to which they are entitled, is paid by the department, and is therefore shown in full in the figures above.

Bonuses

Bonuses are based on performance levels attained and are made as part of the appraisal process. Bonuses relate to the performance in the year in which they become payable to the individual. The bonuses reported in 2023-24 relate to performance in 2022-23 and the comparative bonuses reported for 2022-23 relate to the performance in 2021-2022.

Pension benefits

Ministerial pensions

Pension benefits for Ministers are provided by the Parliamentary Contributory Pension Fund (PCPF). The scheme is made under statute and the rules are set out in the Ministers’ etc. Pension Scheme 2015, available at: Rules of the Parliamentary Contributory Pension Fund (The Ministers’ etc Pension Scheme 2015).

Those ministers who are Members of Parliament may also accrue an MP’s pension under the PCPF (details of which are not included in this report).

Benefits for ministers are payable from State Pension age under the 2015 scheme. Pensions are re-valued annually in line with Pensions Increase legislation both before and after retirement. The contribution rate from May 2015 is 11.1% and the accrual rate is 1.775% of pensionable earnings.

The figure shown for pension value includes the total pension payable to the member under both the pre- and post-2015 Ministerial pension schemes.

Ministerial pensions - the Cash Equivalent Transfer Value (CETV)

This is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member’s accrued benefits and any contingent spouse’s pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the pension benefits, they have accrued in their former scheme.

The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total Ministerial service, not just their current appointment as a Minister. CETVs are calculated in accordance with The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and do not take account of any actual or potential reduction to benefits resulting from Lifetime Allowance Tax which may be due when pension benefits are taken.

Ministerial pensions - the real increase in the value of the CETV

This is the element of the increase in accrued pension funded by the Exchequer. It excludes increases due to inflation and contributions paid by the Minister. It is worked out using common market valuation factors for the start and end of the period.

Civil Service pensions:
Pension benefits are provided through the Civil Service pension arrangements. Before 1 April 2015, the only scheme was the Principal Civil Service Pension Scheme (PCSPS), which is divided into a few different sections – classic, premium, and classic plus provide benefits on a final salary basis, whilst nuvos provides benefits on a career average basis. From 1 April 2015 a new pension scheme for civil servants was introduced – the Civil Servants and Others Pension Scheme or alpha, which provides benefits on a career average basis. All newly appointed civil servants, and the majority of those already in service, joined the new scheme.

The PCSPS and alpha are unfunded statutory schemes. Employees and employers make contributions (employee contributions range between 4.6% and 8.05%, depending on salary). The balance of the cost of benefits in payment is met by monies voted by Parliament each year. Pensions in payment are increased annually in line with the Pensions Increase legislation. Instead of the defined benefit arrangements, employees may opt for a defined contribution pension with an employer contribution, the partnership pension account.

In alpha, pension builds up at a rate of 2.32% of pensionable earnings each year, and the total amount accrued is adjusted annually in line with a rate set by HM Treasury. Members may opt to give up (commute) pension for a lump sum up to the limits set by the Finance Act 2004. All members who switched to alpha from the PCSPS had their PCSPS benefits ‘banked’, with those with earlier benefits in one of the final salary sections of the PCSPS having those benefits based on their final salary when they leave alpha.

The accrued pensions shown in this report are the pension the member is entitled to receive when they reach normal pension age, or immediately on ceasing to be an active member of the scheme if they are already at or over normal pension age. Normal pension age is 60 for members of classic, premium, and classic plus, 65 for members of nuvos, and the higher of 65 or State Pension Age for members of alpha. The pension figures in this report show pension earned in PCSPS or alpha – as appropriate. Where a member has benefits in both the PCSPS and alpha, the figures show the combined value of their benefits in the 2 schemes but note that the constituent parts of that pension may be payable from different ages.

When the government introduced new public service pension schemes in 2015, there were transitional arrangements which treated existing scheme members differently based on their age. Older members of the PCSPS remained in that scheme, rather than moving to alpha. In 2018, the Court of Appeal found that the transitional arrangements in the public service pension schemes unlawfully discriminated against younger members.

As a result, steps are being taken to remedy those 2015 reforms, making the pension scheme provisions fair to all members. The public service pensions remedy^{[Footnote 2]} is made up of 2 parts. The first part closed the PCSPS on 31 March 2022, with all active members becoming members of alpha from 1 April 2022. The second part removes the age discrimination for the remedy period, between 1 April 2015 and 31 March 2022, by moving the membership of eligible members during this period back into the PCSPS on 1 October 2023. This is known as ‘rollback’.

For members who are in scope of the public service pension remedy, the calculation of their benefits for the purpose of calculating their Cash Equivalent Transfer Value and their single total figure of remuneration, as of 31 March 2023 and 31 March 2024, reflects the fact that membership between 1 April 2015 and 31 March 2022 has been rolled back into the PCSPS. Although members will in due course get an option to decide whether that period should count towards PCSPS or alpha benefits, the figures show the rolled back position, that is the PCSPS benefits for that period.

The partnership pension account is an occupational defined contribution pension arrangement which is part of the Legal & General Mastertrust. The employer makes a basic contribution of between 8% and 14.75% (depending on the age of the member). The employee does not have to contribute but, where they do make contributions, the employer will match these up to a limit of 3% of pensionable salary (in addition to the employer’s basic contribution). Employers also contribute a further 0.5% of pensionable salary to cover the cost of centrally provided risk benefit cover (death in service and ill-health retirement).

Further details about the Civil Service pension arrangements can be found at the Civil Service Pensions website.

Civil service pensions - Cash Equivalent Transfer Values:
A Cash Equivalent Transfer Value (CETV) is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member’s accrued benefits and any contingent spouse’s pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the benefits accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total membership of the pension scheme, not just their service in a senior capacity to which disclosure applies.

The figures include the value of any pension benefit in another scheme or arrangement which the member has transferred to the Civil Service pension arrangements. They also include any additional pension benefit accrued to the member as a result of their buying additional pension benefits at their own cost.

CETVs are worked out in accordance with The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and do not take account of any actual or potential reduction to benefits resulting from Lifetime Allowance Tax which may be due when pension benefits are taken.

Civil service pensions - Real increase in CETV:
This reflects the increase in CETV that is funded by the employer. It does not include the increase in accrued pension due to inflation, contributions paid by the employee (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market valuation factors for the start and end of the period.

Parliamentary accountability report

Statement of Outturn against Parliamentary Supply (audited information)

Overview

In addition to the primary statements prepared under IFRS, the Government Financial Reporting Manual (FReM) requires the Department for Energy Security and Net Zero to prepare a Statement of Outturn against Parliamentary Supply (SOPS) and supporting notes.

The SOPS and related notes are subject to audit, as detailed in the certificate and report of the comptroller and auditor general to the House of Commons.

The SOPS is a key accountability statement that shows, in detail, how an entity has spent against their supply estimate. Supply is the monetary provision (for resource and capital purposes) and cash (drawn primarily from the Consolidated Fund), that Parliament gives statutory authority for entities to utilise. The estimate details supply and is voted on by Parliament at the start of the financial year.

Should an entity exceed the limits set by their supply estimate, called control limits, their accounts will receive a qualified opinion.

The format of the SOPS mirrors the supply estimates, published on gov.uk, to enable comparability between what Parliament approves and the final outturn.

The SOPS contain a summary table, detailing performance against the control limits that Parliament have voted on, cash spent (budgets are compiled on an accruals basis and so outturn will not exactly tie to cash spent) and administration.

Non-voted Budgets generally comprise CFERs (Consolidated Fund Extra Receipts) that represent operating income or expenditure financed directly from the Consolidated Fund as a standing service or from the National Insurance Fund. Non-voted expenditure does not require Parliamentary authority, but is included within budgets set by HMT for completeness.

Estimates and outturn spend are disclosed gross (gross expenditure and income) for activities of the core department and net for the activities of the departmental group’s arm’s length bodies.

The supporting notes on pages 105 to 116 detail the following: outturn by estimate line, providing a more detailed breakdown (note 1); a reconciliation of Outturn to Net operating expenditure in the SoCNE, to tie the SOPS to the financial statements (note 2); a reconciliation of Outturn to Net cash requirement (note 3); and an analysis of income payable to the Consolidated Fund (note 4).

The SOPS and estimates are compiled against the budgeting framework, which is similar to, but different from, IFRS. An understanding of the budgeting framework and an explanation of key terms is provided on page 26, in the financial review section of the performance report.

Further information on the public spending framework and the reasons why budgeting rules are different to IFRS can also be found in chapter 1 of the Consolidated Budgeting Guidance, available on GOV.UK.

The SOPS provides a detailed view of financial performance, in a form that is voted on and recognised by Parliament. The financial review, in the performance report, provides a summarised discussion of outturn against estimate and functions as an introduction to the SOPS disclosures.

DESNZ has had several prior period adjustments including machinery of government (MoG) change affecting its estimate and accounts for the year ended 31 March 2024 and the comparative information for the year ended 31 March 2023. Details of the changes are provided in note 25.

Summary table 2023‑24

Figures in the areas outlined in thick line cover the voted control limits voted by Parliament. Refer to the Supply Estimates guidance manual, available on GOV.UK, for detail on the control limits voted by Parliament. Significant variances between Outturn and the Estimate are explained in the financial review on pages 26 to 29.

Departmental Expenditure Limit

	Notes	Outturn Voted £’000	Outturn Non-voted £’000	Outturn Total £’000	Estimate Voted £’000	Estimate Non-voted £’000	Estimate Total £’000	Outturn vs Estimate: saving/ (excess) Voted £’000	Outturn vs Estimate: saving/ (excess) Total £’000	2022‑23 outturn Total £’000
Resource	Note 1.1	2,348,147	(971,813)	1,376,334	2,798,310	(1,049,934)	1,748,376	450,163	372,042	13,071,954
Capital	Note 1.2	5,127,574	(129)	5,127,445	5,909,567	-	5,909,567	781,993	782,122	6,199,689
Total DEL	-	7,475,721	(971,942)	6,503,779	8,707,877	(1,049,934)	7,657,943	1,232,156	1,154,164	19,271,643

Annually Managed Expenditure

	Notes	Outturn Voted £’000	Outturn Non-voted £’000	Outturn Total £’000	Estimate Voted £’000	Estimate Non-voted £’000	Estimate Total £’000	Outturn vs Estimate: saving/ (excess) Voted £’000	Outturn vs Estimate: saving/ (excess) Total £’000	2022‑23 outturn Total £’000
Resource	Note 1.1	(13,546,623)	-	(13,546,623)	352,196	-	352,196	13,898,819	13,898,819	(95,620,566)
Capital	Note 1.2	82,489	(142,400)	(59,911)	118,099	(142,400)	(24,301)	35,610	35,610	(143,354)
Total AME	-	(13,464,134)	(142,400)	(13,606,534)	470,295	(142,400)	327,895	13,934,429	13,934,429	(95,763,920)

Total budget

	Notes	Outturn Voted £’000	Outturn Non-voted £’000	Outturn Total £’000	Estimate Voted £’000	Estimate Non-voted £’000	Estimate Total £’000	Outturn vs Estimate: saving/ (excess) Voted £’000	Outturn vs Estimate: saving/ (excess) Total £’000	2022‑23 outturn Total £’000
Resource	Note 1.1	(11,198,476)	(971,813)	(12,170,289)	3,150,506	(1,049,934)	2,100,572	14,348,982	14,270,861	(82,548,612)
Capital	Note 1.2	5,210,063	(142,529)	5,067,534	6,027,666	(142,400)	5,885,266	817,603	817,732	6,056,335
Total budget expenditure	-	(5,988,413)	(1,114,342)	(7,102,755)	9,178,172	(1,192,334)	7,985,838	15,166,585	15,088,593	(76,492,277)

Total budget and non‑budget

	Notes	Outturn Voted £’000	Outturn Non-voted £’000	Outturn Total £’000	Estimate Voted £’000	Estimate Non-voted £’000	Estimate Total £’000	Outturn vs Estimate: saving/ (excess) Voted £’000	Outturn vs Estimate: saving/ (excess) Total £’000	2022‑23 outturn Total £’000
Total budget and non‑budget	-	(5,988,413)	(1,114,342)	(7,102,755)	9,178,172	(1,192,334)	7,985,838	15,166,585	15,088,593	(76,492,277)

Net cash requirement 2023‑24

	SOPS note	Outturn £’000	Estimate £’000	2023‑24 Outturn vs Estimate: saving/(excess) £’000	2022‑23 Outturn total £’000
Net cash requirements	3	12,774,130	17,157,538	4,383,408	48,299,813

Administration costs 2023‑24

	SOPS note	Outturn £’000	Estimate £’000	2023‑24 Outturn vs Estimate: saving/(excess) £’000	2022‑23 Outturn total Restated £’000
Administration costs	1.1	396,967	420,289	23,322	344,967

Although not a separate voted limit, any breach of the administration budget, will also result in an excess vote.

Notes to the SOPS, 2023‑24 (audited information)

SOPS 1. Outturn detail, by estimate line

SOPS 1.1 Analysis of resource outturn by estimate line

Significant variances between outturn and estimate are explained in the financial review on pages 26 to 29.

Spending in Departmental Expenditure Limits (DEL):

	Resource outturn: Administration, Gross £’000	Resource outturn: Administration, Income £’000	Resource outturn: Administration, Net £’000	Resource outturn: Programme, Gross £’000	Resource outturn: Programme, Income £’000	Resource outturn: Programme, Net £’000	Resource outturn: Total £’000	Estimate: Total £’000	Estimate: Virements £’000	Estimate: Total inc. virements £’000	2023‑24 Outturn vs Estimate: saving/ (excess) £’000	2022‑23 Total £’000
Voted expenditure
A: Delivering affordable energy for households and businesses	-	-	-	148,610	(9,913)	138,697	138,697	246,372	(3,113)	243,259	104,562	12,623,280
B: Ensuring that our energy system is reliable and secure	-	-	-	(183,109)	(7,016)	(190,125)	(190,125)	107,527	(17,382)	90,145	280,270	(589,628)
C: Taking action on climate change and decarbonisation	-	-	-	141,950	(331)	141,619	141,619	145,752	(4,133)	141,619	-	95,142
D: Managing our energy legacy safely and responsibly	-	-	-	174,616	-	174,616	174,616	183,270	-	183,270	8,654	40,849
E: Science and Research	-	-	-	3,029	-	3,029	3,029	5,872	(62)	5,810	2,781	2,954
F: Capability	406,941	(57,577)	349,364	36,405	(3,038)	33,367	382,731	375,269	7,462	382,731	-	320,487
G: Ensuring that our energy system is reliable and secure (ALB) net	-	-	-	9,880	-	9,880	9,880	1	9,879	9,880	-	332
H: Taking action on climate change and decarbonisation (ALB) net	6,692	-	6,692	30,472	-	30,472	37,164	29,918	7,246	37,164	-	20,796
I: Managing our energy legacy safely and responsibly (ALB) net	8,857	-	8,857	48,446	-	48,446	57,303	57,241	62	57,303	-	42,018
J: Science and Research (ALB) net	-	-	-	10,604	-	10,604	10,604	12,080	-	12,080	1,476	9,449
K: NDA and SLC expenditure (ALB) net	32,016	-	32,016	1,550,933	-	1,550,933	1,582,949	1,635,008	-	1,635,008	52,059	1,539,517
Deliver an ambitious industrial strategy	-	-	-	(361)	-	(361)	(361)	-	-	-	361	-
Government as Shareholder (ALB) net	38	-	38	3	-	3	41	-	41	41	-	76
Total voted DEL	454,544	(57,577)	396,967	1,971,478	(20,298)	1,951,180	2,348,147	2,798,310	-	2,798,310	450,163	14,105,272
Non-voted expenditure
L: Nuclear Decommissioning Authority Income (CFER)	-	-	-	(92)	(971,721)	(971,813)	(971,813)	(1,049,934)	-	(1,049,934)	(78,121)	(1,033,318)
Total non-voted DEL	-	-	-	(92)	(971,721)	(971,813)	(971,813)	(1,049,934)	-	(1,049,934)	(78,121)	(1,033,318)
Total spending in DEL	454,544	(57,577)	396,967	1,971,386	(992,019)	979,367	1,376,334	1,748,376	-	1,748,376	372,042	13,071,954

Spending in Annually Managed Expenditure (AME):

	Resource outturn: Administration, Gross £’000	Resource outturn: Administration, Income £’000	Resource outturn: Administration, Net £’000	Resource outturn: Programme, Gross £’000	Resource outturn: Programme, Income £’000	Resource outturn: Programme, Net £’000	Resource outturn: Total £’000	Estimate: Total £’000	Estimate: Virements £’000	Estimate: Total inc. virements £’000	2023‑24 Outturn vs Estimate: saving/ (excess) £’000	2022‑23 Total £’000
Voted expenditure
M: Delivering affordable energy for households and businesses	-	-	-	835,564	(3,676)	831,888	831,888	2,078,720	(46,131)	2,032,589	1,200,701	31,137,612
N: Taking action on climate change and decarbonisation	-	-	-	19,731	(1,707)	18,024	18,024	5,200	12,824	18,024	-	(3,480)
O: Managing our energy legacy safely and responsibly	-	-	-	(113,924)	(14,099)	(128,023)	(128,023)	(232,890)	104,867	(128,023)	-	(57,181)
P: Science and Research	-	-	-	(16,192)	-	(16,192)	(16,192)	976,550	-	976,550	992,742	(69,240)
Q: Capability	-	-	-	3,192	-	3,192	3,192	5,400	-	5,400	2,208	(9,526)
R: Renewable Heat Incentive	-	-	-	1,218,131	-	1,218,131	1,218,131	1,172,000	46,131	1,218,131	-	1,001,880
S: Taking action on climate change and decarbonisation (ALB) net	-	-	-	4,009,238	-	4,009,238	4,009,238	7,600,000	(12,824)	7,587,176	3,577,938	(13,507,265)
T: Managing our energy legacy safely and responsibly (ALB) net	-	-	-	(587,756)	-	(587,756)	(587,756)	639,286	(104,867)	534,419	1,122,175	(3,385,547)
U: Science and Research (ALB) net	-	-	-	504	-	504	504	1,430	-	1,430	926	(4,360)
V: Government as Shareholder (ALB) net	-	-	-	(86,285)	-	(86,285)	(86,285)	(80,000)	-	(80,000)	6,285	(87,548)
W: Nuclear Decommissioning Authority (ALB) net	-	-	-	(18,371,822)	-	(18,371,822)	(18,371,822)	(11,813,500)	-	(11,813,500)	6,558,322	(110,365,377)
Deliver an ambitious industrial strategy	-	-	-	(478)	-	(478)	(478)	-	-	-	478	(14,051)
Government as Shareholder	-	-	-	-	-	-	-	-	-	-	-	(256,483)
Ensuring that our energy system is reliable and secure	-	-	-	(25,518)	(411,526)	(437,044)	(437,044)	-	-	-	437,044	-
Total voted AME	-	-	-	(13,115,615)	(431,008)	(13,546,623)	(13,546,623)	352,196	-	352,196	13,898,819	(95,620,566)
Non-voted expenditure
Total spending in AME	-	-	-	(13,115,615)	(431,008)	(13,546,623)	(13,546,623)	352,196	-	352,196	13,898,819	(95,620,566)

Total resource spending

	Resource outturn: Administration, Gross £’000	Resource outturn: Administration, Income £’000	Resource outturn: Administration, Net £’000	Resource outturn: Programme, Gross £’000	Resource outturn: Programme, Income £’000	Resource outturn: Programme, Net £’000	Resource outturn: Total £’000	Estimate: Total £’000	Estimate: Virements £’000	Estimate: Total inc. virements £’000	2023‑24 Outturn vs Estimate: saving/ (excess) £’000	2022‑23 Total £’000
Total resource	454,544	(57,577)	396,967	(11,144,229)	(1,423,027)	(12,567,256)	(12,170,289)	2,100,572	-	2,100,572	14,270,861	(82,548,612)
Non-budget: voted
Total Resource and non-budget spending	454,544	(57,577)	396,967	(11,144,229)	(1,423,027)	(12,567,256)	(12,170,289)	2,100,572	-	2,100,572	14,270,861	(82,548,612)

The total Estimate columns include virements. Virements are the reallocation of provision in the Estimates that do not require parliamentary authority (because Parliament does not vote to that level of detail and delegates to HM Treasury). Further information on virements is provided in the Supply Estimates Manual, available on GOV.UK.

The outturn vs estimate column is based on the total including virements. The estimate total before virements have been made is included so that users can tie the estimate back to the Estimates laid before Parliament.

SOPS 1.2. Analysis of capital Outturn by Estimate line

Spending in Departmental Expenditure Limit (DEL):

	Capital outturn: Gross £’000	Capital outturn: Income £’000	Capital outturn: Net total £’000	Estimate: Total £’000	Estimate: Virements £’000	Estimate: Total inc. virements £’000	2023‑24 Outturn vs Estimate: saving/ (excess) £’000	2022‑23 Outturn Total £’000
Voted expenditure
A: Delivering affordable energy for households and businesses	775,882	(69,870)	706,012	895,331	-	895,331	189,319	365,271
B: Ensuring that our energy system is reliable and secure	55,326	(381,039)	(325,713)	568,401	(402,694)	165,707	491,420	2,076,559
C: Taking action on climate change and decarbonisation	624,034	(10,335)	613,699	622,405	-	622,405	8,706	421,343
D: Managing our energy legacy safely and responsibly	7,474	-	7,474	12,630	-	12,630	5,156	9,131
E: Science and Research	28,576	-	28,576	36,773	-	36,773	8,197	-
F: Capability	133,676	-	133,676	93,153	40,523	133,676	-	(1,147)
G: Ensuring that our energy system is reliable and secure (ALB) net	1,274,171	-	1,274,171	912,000	362,171	1,274,171	-	840,898
H: Taking action on climate change and decarbonisation (ALB) net	3,602	-	3,602	9,593	-	9,593	5,991	1,628
I: Managing our energy legacy safely and responsibly (ALB) net	16,904	-	16,904	27,863	-	27,863	10,959	24,311
J: Science and Research (ALB) net	277,053	-	277,053	290,800	-	290,800	13,747	264,318
K: NDA and SLC expenditure (ALB) net	2,392,120	-	2,392,120	2,440,618	-	2,440,618	48,498	2,192,595
Government as Shareholder	-	-	-	-	-	-	-	4,782
Total voted DEL	5,588,818	(461,244)	5,127,574	5,909,567	-	5,909,567	781,993	6,199,689
Non-voted expenditure
L: Nuclear Decommissioning Authority Income (CFER)	-	(129)	(129)	-	-	129	-	-
Total non-voted DEL	-	(129)	(129)	-	-	129	-	-
Total spending in DEL	5,588,818	(461,373)	5,127,445	5,909,567	-	5,909,696	781,993	6,199,689

Spending in Annually Managed Expenditure (AME):

	Capital outturn: Gross £’000	Capital outturn: Income £’000	Capital outturn: Net total £’000	Estimate: Total £’000	Estimate: Virements £’000	Estimate: Total inc. virements £’000	2023‑24 Outturn vs Estimate: saving/ (excess) £’000	2022‑23 Outturn Total £’000
Voted expenditure
O: Managing our energy legacy safely and responsibly	14,099	-	14,099	14,099	-	14,099	-	-
P: Science and Research	76,500	-	76,500	104,000	-	104,000	27,500	-
S: Taking action on climate change and decarbonisation (ALB) net	(74)	-	(74)	-	-	-	74	74
T: Managing our energy legacy safely and responsibly (ALB) net	(225)	-	(225)	-	-	-	225	558
U: Science and Research (ALB) net	(7,811)	-	(7,811)	-	-	-	7,811	(1,586)
Ensuring that our energy system is reliable and secure	-	-	-	-	-	-	-	-
Total voted AME	82,489	-	82,489	118,099	-	118,099	35,610	(954)
Non-voted expenditure
X: Managing our energy legacy safely and responsibly (CFER)	-	(142,400)	(142,400)	(142,400)	-	(142,400)	-	(142,400)
Total non-voted AME	-	(142,400)	(142,400)	(142,400)	-	(142,400)	-	(142,400)
Total spending in AME	82,489	(142,400)	(59,911)	(24,301)	-	(24,301)	35,610	(143,354)

Total capital spending

	Capital outturn: Gross £’000	Capital outturn: Income £’000	Capital outturn: Net total £’000	Estimate: Total £’000	Estimate: Virements £’000	Estimate: Total inc. virements £’000	2023‑24 Outturn vs Estimate: saving/ (excess) £’000	2022‑23 Outturn Total £’000
Total capital	5,671,307	(603,773)	5,067,534	5,885,266	-	5,885,395	817,603	6,056,335
Non-budget
Total capital and non-budget spending	5,671,307	(603,773)	5,067,534	5,885,266	-	5,885,395	817,603	6,056,335

Notes:

The total Estimate columns include virements. Virements are the reallocation of provision in the Estimates that do not require parliamentary authority (because Parliament does not vote to that level of detail and delegates to HM Treasury). Further information on virements is provided in the Supply Estimates Manual, available on gov.uk. The outturn vs estimate column is based on the total including virements. The estimate total before virements have been made is included so that users can tie the estimate back to the Estimates laid before Parliament.

Significant variances between Outturn and Estimate are explained in the financial review on pages 26 to 29.

SOPS 2. Reconciliation of outturn to net operating expenditure

As noted in the overview to the SOPS, outturn and the estimates are compiled against the budgeting framework – which is similar to, but different from, IFRS. Therefore, this reconciliation bridges the resource outturn to net operating expenditure, linking the SOPS to the financial statements.

The prior year comparatives present the net operating expenditure as reported on 31 March 2023.

	SOPS note	2023‑24 Outturn total £’000	2022‑23 Outturn total £’000
Total resource Outturn in Statement of Outturn against Parliamentary Supply	SOPS 1.1	(12,170,289)	(82,548,612)
Add
NDA remedial decommissioning costs which are capital in budgets but taken through the SoCNE	-	6,300,867	5,940,900
Share of profit/loss of joint ventures and associates	-	(73,179)	(340,565)
Other non-budget	-	179,337	104,691
Research and development costs	-	1,732,921	1,298,067
Total	-	8,139,946	7,003,083
Less
NDA income scored in SOPS only	-	34,854	57,613
Capital income in SoCNE	-	(5,969)	(2,037)
Research and development income	-	(72,341)	(54,753)
Prior period adjustments	-	-	1,057,709
Other
Impact of intra group transactions	-	(4,057,939)	(4,043,279)
Total	-	(4,101,395)	(2,984,747)
Net operating expenditure for the period in Consolidated Statement of Comprehensive Net Expenditure	SoCNE	(8,131,738)	(78,530,266)

Some NDA decommissioning utilisations are capital in nature and therefore not included in resource outturn, this results in them being a reconciling item.

Capital grants are budgeted for as capital departmental expenditure limit (CDEL) but accounted for as expenditure and income in the SoCNE, and therefore function as a reconciling item between resource and net operating expenditure.

Share of profit/loss of joint ventures and associates is accounted for in the SoCNE as a non‑budget item and therefore function as a reconciling item.

Other non-budget includes intra group transactions where the cash payment is eliminated and the budget impact is therefore recognised as a reconciling item.

Research and Development is budgeted for as CDEL but accounted for as income and expenditure in the SoCNE and therefore functions as a reconciling item.

SOPS 3. Reconciliation of net resource outturn to net cash requirement

As noted in the overview to the SOPS, outturn and the estimates are compiled against the budgeting framework - not on a cash basis. Therefore, this reconciliation bridges the resource and capital outturn to the net cash requirement.

	SOPS note	Outturn £’000	Estimate £’000	Outturn vs Estimate: saving/ (excess) £’000
Total Resource Outturn	SOPS 1.1	(12,170,289)	2,100,572	14,270,861
Total Capital Outturn	SOPS 1.2	5,067,534	5,885,266	817,732
Adjustments for ALBs
Remove voted resource and capital	-	9,382,440	(1,762,338)	(11,144,778)
Removal of intra-group transactions	-	(162,772)	-	162,772
Add cash in grant-in-aid	-	4,292,568	5,288,120	995,552
Add share purchase and loans	-	1,089,963	-	(1,089,963)
Less share capital repayment	-	(121,362)	-	121,362
Dividends from Joint ventures and associates	-	(86,272)	-	86,272
Adjustments to remove non‑cash items
Depreciation	-	(56,752)	(77,663)	(20,911)
New provisions and adjustments to previous provisions	-	(109,675)	2,055,238	2,164,913
Other non-cash items	-	787,301	(1,200)	788,501
Adjustments to reflect movements in working balances
Increase/(decrease) in receivables	-	(2,288,573)	-	2,288,573
(Increase)/decrease in payables	-	2,464,477	2,281,658	(182,819)
Use of provisions	-	3,571,202	195,551	(3,375,651)
Total	-	18,762,543	7,979,366	(10,783,177)
Removal of non-voted budget items
Other non-voted budget items	-	1,114,342	1,192,334	77,992
Total	-	1,114,342	1,192,334	77,992
Net cash requirement	-	12,774,130	17,157,538	4,383,408

SOPS 4. Amounts of income to the Consolidated Fund

SOPS 4.1 – Analysis of income payable to the Consolidated Fund

In addition to the income retained by the department, the following income is payable to the consolidated fund (cash receipts being shown in italics).

The type of income allowed to be retained by the department is set out in the ambit of the Supply Estimate. Income of a type not included in the Estimate, or in excess of amounts agreed with HM Treasury, is required to be surrendered to the Consolidated Fund. This includes the commercial income of the Nuclear Decommissioning Authority and receipts arising from Coal Pension surpluses, which forms the bulk of the amounts shown below, together with other miscellaneous receipts.

	2023‑24 Outturn total: Accruals £’000	2023‑24 Outturn total: Cash basis £’000	2022‑23 Outturn total: Accruals £’000	2022‑23 Outturn total: Cash basis £’000
Operating income of the NDA within the Ambit	515,843	398,208	572,228	562,000
Income outside the ambit of the Estimate	30,656	30,656	42,544	42,544
[Excess] cash surrenderable to the Consolidated Fund	142,400	142,400	142,400	142,400
Total amount payable to the Consolidated Fund	688,899	571,264	757,172	746,944

SOPS 4.2: Consolidated Fund income

DESNZ also collects income as an agent for the consolidated fund. This income is disclosed separately in the trust statement, and is not included in SOPS 4.1 – income payable to the consolidated fund.

Other parliamentary disclosures (audited information)

Losses statement

	2023‑24 Core department	2023‑24 Departmental group	2022‑23 Core department	2022‑23 Departmental group
Total number of losses	576	43,049	359	314,683
Total value of losses - £m	-	4	-	33

Losses over £300,000 – core department

There were no losses over £300,000 for the core department in 2023-24.

Losses over £300,000 – departmental group

Store losses:
A loss of £1.3m was reported by Magnox in 2023-24. This relates to the administration of a supplier and the resulting write off of stock with no economic value.

A loss of £1.9m was reported by the NDA in 2023-24. This relates to the administration of a supplier and the resulting write off of stock with no economic value.

A loss of £0.3m (£301,551) was reported by the NDA in 2023-24. This relates to Fruitless Payments.

Special payments:
Special payments include extra-contractual, ex gratia, compensation, special severance payments, extra-statutory and extra-regulatory.

	2023‑24 Departmental group	2022‑23 Departmental group
Total number of special payments	2	5
Total value of special payments - £m	1	-

*Please note that the total value of special payments for 2023-24 was £546k.

Special payments over £300,000:
Special payments totalling £377,207 were incurred by the Nuclear Decommissioning Authority relating to employment matters - relevant Data Protection Act considerations have been applied.

Gifts:
Managing Public Money requires annual reports to report on gifts made by departments if their total value exceeds £300,000. Gifts with a value of more than £300,000 should be noted individually. During 2023-24, the core department did not give any reportable gifts above £300,000.

Fees and charges

Core department:
Details of fees and charges generated by the core department can be found in note 6.1.

Details of charging polices relating to arm’s length bodies may be found in their respective published accounts.

Remote contingent liabilities:

In addition to contingent liabilities reported in the financial statements, under IAS 37, the department also reports remote contingent liabilities. These are liabilities that have a small, remote likelihood of resulting in a transfer of economic benefit by the department. The department has given the following guarantees, indemnities, or letters of comfort.

Quantifiable remote contingent liabilities:

	1 April 2023 £m	Increase / (decrease) in year £m	Crystallised in year £m	Expired in year £m	31 March 2024 £m	Amount reported to Parliament by Departmental Minute £m
The core department has indemnified the Coal Authority against potential claims arising from remunerated advisory work undertaken for other public sector bodies where settlement exceeds the Authority’s professional indemnity insurance.	3	-	-	-	3	-

Unquantifiable remote contingent liabilities - core department:

Statutory indemnities:

• Indemnities have been given to the UK Atomic Energy Authority to cover certain indemnities provided by the authority to carriers and British Nuclear Fuels plc against certain claims for damage caused by nuclear matter in the course of carriage
• Indemnity has been given to National Grid’s liabilities with regards to the interconnector linking the UK and France
• A statutory liability will arise under the Nuclear Installations Act 1965 (as amended by the Nuclear Installations (Liability for Damage) Order 2016) for third-party claims in excess of the operator’s liability in the event of a nuclear accident in the UK
• Indemnities have been provided to certain nuclear site companies and the Nuclear Decommissioning Authority in respect of personal injury claims in the event of a nuclear incident
• Indemnities have been provided to the Energy Price Guarantee scheme administrators in relation to legal fees in case of a legal action against the administrators
• A contingent liability exists in relation to the possibility of claims for any exposure to ionising radiation arising from the fusion activities of the UK Atomic Energy Authority

Legal costs:

• A contingent liability exists in relation to various ongoing legal cases. The cost is dependent on the outcome of cases which currently cannot be estimated

Indemnities against personal liability:

• Indemnities have been given to the directors appointed by the core department to wholly owned subsidiaries. These indemnities are against personal liability following any legal action against the companies
• Indemnities have been provided to directors appointed to the Low Carbon Contracts Company Limited and Electricity Settlements Company Limited against personal liability following any legal action against the companies, to be triggered only after all other means have been exhausted, that is company and directors’ insurance and recovery of costs through their levies
• Indemnities have been provided to the Low Carbon Contracts Company Limited and Electricity Settlements Company Limited in respect of their officers, to be triggered only after all other means have been exhausted, that is company and directors’ insurance and recovery of costs through their levies
• Indemnities have been provided to trustees of the Nuclear Liabilities Fund appointed by the Secretary of State against personal liability in the event of legal action against the Fund
• Indemnities have been provided to trustees of the Nuclear Liabilities Fund appointed by British Energy (now EDF Energy) against personal liability in the event of legal action against the Fund, to be triggered only in the event of failed recourse to indemnities from EDF Energy
• Indemnities have been provided to the Oil and Gas Authority (OGA) who operate as the North Sea Transition Authority (NSTA), in respect of certain liabilities that could arise from the actions or omissions of its directors and otherwise arising from a director holding or having held office in the company
• An indemnity has been provided to Elexon Limited against third party claims relating to the design and/or implementation of the contracts for difference and Capacity Markets settlement systems which are not covered by insurance and/or guarantees by their subcontractors
• Indemnities have been provided to the MCS Service Company Limited and trustees of the MCS Charitable Foundation for any liability that might arise as a result of actions taken and decisions made for which the core department was ultimately responsible prior to transfer to the Company and Charitable Foundation of responsibility for the Microgeneration Certification Scheme (MCS) in April 2018

Losses or damages under agreements:

• An indemnity has been provided for any losses or damages caused to other parties to the Energy Research Partnership consortium agreement

Environmental clean-up:

• A contingent liability exists in relation to the costs of retrieving and disposing of sealed radioactive sources under the Environmental Permitting (England and Wales) Regulations 2016 in the event that a company keeping such sources becomes insolvent
• A contingent liability arises in relation to the remediation of land contaminated by a nuclear occurrence as the Secretary of State is deemed to be the appropriate person to bear responsibility under section 9 of The Radioactive Contaminated Land (Modification of Enactments) (England) (Amendment) Regulations 2007 SI 2007/3245
• The Nuclear Liabilities Fund was established in 1996 to meet certain costs of decommissioning eight nuclear power plants in the UK that have been owned and operated by EDF Energy Nuclear Generation Limited since 2009. A constructive obligation was created in 2002 when the government undertook to underwrite the fund in respect of these liabilities to the extent that the assets of the fund might fall short; any surplus generated by the Fund would be paid over to the government once the liabilities have been met. The total undiscounted estimated liability as at 31 March 2024 of £26.7 billion (31 March 2023: £26.5 billion) has a present value of £13.5 billion (31 March 2023: £19.0 billion) which includes an allowance for future inflation. The value of the fund as at 31 March 2024 is £20.7 billion (31 March 2023: £20.5 billion). It is not possible to quantify the extent to which the government may be obliged to contribute to the fund, nor of any surplus that may arise, given the high level of uncertainty relating to estimation of decommissioning costs and investment returns on fund assets over a future period exceeding 100 years
• Under the United Nations Convention on the Law of the Sea (UNCLOS) 1982, OSPAR decision 98/3, the Energy Act 2004 and the Petroleum Act 1998, the department would become responsible for decommissioning most oil, gas and renewable energy installations in the event that operators are unable to fulfil their decommissioning commitments
• The 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

Others:

• A contingent liability exists in respect of the risks associated with the core department assuming responsibility for uplifts in pension contributions for the UK Atomic Energy Authority’s non-active pension scheme members
• The Secretary of State Investor Agreement (SOSIA) provides protections in certain scenarios where the Hinkley Point C nuclear plant is shut down for reasons that are political or due to certain changes in insurance arrangements or certain changes in law. Payments under the SOSIA would be expected in the first instance to be made using funds from the Supplier Obligation but in certain circumstances they could also come direct from the Secretary of State, relying on spending powers granted under the relevant Appropriation Act or, if payments were to be made over a period longer than 2 years, seeking a new spending power at the time. The payments could be up to £22 billion excluding non‑decommissioning operational costs that may be incurred after any shutdown. However, the liability to make payments under the SOSIA is almost entirely within the control of HM Government

Unquantifiable remote contingent liabilities - departmental group:

NDA:

• The NDA has non-quantifiable contingent liabilities arising from indemnities given as part of the contracts for the management of the nuclear site license companies. These indemnities are in respect of the uninsurable residual risk that courts in a country which is not party to the Paris and Brussels Conventions on third party liability in the field of nuclear energy may accept jurisdiction to determine liability in the event of a nuclear incident. Indemnities are provided to the previous Parent Body Organisations (PBOs) of LLWR, Magnox, Sellafield and Dounreay covering the periods of their ownership. Post the PBO arrangement, Magnox and Dounreay & LLWR have now joined to form Nuclear Restoration Services

Other potential or expected liabilities (unaudited):

The department has entered into the following arrangements for which their details are provided in the interest of transparency. They are not contingent liabilities which require disclosure under IAS 37 or Managing Public Money, as the obligating events did not exist at the reporting date.

Hinkley Point C Funded Decommissioning Programme (FDP) and Waste Transfer Contracts (WTCs):

The contract with NNB Generation Company Limited (NNB) to build Hinkley Point C (HPC) nuclear power plant includes a Contract for Difference between NNB and the Low Carbon Contracts Company Ltd, an FDP and associated FDP documents including WTCs between NNB and the core department.

The FDP and related documents including WTCs require NNB to make prudent provision for their waste and decommissioning liabilities. To meet their liabilities, the operator must set up a fund with an independent governance framework and will pay into it so that it is on track to fund the liabilities that arise from decommissioning and waste management. The fund will report annually to the Secretary of State and a full review will be conducted every 5 years to ensure that the fund is on track to meet all its liabilities. If it is off track, the operator will be required to take corrective action. These liabilities are strictly the operator’s responsibility and the probability of taxpayers picking up these liabilities is remote.

Alongside the FDP, the government has entered into 2 WTCs. These set out terms on which the government will take title to and liability for the spent fuel and intermediate level waste (ILW) from the site after decommissioning in order to dispose of the waste safely. The WTCs have generally been prepared in line with the government’s published waste transfer pricing methodology.^{[Footnote 3]} Although the WTCs provide a default price based on today’s best estimate, they allow the waste transfer price to be set after a specified later date. The final price agreed is subject to a cap, but the likelihood of the future costs exceeding the agreed cap is considered remote.

Capacity agreements:

A capacity agreement is a regulatory and rule-based arrangement between National Grid, as System Operator, and a successful applicant in a Capacity Market auction. The capacity agreement provides a regular retainer payment to the successful applicant or ‘capacity provider’.

At a Capacity Auction, applicants who offer the lowest bid can win a capacity agreement. A Capacity Auction relates to delivery of capacity approximately 4 years ahead (T-4). For instance, the capacity agreements resulting from the 2024 T-4 Capacity Auction will require capacity to be delivered in the Delivery Year commencing 2028/29

There are currently 12 live capacity auctions out of a total of 19, which have been awarded from the start of the scheme in 2014 for the delivery year commencing 2016-17 and 8 active auctions in financial year 2023-24.

	Departmental group as at 31 Mar 2024 Due within 1 year £m	Departmental group as at 31 Mar 2024 Due within 2-5 years £m	Departmental group as at 31 Mar 2024 Due over 5 years £m	Departmental group as at 31 Mar 2024 Total £m	Departmental group as at 31 Mar 2023 Due within 1 year £m	Departmental group as at 31 Mar 2023 Due within 2-5 years £m	Departmental group as at 31 Mar 2023 Due over 5 years £m	Departmental group as at 31 Mar 2023 Total £m
Capacity Market - ESC	1,379	10,039	8,784	20,202	1,089	7,032	6,621	14,742
Income from levy - ESC	(1,379)	(10,039)	(8,784)	(20,202)	(1,089)	(7,032)	(6,621)	(14,742)
Total	-	-	-	-	-	-	-	-

The department has responsibility for administering the settlement process. This role is undertaken by the Electricity Settlements Company (ESC). The obligation for ESC to make capacity payments only arises when the respective levy is received from licensed suppliers and the generator provides the agreed level of capacity.

Reconciliation of contingent liabilities included in the supply estimate to the accounts (unaudited):

A reconciliation of differences between contingency liabilities reported in the supply estimates and those reported in the annual report and accounts are set out below. Further detail on the contingent liabilities can be found in note 22 Contingent Liabilities and in the Supplementary Estimates 2023-24.

Quantifiable contingent liabilities:

Description	Amount per supply estimate £’000	Amount disclosed in ARA £’000	Variance
Core department - Energy Price Guarantee (EPG)	6,000	Unquantifiable	The remaining contingent liability relates to the amounts that might be payable following the completion of the reconciliation process. This amount cannot be reliably estimated.
Core department - Energy Bills Support Scheme and Alternative Fuel Payment in Northern Ireland (EBSS AFP NI)	3,125	Not disclosed	Contingent liability expired
Core department - Wave Hub transfer: The department has indemnified Cornwall Council up to 2028 in respect of the transfer of Wave Hub	5,000	Not disclosed	Contingent liability expired
Core department - Wave Hub Transfer - The department has indemnified Cornwall Council for any liability relating to the European Regional Development Fund (ERDF) that might arise from the transfer (a) any breach of the ERDF Funding Agreements which occurred on or before the transfer date of 31 March 2017 and (b) any action or omission by the core department or Wave Hub in relation to the ERDF Funding Agreements prior to the transfer which leads to finding of an irregularity by any competent authority.	18,000	Not disclosed	Contingent liability expired

Unquantifiable contingent liabilities:

Description	Included in the supply estimates	Disclosed in the ARA	Explanation of difference
Core department - Claims for judicial review - in relation to the transfer of the business of Bulb Energy Limited (in special administration)	Not disclosed	Unquantifiable	Contingent liability arose during the financial year 2022-23
CPNA - 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	Unquantifiable	Not disclosed	Contingent liability expired
NDA - Uranic Material - Held inventories of reprocessed uranic material which may result in as-yet-unquantified liabilities	Not disclosed	Unquantifiable	Contingent liability arose during the period

The certificate and report of the Comptroller and Auditor General to the House of Commons

Opinion on financial statements

I certify that I have audited the financial statements of the Department for Energy Security and Net Zero (the Department) and of its Departmental Group for the year ended 31 March 2024 under the Government Resources and Accounts Act 2000. The Department comprises the core Department. The Departmental Group consists of the Department and the bodies designated for inclusion under the Government Resources and Accounts Act 2000 (Estimates and Accounts) Order 2023. The financial statements comprise: the Department’s and the Departmental Group’s:

• Statement of Financial Position as at 31 March 2024
• Statement of Comprehensive Net Expenditure, Statement of Cash Flows and Statement of Changes in Taxpayers’ Equity for the year then ended; and
• the related notes including the significant accounting policies

The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and UK adopted international accounting standards.

In my opinion, the financial statements:

• give a true and fair view of the state of the Department and the Departmental Group’s affairs as at 31 March 2024 and its net expenditure for the year then ended; and
• have been properly prepared in accordance with the Government Resources and Accounts Act 2000 and HM Treasury directions issued thereunder

Opinion on regularity

In my opinion, in all material respects:

• the Statement of Outturn against Parliamentary Supply properly presents the outturn against voted Parliamentary control totals for the year ended 31 March 2024 and shows that those totals have not been exceeded; and
• the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them

Basis for opinions

I conducted my audit in accordance with International Standards on Auditing (UK) (ISAs UK), applicable law and Practice Note 10 ‘Audit of Financial Statements and Regularity of Public Sector Bodies in the United Kingdom (2022)’. My responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’ section of my certificate.

Those standards require me and my staff to comply with the Financial Reporting Council’s ‘Revised Ethical Standard 2019’. I am independent of the Department and its Group in accordance with the ethical requirements that are relevant to my audit of the financial statements in the UK. My staff and I have fulfilled our other ethical responsibilities in accordance with these requirements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

The framework of authorities described in the table below has been considered in the context of my opinion on regularity.

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Framework of authorities

Authorising legislation:

• Government Resources and Accounts Act 2000
• The Energy Act 2004, The Energy Act 2008, The Energy Act 2010, The Energy Act 2011, The Energy Act 2013 The Energy Act 2016, and the Energy Act 2023
• The Energy Prices Act 2022
• The Contracts for Difference Order and Regulations 2014
• The Coal Industry Act 1994
• The Energy Bills Discount Scheme Regulations 2023

Parliamentary authorities:

• Supply and Appropriations Act

HM Treasury and related authorities:

• Managing Public Money

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Conclusions relating to going concern

In auditing the financial statements, I have concluded that the Department and its Group’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work I have performed, I have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Department and its Group’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

My responsibilities and the responsibilities of the Accounting Officer with respect to going concern are described in the relevant sections of this certificate.

The going concern basis of accounting for the Department and its Group is adopted in consideration of the requirements set out in HM Treasury’s Government Financial Reporting Manual, which requires entities to adopt the going concern basis of accounting in the preparation of the financial statements where it is anticipated that the services which they provide will continue into the future.

Overview of my audit approach

Key audit matters

Key audit matters are those matters that, in my professional judgment, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditor, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of the audit of the financial statements as a whole, and in forming my opinion thereon. I do not provide a separate opinion on these matters.

I have determined that there are no other key audit matters to communicate in our certificate and report.

This is not a complete list of all risks identified through the course of my audit but only those areas that had the greatest effect on my overall audit strategy, allocation of resources and direction of effort. I have not, for example, included information relating to the work I have performed around:

• management override of controls, other than to the extent where this was part of my work on significant estimates made by management as set out below;
• the valuation of the Bulb Support Loan
• the valuation of the investment in Sizewell C
• the valuation of accrued Renewable Heat Incentive expenditure
• the regularity of energy scheme payments
• estimation uncertainty in respect of Coal Authority provisions
• the valuation of the United Kingdom Atomic Energy Authority (UKAEA) site restoration provision
• the valuation of UKAEA property
• the accuracy and completeness of group consolidation adjustments and eliminations
• the presumed risk of fraud in revenue recognition in the Nuclear Decommissioning Authority (NDA)

where my work has not identified any matters to report.

The key audit matters were discussed with the Audit and Risk Assurance Committee; their report on matters that they considered to be significant to the financial statements is set out on pages 65-66.

As this is the first year that the Department has produced financial statements following a Machinery of Government Change, this is the first time I have completed a risk assessment.

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First year production of the department’s financial statements

Description of risk:

A Machinery of Government change was announced on 7 February 2023. DESNZ and its group was formed from the energy security and net zero activities of the former Department for Business, Energy and Industrial Strategy (BEIS). The functions of BEIS were split between DESNZ, the newly formed Department for Science Innovation and Technology and the newly formed Department for Business and Trade (the successor departments). Due to the timing of the announcement, HM Treasury directed that the departments’ 2022–23 accounts should be prepared in line with the Supplementary Estimates in place for 2022–23. This is therefore the first year of account for the Department in its current form.

The Department took part in a process with the two other Departments, formed from BEIS to compile the data for the Department to prepare its first-year financial statements. Legacy BEIS systems, including underlying general ledger; payroll; cash management; and payables/receivables systems, continued to run for much of the year, as the successor departments managed the transition process. To prepare financial statements for 2023-24, the Department recognised its share of assets, liabilities and transactions from the former BEIS financial reporting systems. The Department did this by taking part in a process which mapped the 2023-24 transactions in the legacy financial systems to the successor departments, manually raising journals to transfer the transactions. Further detail of the exercise undertaken by the Department can be found in note 25.

I considered that the manual nature of this data transfer gave rise to a significant risk of material misstatement. The risks to misstatement being:

• inaccurate or incomplete data migration as a result of error in the scoping or execution of the mapping exercise
• a pervasive opportunity for management override of controls due to the significant level of management judgement in the data transfer exercise; and
• misstatement in the cash and supply year-end balance, due to balancing adjustments posted in year. These balancing adjustments were required as the former BEIS bank account continued to be used for material transactions during the year, and as legacy balances were settled between the successor departments

Further, this is the first time the Department has produced these accounts, which have a significantly different focus, and a lower materiality level than the former BEIS accounts. I therefore considered that there was a significant risk that adjustments required to align the accounting policies across the new group would not be complete, and that the disclosures in the accounts would not be accurate or sufficient. This risk particularly applies to adjustments and disclosures relating to transactions or balances in components of the group which were not previously material to BEIS.

How the scope of my audit responded to the risk:

In relation to the identified risks relating to the first-year production of the Department’s financial statements:

• I assessed the design and implementation of controls in relation to:
  • the governance and high-level review of the data transfer exercise;
  • the posting of manual journals and adjustments;
  • the recognition of supply drawn down and the presentation of reserves;
  • bank reconciliation processes; and
  • group consolidation and accounting policy alignment.
• I reviewed the data transfer process undertaken by management to ensure each step was supported by appropriate evidence and was calculated correctly. I reperformed the mapping exercise from the former BEIS financial reporting systems into the new Department systems. I performed variance analysis to assess the reasonableness of key assumptions made and evaluated other potential ways of carrying out the exercise using available bases to either support or contradict the approach taken. I reconciled the mapped BEIS ledger to the journals posted into the department.
• Throughout my audit, I performed classification testing to ensure that transactions and balances were in the correct department as at 31 March 2024.
• I performed a stand back exercise to evaluate whether there was any evidence of management bias or manipulation of results through the data transfer exercise.
• I vouched supply received (ie funding received) to cash records and tested all non-trivial manual journal adjustments to supply. I reperformed the department’s bank reconciliation exercise and tested a sample of reconciling items. I reperformed the derivation of the Statement of Cash Flows.
• I reviewed all non-trivial consolidation adjustments and assessed the completeness of adjustments made to align accounting policies across the departmental group. I reviewed the department’s accounts to ensure they have appropriately included disclosures which arise from the components that are relevant at a group level. Where material, I have obtained representation from the component auditor to support those disclosures.

Key observations:

In the course of completing this work, I did not identify any material misstatements in the information transferred into the Department and disclosed in these financial statements. I noted no instances of irregularity.

I found that management’s exercise to transfer data from BEIS has been performed appropriately. I did not identify any indication of management bias or manipulation.

I consider the disclosures included to be sufficient to enable users to understand the material risks and activities of the new departmental group.

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Restatement of prior year figures

Refer to Note 25 Restatement of Statement of Financial position and Statement of Comprehensive Net Expenditure as a result of Machinery of Government (MoG) changes, changes to the Designation Order and other restatements.

Description of risk:

As the Machinery of Government change was a re-arranging of central government functions, the Department has treated this as a ‘transfer by merger’. This means that this set of financial statements have been prepared as if the Department had always existed. This has necessitated the restatement of all prior year figures in the accounts.

To prepare these figures, the Department took part in a process which identified all transactions and balances in the 2022-23 and 2021-22 BEIS financial statements and re-allocated these between the three successor departments. For transactions in the prior year’s Statement of Comprehensive Net Expenditure, this exercise did not require a significant level of management judgement as it largely involved the mechanical application of the departments’ ledger mapping. However, for balances on the prior years’ Statements of Financial Position, this required detailed manual analysis utilising management’s judgement and their understanding of the operations of the successor departments. This was particularly complex for areas where there was only a single balance in BEIS that needed to be spread across several successor departments including the Department, most notably standard payables and receivables, cash and supply. Further detail of the exercise undertaken by the Department can be found in note 25.

As a result, I judged that there was a significant risk that restated prior period figures may not be accurately derived or were not appropriately presented or disclosed. This risk applied to all restated figures. I applied particular attention to considering the impact of any uncertainty introduced by management estimates across the restated Statements of Financial Position on the presentation of reserves.

How the scope of my audit responded to the risk:

In relation to the restatement of prior year figures:

• I assessed the design and implementation of the governance and high-level review of the restatement exercise.
• I reperformed the restatement exercise using auditor knowledge, understanding of the three new departments’ policy objectives and audited mappings of the BEIS ledger system to the new departments.
• I performed an analytical procedure to compare any simplifying assumptions to other alternatives to confirm that management’s choice of assumption was reasonable and did not create any significant uncertainty in the comparative amounts disclosed.
• I inspected evidence confirming that the split of cash, supply, payables, and receivables had been agreed in writing between the three successor departments at an appropriately senior level.
• I reconciled workings to all lines in the audited BEIS 2022–23 trial balance to confirm the full trial balance has been analysed and mapped.
• I performed a reconciliation of the 2022–23 Department trial balance presented for audit to my independently split BEIS 2022–23 trial balance, and then to restated figures presented in the accounts.
• I reviewed and challenged the disclosure in the department’s accounts to ensure it is sufficient to enable a user to understand the exercise undertaken by management.
• I performed a stand back exercise to consider management bias in any estimates made, and ensured journals posted reconciled to audited workings.

Key observations:

In the course of completing this work, I did not identify any material misstatements in the restated figures disclosed in these financial statements.

Following my analytical procedures, I do not consider there to be any material estimation uncertainty in the comparative figures, aside from cash and reserves as at March 2022, as disclosed in Note 25.

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Group Valuation of nuclear provisions

Refer to Note 18 Provisions for liabilities and charges - NDA nuclear decommissioning liabilities as at 31 March 2024 £105 billion.

Description of risk:

The Departmental Group holds nuclear decommissioning provisions from the Nuclear Decommissioning Authority (NDA) which is comprised of several individual estimates of the decommissioning costs associated with the NDA’s subsidiaries and for several additional sites and entities. The nuclear provisions are valued at an undiscounted liability of £199 billion as at 31 March 2024 (see note 18.1 for further information).

As a result, I judged that there was a significant risk that nuclear decommissioning figures may not be accurately derived or may not be appropriately presented or disclosed. I applied particular attention to considering the impact of any uncertainty introduced by management estimates across the nuclear decommissioning provisions. The nuclear provisions are inherently uncertain due to the requirement for management to estimate the cost of decommissioning facilities of uncertain content and condition over long timescales as the programme of decommissioning work is currently planned to take until 2137. Specifically, the Sellafield estimate is subject to a wide range of judgments, including uncertainties on plutonium strategy, adjustments to improve cost estimates associated with immature projects, and required savings to be achieved by Sellafield.

How the scope of my audit responded to the risk:

In relation to the valuation of the nuclear provisions I performed the following procedures:

• reviewed the design and implementation of key controls surrounding the nuclear provision estimate. This includes testing the change controls process through which updates to the nuclear provision are made
• challenged the change control process by which changes are made to the Lifetime Plans underpinning each site’s estimate
• assessed management’s processes for challenging key assumptions across the nuclear provisions
• challenged the peer review process over the nuclear provision model
• tested the supporting evidence for key judgements and assumptions made by management in valuing nuclear provisions, including management’s response to changes in circumstances since the prior year. In particular I monitored strategy developments, such as the approach to providing for the Geological Disposal Facility, and whether the provision represents management’s best estimate based on evidence available at the reporting date
• assessed and challenged management on the key assumptions in respect of material amounts provided in-year, including using external experts to assess the reasonableness of the more technical assumptions;
• agreed the inputs to the nuclear provision to supporting evidence, including change controls raised and annual submissions provided by subsidiaries;
• assessed management’s application of the data, methodology, and modelling previously agreed to revenue recognised from long term contracts;
• assessed the NDA’s approach to addressing estimation uncertainty in its cost estimates in the provision by taking a granular approach to assess the merits of the approaches used across the different elements of the provision;
• assessed the accuracy and completeness of utilisation of the provision as reported within the financial statements;
• assessed the completeness of the provision, by reference to sanction approvals and other developments; and
• assessed the disclosures over the provision within the financial statements, particularly in how they address estimation uncertainty

Key observations:

In response to my work, the department has made an adjustment to reduce the value of the provision by £6.8 billion. This related to efficiencies identified in respect of the provision, which were not supported by sufficient audit evidence.

I also draw attention to the disclosures made in notes 1.22 and 18.1 to the financial statements concerning the uncertainties inherent in the nuclear decommissioning provisions. As set out in these notes, given the very long timescales involved and the complexity of the plants and materials being handled, a considerable degree of uncertainty remains over the value of the liability for decommissioning nuclear sites designated by the Secretary of State. Significant changes to the liability could occur as a result of subsequent information and events which are different from the current assumptions adopted by the Nuclear Decommissioning Authority.

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Group Valuation of Contracts for Difference

Refer to Note 9 Derivative financial instruments – Net liability of Contracts for Difference as at 31 March 2024 £89.2 billion.

Description of risk:

The Departmental Group holds Contracts for Difference (CfD) which are financial instruments intended to support investment in low carbon energy generation. These are classified as derivatives under IFRS 9, with the fair value of the CfDs being determined using an income (discounted cash flow) approach which requires estimation of future payments which will be made, or received from, generators.

At 31 March 2024, the disclosed fair value of the liability was £89.2 billion. The Statement of Financial Position disclosed £2.9 billion of contracts in an asset position, with £92.1 billion in a liability position.

The measurement of the fair value of CfD liabilities is a Key Audit Matter because of the degree of estimation uncertainty inherent in forecasting generation volumes and wholesale prices into the 2030s and the material values involved. The long-term forecasts used by the Low Carbon Contracts Company (LCCC) to value the CfD liabilities require a series of significant judgements that are both complex and highly subjective and are susceptible to developments in the energy markets and changes in government policy.

Specifically, the Contract for Difference for Hinkley Point C (HPC) (fair value of liabilities was £56.5 billion at 31 March 2024), has a contract duration more than double (35 years) the length of other CfDs (typically 15 years) entered into by the company. The fair value estimate for the HPC CfD reflects the company’s assumptions around start date, future nuclear generation volumes and specifically the construction of Sizewell C.

The HPC CfD includes a clause which adjusts the contractual strike price if a CfD or equivalent support in relation to Sizewell C is entered into before the reactor one start date. LCCC is therefore required to estimate the likelihood of this occurring. The company has assessed this likelihood at 75% in March 2024, increased from 50% in March 2023 and this has been reflected in the HPC strike price, which is the agreed sale price per unit of electricity generated per the contract.

How the scope of my audit responded to the risk:

A key element of the CfD valuation is the forecast of future electricity prices, which is the most sensitive assumption in the CfD model.

For the HPC CfD, the estimated start dates for reactors one and two of the Hinkley Point C power station is a material assumption with a large degree of uncertainty around the outcome of future events. The currently estimated start dates for both HPC reactors means that generation is expected to fall outside of their respective Target Commissioning Windows, resulting in contract erosion.

In relation to the valuation of the Contracts for Difference, I performed the following procedures:

• assessed management’s processes for challenging key assumptions across CfDs;
• assessed the reasonableness of the future forecast electricity price series via consultation with industry experts.
• reviewed other model assumptions and inputs, vouching these to contracts or benchmarking them to independent information and analysis where possible. reperformed the modelling to develop an auditor’s valuation to evaluate management’s point estimate.
• compared the outputs from LCCC’s valuation model to the workings and journals underpinning the financial statements;
• reviewed the application of the new accounting policy arising from the adaptation of IFRS 9 (Financial Instruments) for the public-sector context, and
• reviewed the disclosures included in the financial statements in relation to the CfDs

Key observations:

At 31 March 2024, the CfD liability on the Statement of Financial Position is significantly larger following a change in the requirements of the Government Financial Reporting Manual which adapts IFRS 9 for the public sector. There are also CfDs with a positive fair value which are collectively material to the financial statements. I am content that management has made a reasonable estimate and presented the valuation, as well as the associated sensitivity disclosures, appropriately. I did not identify any material misstatements. I do, however, draw attention to the disclosures made in notes 1.20 and 9 to the financial statements concerning the measurement of liabilities relating to CfDs. As set out in these notes, there is a high degree of estimation uncertainty inherent in forecasting electricity generation volumes and wholesale electricity prices into the late 2030s (and 2060s for the purposes of the Hinkley Point C CfD) and there is a great deal of subjectivity involved in selecting a wholesale electricity price forecast input that conforms to the principles of fair value. The fair value estimate is particularly sensitive to other assumptions, including the rate applied to discount projected future difference payments. Significant changes to the liability could occur as a result of subsequent information and events which are different from the current assumptions adopted.

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Valuation of defined benefit pension schemes (NDA)

Refer to Note 19 Retirement benefit obligations – Group net pension surplus as at 31 March 2024 £663 million.

Description of risk:

The Departmental Group financial statements include assets and liabilities associated with eight funded defined-benefit pension schemes from the Nuclear Decommissioning Authority (NDA). The gross assets and liabilities of these schemes as at 31 March 2024 are £5.4 billion and £4.7 billion respectively. The net pension surplus is a material balance and relies on actuarial valuations of the pension liabilities, which are subject to estimation uncertainty and are based on significant assumptions, as well as estimations of the value of the pension asset portfolios, which include hard-to-value assets including private equity and investment funds.

How the scope of my audit responded to the risk:

In relation to the valuation of the defined benefit pension schemes for NDA I performed the following procedures:

• assessed the design and implementation of controls in respect of NDA defined benefit pension schemes
• assessed the independence, capability and competence of the scheme actuaries used to provide valuations of scheme liabilities to ensure the auditor can place reliance on their work as management’s experts
• considered the appropriateness of key assumptions used to value scheme liabilities and benchmarking against similar assumptions set by other NAO audited bodies
• performed data verification testing on the scheme membership data; and
• performed substantive testing of scheme assets using relevant reports from fund managers, audited fund accounts, transactions in the fund around the reporting date and relevant controls reports to ensure the valuations as at 31 March 2024 were appropriate

Key observations:

Review of the financial and demographic assumptions as at 31 March 2024 confirmed these assumptions as reasonable. Detailed sample testing of scheme assets found these to be materially accurate.

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Application of materiality

Materiality

I applied the concept of materiality in both planning and performing my audit, and in evaluating the effect of misstatements on my audit and on the financial statements. This approach recognises that financial statements are rarely absolutely correct, and that an audit is designed to provide reasonable, rather than absolute, assurance that the financial statements are free from material misstatement or irregularity. A matter is material if its omission or misstatement would, in the judgement of the auditor, reasonably influence the decisions of users of the financial statements.

Based on my professional judgement, I determined overall materiality for the Department and its group’s financial statements as a whole as follows:

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Departmental Group

Materiality for the group: £1.98 bn

Basis for determining materiality: 2% of nuclear liabilities of £98,960 million

Rational for the benchmark applied:
The nuclear decommissioning provision is the largest item in the Departmental Group Statement of Financial Position and is of primary interest to users of the accounts as the largest and most complex balance being managed by the Department. Its valuation is subject to significant uncertainty arising from both the complexity of the decommissioning work to be performed and the very long timescales involved. I have therefore set materiality at a level intended to reflect my view that a greater level of precision would potentially overstate the confidence that users may place on using this information for their decision making.

Particular classes of transactions, account balances and disclosures where an additional level of materiality has been applied:
This materiality has been used to assess the material accuracy of the Nuclear Decommissioning Provision valuation and all non-cash adjustments made to the Nuclear Decommissioning Provision.

Reduced materiality for the group financial statements: £1.78 bn

Basis for determining materiality: 2% of Contracts for Difference fair value of £89,151 million

Rational for the benchmark applied:
The fair value for Contracts for Difference is the second largest item in the Departmental Group Statement of Financial Position. The Contracts for Difference are of particular interest to users of the accounts as large financial instruments being used as a major policy intervention. The balances are highly volatile and sensitive to model assumptions outside of the Department’s control. The high level of uncertainty in the valuation of these derivative contracts informs my judgement that a separate materiality be applied that is reflective of this uncertainty and does not obscure user interest in other drivers of the financial statements.

Particular classes of transactions, account balances and disclosures where an additional level of materiality has been applied:
This materiality has been used to assess the material accuracy of the Contracts for Difference valuation and all non-cash adjustments made to the Contracts for Difference.

Residual materiality for the group financial statements:: £132 million

Basis for determining residual account materiality: 1.25% of adjusted gross expenditure

Rationale for the benchmark applied:
The department’s main activities result in grant expenditure in line with their policy objectives – a key area of user interest. I have therefore used expenditure as the materiality benchmark for balances and transactions not related to the nuclear decommissioning liabilities or contracts for difference. I have adjusted the expenditure benchmark to exclude movements relating to the Nuclear Decommission Provision and the Contracts for Difference, because this line reflects valuation movements sensitive to external market movements. I have used 1.25% as the basis for determining materiality as this is within the range normally used for departments.

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Parent Department

Materiality for the group financial statements as a whole: £112 million

Basis for determining materiality: 1.25% of gross expenditure

Rational for the benchmark applied:
Expenditure is used as the materiality benchmark for the general group materiality level because the Department’s main activities result in grant expenditure in line with their policy objectives – a key area of user interest.

Particular classes of transactions, account balances and disclosures where an additional level of materiality has been applied:
All balances within the Parent financial statements have been audited to this materiality, except for where we consider them to be material by nature eg certain disclosures such as the Remuneration report, and losses and special payments.

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Performance materiality

I set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality of the financial statements as a whole. Group performance materiality was set at 65% of Group materiality for the 2023-24 audit as the Department was a new engagement this year. This is in line with my usual approach to setting materiality, which recognises that there may be a higher risk of misstatement in a new engagement.

Other materiality considerations

Apart from matters that are material by value (quantitative materiality), there are certain matters that are material by their very nature and would influence the decisions of users if not corrected. Such an example is any errors reported in the Related Parties note in the financial statements. Assessment of such matters needs to have regard to the nature of the misstatement and the applicable legal and reporting framework, as well as the size of the misstatement.

I applied the same concept of materiality to my audit of regularity. In planning and performing my audit work to support my opinion on regularity and in evaluating the impact of any irregular transactions, I considered both quantitative and qualitative aspects that would reasonably influence the decisions of users of the financial statements.

Error Reporting Threshold

I agreed with the Audit and Risk Assurance Committee that I would report to it all uncorrected misstatements identified through my audit in excess of £1,000,000, as well as differences below this threshold that in my view warranted reporting on qualitative grounds. I also report to the Audit and Risk Assurance Committee on disclosure matters that I identified when assessing the overall presentation of the financial statements.

Total unadjusted audit differences reported to the Audit and Risk Assurance Committee would have decreased net expenditure by £34 million.

Audit scope

The scope of my Group audit was determined by obtaining an understanding of the Department and its Group’s environment, including Department and Group-wide controls, and assessing the risks of material misstatement at the Group level.

The Department has total liabilities of £159.8 billion. The group’s significant components by size are the Nuclear Decommissioning Agency (NDA) and the Low Carbon Contracts Company (LCCC). These components hold the key assets and liabilities in the Group balances. I have audited the full financial information in the Core Department, as well as the group consolidation. The audits of the significant components were complete at the time of my completion of the group audit. As group auditor, I have gained assurance from the auditors of the significant and material components and engaged regularly on the group significant risks such as valuation of nuclear provisions in NDA; valuation of defined benefit pension schemes in NDA; presumed risk of fraud in revenue recognition in NDA; valuation of Contracts for Difference (excluding Hinkley C) in LCCC; and valuation of the Hinkley Point C Contract for Difference in LCCC.

I obtained assurance over the risks of non-compliance with the entity’s framework of authorities through enquiries of component auditors. I also considered the audit opinions for evidence of material non-compliance. This gave me the assurances I required for my opinions on the group financial statements.

I also audited the Statement of Parliamentary Supply, which includes figures derived from the group financial statements. I obtained assurance over the classification of items within this statement and confirmed that these had been properly disclosed and classified. I also tested reconciling items.

I covered 94% of the group’s gross expenditure and 98% of the group’s gross liabilities through audit work on significant components, with the remainder covered by analytical procedures performed on non-significant components. For these non-significant components, audit of the financial information was complete at the point of my analytical procedures. Together with my audit work on consolidation adjustments, this work gave me the evidence I needed for my opinion on the group financial statements as a whole.

Group coverage

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Group coverage: diagram data

Group	Percentage
Nuclear Decommissioning Authority	80%
Low Carbon Contracts Company	14%
Parent (DESNZ)	4%
Other components	2%

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Other information

The other information comprises the information included in the Annual Report but does not include the financial statements and my auditor’s certificate and report thereon. The Accounting Officer is responsible for the other information.

My opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in my certificate, I do not express any form of assurance conclusion thereon.

My responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or my knowledge obtained in the audit or otherwise appears to be materially misstated.

If I identify such material inconsistencies or apparent material misstatements, I am required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact.

I have nothing to report in this regard.

Opinion on other matters

In my opinion the part of the Remuneration and Staff Report to be audited has been properly prepared in accordance with HM Treasury directions issued under the Government Resources and Accounts Act 2000.

In my opinion, based on the work undertaken in the course of the audit:

• the parts of the Accountability Report subject to audit have been properly prepared in accordance with HM Treasury directions issued under the Government Resources and Accounts Act 2000
• the information given in the Performance and Accountability Reports for the financial year for which the financial statements are prepared is consistent with the financial statements and is in accordance with the applicable legal requirements

Matters on which I report by exception

In the light of the knowledge and understanding of the Department and its Group and their environment obtained in the course of the audit, I have not identified material misstatements in the Performance and Accountability Reports.

I have nothing to report in respect of the following matters which I report to you if, in my opinion:

• adequate accounting records have not been kept by the Department and its Group or returns adequate for my audit have not been received from branches not visited by my staff; or
• I have not received all of the information and explanations I require for my audit; or
• the financial statements and the parts of the Accountability Report subject to audit are not in agreement with the accounting records and returns; or
• certain disclosures of remuneration specified by HM Treasury’s Government Financial Reporting Manual have not been made or parts of the Remuneration and Staff Report to be audited is not in agreement with the accounting records and returns; or
• the Governance Statement does not reflect compliance with HM Treasury’s guidance

Responsibilities of the Accounting Officer for the financial statements

As explained more fully in the Statement of Accounting Officer’s Responsibilities, the Accounting Officer is responsible for:

• maintaining proper accounting records
• providing the C&AG with access to all information of which management is aware that is relevant to the preparation of the financial statements such as records, documentation and other matters
• providing the C&AG with additional information and explanations needed for his audit
• providing the C&AG with unrestricted access to persons within the Department and its Group from whom the auditor determines it necessary to obtain audit evidence
• ensuring such internal controls are in place as deemed necessary to enable the preparation of financial statements to be free from material misstatement, whether due to fraud or error
• preparing financial statements which give a true and fair view and are in accordance with HM Treasury directions issued under the Government Resources and Accounts Act 2000
• preparing the annual report, which includes the Remuneration and Staff Report, in accordance with HM Treasury directions issued under the Government Resources and Accounts Act 2000; and
• assessing the Department and its Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Accounting Officer anticipates that the services provided by the Department and its Group will not continue to be provided in the future

Auditor’s responsibilities for the audit of the financial statements

My responsibility is to audit, certify and report on the financial statements in accordance with the Government Resources and Accounts Act 2000.

My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a certificate that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was considered capable of detecting non-compliance with laws and regulations including fraud

I design procedures in line with my responsibilities, outlined above, to detect material misstatements in respect of non-compliance with laws and regulations, including fraud. The extent to which my procedures are capable of detecting non-compliance with laws and regulations, including fraud is detailed below.

Identifying and assessing potential risks related to non-compliance with laws and regulations, including fraud

In identifying and assessing risks of material misstatement in respect of non-compliance with laws and regulations, including fraud, I:

• considered the nature of the sector, control environment and operational performance including the design of the Department and its Group’s accounting policies, and strategic priorities
• inquired of management, the Department’s head of internal audit and those charged with governance, including obtaining and reviewing supporting documentation relating to the Department and its Group’s policies and procedures on:
  • identifying, evaluating and complying with laws and regulations;
  • detecting and responding to the risks of fraud; and
  • the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations including the Department and its Group’s controls relating to the Department’s compliance with the Government Resources and Accounts Act 2000, The Energy Act 2004, The Energy Act 2013 and the Energy Act 2023, The Energy Prices Act 2022, The Contracts for Difference Order and Regulations 2014, Supply and Appropriations Act (Amended) and Managing Public Money
• inquired of management, the Department’s head of internal audit and those charged with governance whether:
  • they were aware of any instances of non-compliance with laws and regulations
  • they had knowledge of any actual, suspected, or alleged fraud
• discussed with the engagement team including internal specialists and significant component audit teams regarding how and where fraud might occur in the financial statements and any potential indicators of fraud

As a result of these procedures, I considered the opportunities and incentives that may exist within the Department and its Group for fraud and identified the greatest potential for fraud in the following areas: revenue recognition, posting of unusual journals, complex transactions and bias in management estimates. I have additionally considered the posting of adjustments moving transactions between the successor departments of the former Department for Business, Energy and Industrial Strategy following the Machinery of Government change, particularly where those adjustments aligned with incentives to manipulate the accounts to avoid a breach of control totals. In common with all audits under ISAs (UK), I am required to perform specific procedures to respond to the risk of management override.

I obtained an understanding of the Department and Group’s framework of authority and other legal and regulatory frameworks in which the Department and Group operates. I focused on those laws and regulations that had a direct effect on material amounts and disclosures in the financial statements or that had a fundamental effect on the operations of the Department and its Group. The key laws and regulations I considered in this context included Government Resources and Accounts Act 2000, Managing Public Money, Supply and Appropriation (Main Estimates) Act 2023, The Energy Act 2004, The Energy Act 2013 and the Energy Act 2023, The Energy Prices Act 2022, The Contracts for Difference Order and Regulations 2014 and relevant employment law and pension legislation.

Audit response to identified risk

To respond to the identified risks resulting from the above procedures:

• I reviewed the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described above as having direct effect on the financial statements
• I enquired of management, the Audit and Risk Committee and in-house legal counsel concerning actual and potential litigation and claims
• I reviewed minutes of meetings of those charged with governance and the Board and internal audit reports
• in addressing the risk of fraud through management override of controls, I tested the appropriateness of journal entries and other adjustments; assessed whether the judgements on estimates are indicative of a potential bias; and evaluated the business rationale of any significant transactions that are unusual or outside the normal course of business; and
• I considered the methodologies used by the Department for each grant stream, and re-performed a sample of checks performed by the Department to determine an estimate of fraud and error in these grant streams. I communicated relevant identified laws and regulations and potential risks of fraud to all engagement team members including internal specialists and significant component audit teams and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit

A further description of my responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of my certificate.

Other auditor’s responsibilities

I am required to obtain appropriate evidence sufficient to give reasonable assurance that the Statement of Outturn against Parliamentary Supply properly presents the outturn against voted Parliamentary control totals and that those totals have not been exceeded. The voted Parliamentary control totals are Departmental Expenditure Limits (Resource and Capital), Annually Managed Expenditure (Resource and Capital), Non-Budget (Resource) and Net Cash Requirement.

I am required to obtain sufficient appropriate audit evidence to give reasonable assurance that the expenditure and income recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.

I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control I identify during my audit.

Report

I have no observations to make on these financial statements.

Gareth Davies
Comptroller and Auditor General

13 November 2024

National Audit Office
157-197 Buckingham Palace Road
Victoria
London
SW1W 9SP

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