Annual report and accounts 2022-23: Financial statements (HTML)

Question 1

Consolidated Statement of Comprehensive Net Expenditure

Accepted Answer

for the year ended 31 March 2023

			2022-23		2021-22
		Core department and agencies	Departmental group	Core department and agencie	Departmental group
	Note	£000	£000	£000	£000
Revenue from contracts with customers	3	(1,627,932)	(1,646,704)	(1,545,561)	(1,562,306)
Other operating income	4	(64,091)	(64,332)	(73,244)	(73,243)
Total operating income		(1,692,023)	(1,711,036)	(1,618,805)	(1,635,549)
Staff costs	5	4,303,449	4,563,183	3,895,744	4,148,577
Judicial costs	5	642,224	642,224	613,506	613,506
Purchase of goods and services	6	2,612,076	2,498,230	2,398,237	2,275,220
Depreciation, amortisation and impairment	7	795,474	801,826	819,589	825,891
Legal Aid funded provisions	8	1,924,930	1,924,930	1,742,315	1,742,315
Other provision expenses	8	85,751	86,495	273,921	273,664
Net (gain)/loss on disposal of assets	9	(12,750)	(12,719)	743	898
Revaluation of non-current and financial assets	10	(14,826)	(14,829)	63,234	63,234
Other operating expenditure	11	1,493,014	1,362,591	1,450,596	1,355,939
Total operating expenditure		11,829,342	11,851,931	11,257,885	11,299,244
Net operating expenditure before financing		10,137,319	10,140,895	9,639,080	9,663,695
Finance income		(3)	(3)	-	-
Finance expense	12	77,122	83,461	85,018	91,585
Borrowing cost on provisions		(1,238)	(1,238)	3,685	3,685
Net operating expenditure before tax		10,213,200	10,223,115	9,727,783	9,758,965
Taxation		-	45	-	-
Net expenditure for the year		10,213,200	10,223,160	9,727,783	9,758,965
Other comprehensive net expenditure
Items that will not be reclassified to operating expenditure:
Net (gain)/loss on revaluation of:
Property, plant and equipment		(806,167)	(806,195)	(708,990)	(708,978)
Right of use assets		(19,728)	(19,728)	87,391	87,391
Intangible assets		(9,292)	(9,427)	2,134	2,054
Assets for sale		509	509	23	23
Remeasurement of pension schemes:
Cafcass pension scheme		-	(249,322)	-	(108,268)
LSC pension scheme		48,529	48,529	(22,359)	(22,359)
By-analogy pension schemes		(41)	(1,443)	47	420
Probation pension schemes		(1,969,664)	(1,969,664)	(950,558)	(950,558)
Total comprehensive net expenditure for the year		7,457,346	7,216,419	8,135,471	8,058,690

The notes on pages 169 to 254 form part of these accounts.

Question 2

Consolidated Statement of Financial Position

Accepted Answer

as at 31 March 2023

			2022-23		2021-22
		Core department and agencies	Departmental group	Core department and agencie	Departmental group
	Note	£000	£000	£000	£000
Revenue from contracts with customers	3	(1,627,932)	(1,646,704)	(1,545,561)	(1,562,306)
Other operating income	4	(64,091)	(64,332)	(73,244)	(73,243)
Total operating income		(1,692,023)	(1,711,036)	(1,618,805)	(1,635,549)
Staff costs	5	4,303,449	4,563,183	3,895,744	4,148,577
Judicial costs	5	642,224	642,224	613,506	613,506
Purchase of goods and services	6	2,612,076	2,498,230	2,398,237	2,275,220
Depreciation, amortisation and impairment	7	795,474	801,826	819,589	825,891
Legal Aid funded provisions	8	1,924,930	1,924,930	1,742,315	1,742,315
Other provision expenses	8	85,751	86,495	273,921	273,664
Net (gain)/loss on disposal of assets	9	(12,750)	(12,719)	743	898
Revaluation of non-current and financial assets	10	(14,826)	(14,829)	63,234	63,234
Other operating expenditure	11	1,493,014	1,362,591	1,450,596	1,355,939
Total operating expenditure		11,829,342	11,851,931	11,257,885	11,299,244
Net operating expenditure before financing		10,137,319	10,140,895	9,639,080	9,663,695
Finance income		(3)	(3)	-	-
Finance expense	12	77,122	83,461	85,018	91,585
Borrowing cost on provisions		(1,238)	(1,238)	3,685	3,685
Net operating expenditure before tax		10,213,200	10,223,115	9,727,783	9,758,965
Taxation		-	45	-	-
Net expenditure for the year		10,213,200	10,223,160	9,727,783	9,758,965
Other comprehensive net expenditure
Items that will not be reclassified to operating expenditure:
Net (gain)/loss on revaluation of:
Property, plant and equipment		(806,167)	(806,195)	(708,990)	(708,978)
Right of use assets		(19,728)	(19,728)	87,391	87,391
Intangible assets		(9,292)	(9,427)	2,134	2,054
Assets for sale		509	509	23	23
Remeasurement of pension schemes:
Cafcass pension scheme		-	(249,322)	-	(108,268)
LSC pension scheme		48,529	48,529	(22,359)	(22,359)
By-analogy pension schemes		(41)	(1,443)	47	420
Probation pension schemes		(1,969,664)	(1,969,664)	(950,558)	(950,558)
Total comprehensive net expenditure for the year		7,457,346	7,216,419	8,135,471	8,058,690

The notes on pages 169 to 254 form part of these accounts.

Antonia Romeo
Principal Accounting Officer
24 November 2023

Question 3

Consolidated Statement of Cash Flows

Accepted Answer

for the year ended 31 March 2023

			2022-23		2021-22
		Core department and agencies	Departmental group	Core department and agencie	Departmental group
	Note	£000	£000	£000	£000
Revenue from contracts with customers	3	(1,627,932)	(1,646,704)	(1,545,561)	(1,562,306)
Other operating income	4	(64,091)	(64,332)	(73,244)	(73,243)
Total operating income		(1,692,023)	(1,711,036)	(1,618,805)	(1,635,549)
Staff costs	5	4,303,449	4,563,183	3,895,744	4,148,577
Judicial costs	5	642,224	642,224	613,506	613,506
Purchase of goods and services	6	2,612,076	2,498,230	2,398,237	2,275,220
Depreciation, amortisation and impairment	7	795,474	801,826	819,589	825,891
Legal Aid funded provisions	8	1,924,930	1,924,930	1,742,315	1,742,315
Other provision expenses	8	85,751	86,495	273,921	273,664
Net (gain)/loss on disposal of assets	9	(12,750)	(12,719)	743	898
Revaluation of non-current and financial assets	10	(14,826)	(14,829)	63,234	63,234
Other operating expenditure	11	1,493,014	1,362,591	1,450,596	1,355,939
Total operating expenditure		11,829,342	11,851,931	11,257,885	11,299,244
Net operating expenditure before financing		10,137,319	10,140,895	9,639,080	9,663,695
Finance income		(3)	(3)	-	-
Finance expense	12	77,122	83,461	85,018	91,585
Borrowing cost on provisions		(1,238)	(1,238)	3,685	3,685
Net operating expenditure before tax		10,213,200	10,223,115	9,727,783	9,758,965
Taxation		-	45	-	-
Net expenditure for the year		10,213,200	10,223,160	9,727,783	9,758,965
Other comprehensive net expenditure
Items that will not be reclassified to operating expenditure:
Net (gain)/loss on revaluation of:
Property, plant and equipment		(806,167)	(806,195)	(708,990)	(708,978)
Right of use assets		(19,728)	(19,728)	87,391	87,391
Intangible assets		(9,292)	(9,427)	2,134	2,054
Assets for sale		509	509	23	23
Remeasurement of pension schemes:
Cafcass pension scheme		-	(249,322)	-	(108,268)
LSC pension scheme		48,529	48,529	(22,359)	(22,359)
By-analogy pension schemes		(41)	(1,443)	47	420
Probation pension schemes		(1,969,664)	(1,969,664)	(950,558)	(950,558)
Total comprehensive net expenditure for the year		7,457,346	7,216,419	8,135,471	8,058,690

The notes on pages 169 to 254 form part of these accounts.

Question 4

Consolidated Statement of Changes in Taxpayers’ Equity

Accepted Answer

for the year ended 31 March 2023

			2022-23		2021-22
		Core department and agencies	Departmental group	Core department and agencie	Departmental group
	Note	£000	£000	£000	£000
Revenue from contracts with customers	3	(1,627,932)	(1,646,704)	(1,545,561)	(1,562,306)
Other operating income	4	(64,091)	(64,332)	(73,244)	(73,243)
Total operating income		(1,692,023)	(1,711,036)	(1,618,805)	(1,635,549)
Staff costs	5	4,303,449	4,563,183	3,895,744	4,148,577
Judicial costs	5	642,224	642,224	613,506	613,506
Purchase of goods and services	6	2,612,076	2,498,230	2,398,237	2,275,220
Depreciation, amortisation and impairment	7	795,474	801,826	819,589	825,891
Legal Aid funded provisions	8	1,924,930	1,924,930	1,742,315	1,742,315
Other provision expenses	8	85,751	86,495	273,921	273,664
Net (gain)/loss on disposal of assets	9	(12,750)	(12,719)	743	898
Revaluation of non-current and financial assets	10	(14,826)	(14,829)	63,234	63,234
Other operating expenditure	11	1,493,014	1,362,591	1,450,596	1,355,939
Total operating expenditure		11,829,342	11,851,931	11,257,885	11,299,244
Net operating expenditure before financing		10,137,319	10,140,895	9,639,080	9,663,695
Finance income		(3)	(3)	-	-
Finance expense	12	77,122	83,461	85,018	91,585
Borrowing cost on provisions		(1,238)	(1,238)	3,685	3,685
Net operating expenditure before tax		10,213,200	10,223,115	9,727,783	9,758,965
Taxation		-	45	-	-
Net expenditure for the year		10,213,200	10,223,160	9,727,783	9,758,965
Other comprehensive net expenditure
Items that will not be reclassified to operating expenditure:
Net (gain)/loss on revaluation of:
Property, plant and equipment		(806,167)	(806,195)	(708,990)	(708,978)
Right of use assets		(19,728)	(19,728)	87,391	87,391
Intangible assets		(9,292)	(9,427)	2,134	2,054
Assets for sale		509	509	23	23
Remeasurement of pension schemes:
Cafcass pension scheme		-	(249,322)	-	(108,268)
LSC pension scheme		48,529	48,529	(22,359)	(22,359)
By-analogy pension schemes		(41)	(1,443)	47	420
Probation pension schemes		(1,969,664)	(1,969,664)	(950,558)	(950,558)
Total comprehensive net expenditure for the year		7,457,346	7,216,419	8,135,471	8,058,690

Consolidated Statement of Changes in Taxpayers’ Equity

for the year ended 31 March 2022

				Core department and agencies			Departmental group
		General fund	Revaluation reserve	Total reserves	General fund	Revaluation reserve	Total reserves
	Note	£000	£000	£000	£000	£000	£000
Balance at 1 April 2021		3,510,822	3,825,800	7,336,622	3,217,084	3,827,022	7,044,106
Changes in accounting policy		68,541	-	68,541	68,541	-	68,541
Restated balance at 1 April 2021		3,579,363	3,825,800	7,405,163	3,285,625	3,827,022	7,112,647
Net Parliamentary Funding – drawn down		10,089,757	-	10,089,757	10,089,757	-	10,089,757
Net Parliamentary Funding – deemed		214,504	-	214,504	214,504	-	214,504
Unspent Supply drawn down repayable to the Consolidated Fund		(179,503)	-	(179,503)	(179,503)	-	(179,503)
Consolidated Fund Standing Services
- Judicial salaries		155,402	-	155,402	155,402	-	155,402
- Lord Chancellor’s salary		89	-	89	89	-	89
- Utilisation of Judicial Service Award		7,593	-	7,593	7,593	-	7,593
CFERs payable to the Consolidated Fund		(2,820)	-	(2,820)	(20,624)	-	(20,624)
Net expenditure for the year	CSoCNE	(9,727,783)	-	(9,727,783)	(9,758,965)	-	(9,758,965)
Net gain/(loss) on revaluation of
- Property, plant and equipment		-	708,990	708,990	-	708,978	708,978
- Right of use assets		-	(87,391)	(87,391)	-	(87,391)	(87,391)
- Intangible assets		-	(2,134)	(2,134)	-	(2,054)	(2,054)
- Assets held for sale		-	(23)	(23)	-	(23)	(23)
Remeasurement of pension schemes
- Cafcass pension scheme	25	-	-	-	108,268	-	108,268
- LSC pension scheme	25	22,359	-	22,359	22,359	-	22,359
- By-analogy pension schemes		(47)	-	(47)	(420)	-	(420)
- Probation pension schemes	25	950,558	-	950,558	950,558	-	950,558
Non-cash adjustment
- Auditor’s remuneration	6	1,707	-	1,707	1,707	-	1,707
- Corporate overhead recharges	11	(3,037)	-	(3,037)	-	-	-
Movements in reserves
- Transfers from revaluation reserve		158,195	(158,195)	-	158,537	(158,537)	-
Other movements
Adjustment in respect of prior periods		(5,677)	-	(5,677)	(5,725)	8	(5,717)
Other		(19,079)	2	(19,077)	(2,188)	(1)	(2,189)
Balance at 31 March 2022		5,241,581	4,287,049	9,528,630	5,026,974	4,288,002	9,314,976

The notes on pages 169 to 254 form part of these accounts.

Question 5

Notes to the accounts for the year ended 31 March 2023

Accepted Answer

1a) Statement of accounting policies

1.1 Basis of preparation

These accounts have been prepared in accordance with the Government Financial Reporting Manual (FReM) 2022-23 issued by HM Treasury. The accounting policies contained in the FReM apply International Financial Reporting Standards (IFRS) as adapted or interpreted for the public sector.

Where the FReM permits a choice of accounting policy, the accounting policy which is judged to be most appropriate to our particular circumstances for the purpose of giving a true and fair view has been selected. The particular policies we adopt are described below. They have been applied consistently in dealing with items that are considered material to the accounts.

The preparation of the accounts in conformity with IFRS requires the use of certain critical accounting estimates (see Note 1b).

In addition to the primary statements prepared under IFRS, the FReM requires the department to prepare a Statement of Outturn against Parliamentary Supply and supporting notes showing the outturn against estimates in terms of the net resource requirement and the net cash requirement. These are included within the Parliamentary accountability section in this document.

The functional and presentational currency of the department is the British pound sterling (£).

1.2 Going concern

The financial reporting framework applicable to Government bodies, derived from the HM Treasury Government Financial Reporting Manual, defines that the anticipated continued provision of the entity’s services in the public sector is normally sufficient evidence of going concern. In common with other government departments, the group’s liabilities are expected to be met by future grants of supply and the application of future income, both to be approved annually by Parliament. The department considers there is no reason to believe that future approvals will not be forthcoming. Hence, it is considered appropriate to adopt a going concern basis for the preparation of these financial statements.

1.3 Accounting convention

These accounts have been prepared on an accruals basis under the historical cost convention, modified to account for the revaluation of non-current assets, inventories, financial assets and liabilities and assets held for sale, where material.

1.4 Basis of consolidation

These accounts consolidate the core department, executive agencies and non-departmental public bodies (NDPBs) which fall within the departmental boundary as defined in the FReM and make up the departmental group. A list of entities included within the departmental boundary is given at Note 29.

Where two columns are included, the first contains amounts for the core department and its agencies and the second contains amounts for the departmental group as a whole. Accounting policies are harmonised across the group and all significant intra-departmental balances and transactions between entities within the departmental boundary are eliminated.

All consolidated entities have accounting reference dates that align with the core department.

1.5 Machinery of government changes and restatement of comparatives

There have been no machinery of government changes in 2022-23 (none in 2021-22).

1.6 Changes in accounting policy and disclosures

New standards, amendments and interpretations issued but not effective for the financial year beginning 1 April 2022 and not early adopted

IFRS 17 Insurance Contracts requires a discounted cash flow approach to accounting for insurance contracts. IFRS 17 is to be applied by entities for accounting periods beginning on or after 1 January 2023. The earliest implementation date in central government is 1 April 2025. To assess the impact of the standard, we are reviewing contracts which meet the definition of insurance contracts.

We do not consider that any other new, or revised standard, or interpretation will have a material impact.

1.7 Property, plant and equipment

Initial recognition and capitalisation threshold

Property, plant and equipment is initially recognised at cost, representing the costs directly attributable to acquiring or constructing the asset and bringing it to the location and condition necessary for it to be capable of operating in the manner intended by management.

Such expenditure is capitalised where:

the asset is held for use in delivering services or for administrative purposes
it is probable that future economic benefits will flow, or service potential be provided, to us
it is expected that the asset will be used for more than one financial year, and
the cost of the asset can be measured reliably

The core department’s capitalisation threshold for individual assets is £10,000. The thresholds across the departmental group range from £500 to £10,000.

Where significant purchases of individual assets which are separately below the capitalisation threshold arise in connection with a single project, they are treated as a grouped asset. The core department’s capitalisation threshold for grouped assets is £1 million. The thresholds across the departmental group range from £500 to £1 million. All thresholds include irrecoverable VAT.

Where an item costs less than the prescribed limit, but forms an integral part of a package whose total value is greater than the capitalisation level, then the item is capitalised.

Where a large asset, for example a building, includes a number of components with significantly different asset lives, e.g. plant and equipment, then these components are treated as separate assets and depreciated over their own useful lives.

Where capital budgets on agency projects are held centrally by MoJ as the parent department, expenditure is first capitalised in the MoJ accounts and transferred to the agencies when the associated project is complete.

Subsequent expenditure

Subsequent expenditure relating to an item of property, plant and equipment is recognised as an increase in the carrying amount of the asset when it is probable that additional future economic benefits or service potential deriving from the cost incurred to replace a component of such item will flow to the group and the cost of the item can be determined reliably. Where a component of an asset is replaced, the cost of the replacement is capitalised if it meets the criteria for recognition above. The carrying amount of the part replaced is de-recognised.

Other expenditure that does not generate additional future economic benefits or service potential, such as repairs and maintenance, is charged to the CSoCNE during the financial year in which it is incurred.

Subsequent valuation method

Land and buildings (including dwellings) are recorded at fair value, as interpreted by the FReM, on the basis of professional valuations, which are conducted for each property at least once every five years. These are primarily undertaken by the Valuation Office Agency (VOA) using the Royal Institution of Chartered Surveyors (RICS) appraisal and valuation manual, known as the ‘Red Book’.

In between professional valuations, carrying values are adjusted by the application of indices or through desktop valuations for which different indices are applied depending on the assets. This ensures that carrying values are not materially different from those that would be determined at the end of the reporting period. For buildings the index applied is the Building Cost Information Service Construction data tender price index (TPI) that reflects price changes in the construction sector and is a good indicator of price pressure in building contracts in the UK.

Criminal courts, prisons and some parts of the probation estate are mostly classified as specialised buildings which cannot be sold on the open market. For specialised assets, current value in existing use is interpreted as the present value of the asset’s remaining service potential, which is assumed to be at least equal to the cost of replacing that service potential. Specialised assets are therefore valued at their depreciated replacement cost (DRC) on a modern equivalent asset (MEA) basis in accordance with the FReM and RICS guidance, taking into account the functional obsolescence of the property and other assumptions. An MEA basis assumes that the asset will be replaced with a modern asset of equivalent capacity and location requirements of the services being provided.

Non-specialised properties are valued based on existing use or market value where there is an open market valuation for such properties.

Assets which are held for their service potential and are in use (i.e. operational assets used to deliver either front line services or back-office functions) are measured at their current value in existing use.

In determining whether a non-operational asset is surplus, MoJ assesses whether there is a clear plan to bring the asset back into future use as an operational asset. Where there is a clear plan, the asset is not considered as surplus and is maintained at current value in existing use.

Assets that were most recently held for their service potential but are surplus with no plan to bring them back into use are valued at current value in existing use where there are restrictions which would prevent access to the market at the reporting date. If we can access the market, then the surplus asset is valued at fair value in accordance with IFRS 13 Fair Value Measurement.

Assets are revalued and depreciation commences when the assets are brought into use. IT equipment, transport equipment, furniture and fittings, and plant and machinery that are held for operational use are valued at depreciated historic cost where these assets have short useful lives or low values or both, as this is not considered to be materially different from current value in existing use.

Fair value hierarchy and inputs

The valuation technique applied to all fair value figures of surplus properties is the market approach in accordance with IFRS 13; it uses prices and other relevant information generated by market transactions involving identical or comparable (i.e. similar) assets.

The inputs to this technique constitute level 2 inputs in each instance. Level 2 inputs are inputs that are observable for the asset, either directly or indirectly. The inputs used take the form of analysed and weighted market evidence such as sales, rentals and yields in respect of comparable properties in the same or similar locations at or around the valuation date.

For other property assets in continuing use, fair value is interpreted as market value or ‘value in use’. In the Red Book this is defined as ‘market value’ on the assumption that property is sold as part of the continuing enterprise in occupation. The ‘value in use’ of a non-cash-generating asset is the present value of the asset’s remaining service potential, which can be assumed to be at least equal to the cost of replacing that service potential.

Depreciated historical cost is used as a proxy for fair value for those assets with short useful lives or low values, as allowed by the FReM.

Revaluation

Gains arising on revaluation are credited to the revaluation reserve and shown in other comprehensive net expenditure, unless they reverse a revaluation decrease on the same asset. Reversals are credited to the Consolidated Statement of Comprehensive Net Expenditure (CSoCNE) to the extent of the previous amount expensed, and any excess is credited to the revaluation reserve.

When an asset’s carrying value decreases as a result of a permanent diminution in the value of the asset due to a clear consumption of economic benefit or service potential, the decrease is charged directly to operating expenditure in the SoCNE, with any remaining revaluation reserves balance released to the General Fund.

A revaluation decrease (other than as a result of a permanent diminution) is reversed against any existing amount held in the revaluation reserve in respect of that same asset, with any residual decrease taken to net operating costs in the CSoCNE.

Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the CSoCNE and depreciation based on the asset’s original cost is transferred from the revaluation reserve to the General Fund.

Depreciation

Items of property, plant and equipment are depreciated over their remaining useful economic lives in a manner consistent with the consumption of economic or service delivery benefits.

Depreciation is charged on a straight-line basis at rates calculated to write-off the value of assets, less estimated residual value evenly over their estimated useful lives. The useful lives of buildings are reviewed annually. Where a change in asset life is determined, the asset is depreciated on a straight-line basis over its remaining assessed life. Depreciation commences in the month following the acquisition of a non-current asset for land, buildings and dwellings and in-month for all other non-current assets.

If an item of property, plant and equipment comprises two or more significant components, with substantially different useful lives, each component is treated separately for depreciation purposes and depreciated over its individual useful life.

Estimated useful asset lives are within the following ranges:

Freehold land	Not depreciated
Leasehold land	Remaining lease period
Freehold buildings (including dwellings)	Shorter of remaining life or 60 years
Leasehold buildings (including dwellings)	Shortest of remaining life, remaining lease period or 60 years
Information technology	Shorter of remaining life or 3 to 15 years
Plant and equipment	Shorter of remaining life or 3 to 15 years
Furniture, fixtures and fittings	Shorter of remaining life or 3 to 20 years

Assets under construction

Assets under construction are valued at historical cost within property, plant and equipment and intangible assets, and are not depreciated or amortised until completed. On completion, the asset’s carrying value is transferred to the respective asset category.

Expenditure is capitalised where it is directly attributable to bringing an asset into working condition, such as external consultant costs, relevant employee costs and an appropriate portion of relevant overheads.

Disposal of non-current assets

Gains and losses on disposal of non-current assets are determined by comparing the proceeds with the carrying amount and are recognised in the CSoCNE.

When revalued assets are sold, the amounts included in the revaluation reserve are transferred to the General Fund.

1.8 Intangible assets

Intangible assets comprise internally developed software for internal use (including such assets under construction), software developed by third parties, and purchased software licences.

Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by MoJ are capitalised when they meet the criteria specified in the FReM, which has been adapted from IAS 38 Intangible Assets. Other expenditure that does not meet these criteria is recognised as an expense as incurred.

The useful lives of internally developed software range from 1 to 15 years. In accordance with IAS 38 Intangible Assets MoJ reviews the useful economic lives of its intangible assets each financial year.

MoJ utilises an agile development approach. For each module of information technology (IT), amortisation begins when it is ready for its intended use, regardless of whether the IT will be placed into service in planned stages that may extend beyond a reporting period. If the functionality of a module is entirely dependent on the completion of other modules, amortisation begins when both that module and the other modules upon which it is functionally dependent are ready for their intended use.

Purchased software licences are recognised when it is probable that future service potential will flow to MoJ and the cost of the licence can be measured reliably. Such licences are initially measured at cost. Purchased software licences are amortised over the licence period.

As at 31 March 2023, we did not identify any software as a service (SAAS), or any other cloud-based, right of use assets. The capitalisation thresholds across the departmental group range from £500 to £250,000 (including irrecoverable VAT). Subsequent to initial recognition, intangible assets are measured at fair value. As no active market exists for MoJ’s intangible assets, fair value is assessed as replacement cost less any accumulated amortisation and impairment losses (i.e. depreciated replacement cost).

Intangible assets in service are re-measured at the end of each reporting period using the producer price index issued by the Office for National Statistics (ONS).

1.9 Impairment

Impairments are recognised in accordance with IAS 36 Impairment of Assets as adapted by the FReM.

An impairment reflects a diminution in the value of an asset as a result of a clear consumption of economic benefits or service potential. At each reporting date, MoJ assesses all assets for indications of impairment. If any such indications exist, the assets in question are tested for impairment by comparing the carrying value of those assets with their recoverable amounts.

If the recoverable amount of an asset is less than its carrying value, the carrying value of the asset is reduced to its recoverable amount. The recoverable amount of an asset is the higher of its ‘fair value less costs to sell’ and ‘value in use’ (as defined above).

When an asset’s carrying value decreases as a result of a permanent diminution in the value of the asset due to a clear consumption of economic benefit or service potential, the decrease is charged directly to net operating costs in the CSoCNE. If the asset has previously been revalued, any remaining revaluation reserve balance (up to the level of the impairment loss) is released to the General Fund.

At each reporting date we review impairment losses recognised in previous years. Any reversal of an impairment loss is recognised in the CSoCNE to the extent that the original charge, adjusted for subsequent depreciation, was previously recognised, with any remaining amount recognised in the revaluation reserve.

1.10 Non-current assets held for sale

Non-current assets are classified as assets held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations as interpreted by the FReM: when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable.

Assets held for sale are stated at the lower of their carrying amount immediately prior to classification as ‘held for sale’ or their fair value less the costs of selling the asset. Any subsequent impairment or reversal of impairment is recognised in the CSoCNE. Assets classified as held for sale are not depreciated.

1.11 Leases

Government bodies typically lease properties used for administrative purposes for reasons of efficiency and flexibility. The departmental group also benefits from the lease of land under leases with peppercorn consideration, which could not have been obtained through outright purchase. For other types of asset, the departmental group determines whether to lease or purchase based on value for money considerations, such as whether the underlying asset is required for its entire life or for a more limited period.

IFRS 16 Leases was adopted by most government bodies reporting under the FReM from 1 April 2022. However, HM Treasury permitted MoJ to early adopt the standard from 1 April 2021. IFRS 16 introduced a single lease accounting model that requires a lessee to recognise assets and liabilities for all leases (apart from the exemptions listed below).

Scope and exclusions – the departmental group as lessee

In accordance with IFRS 16 Leases, contracts, or parts of contracts, that convey the right to control the use of an asset for a period of time are accounted for as leases.

Contracts for services are evaluated to determine whether they:

convey the right to control the use of an identified asset
incorporate the right to obtain substantially all the economic benefits from the asset throughout the period of use, and
the department has the right to direct its use

If so, the relevant part of the contract is treated as a lease.

As adapted by the FReM, IFRS 16 has also been applied to leases with nil or nominal (that is, significantly below market value) consideration and arrangements for sharing accommodation between government departments.

MoJ defines the lease term as the non-cancellable period for which a lessee has the right to use an underlying asset, together with both:

periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option, and
periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option

When making the above assessments, MoJ excludes two types of leases:

those relating to low value items, which it considers as those where the underlying asset would have a cost of less than £10,000 when new, provided those items are not highly dependent on or integrated with other items, and
contracts whose term is less than 12 months

At inception or on reassessment of a contract that contains a lease component, MoJ assesses whether it is reasonably certain to exercise break options or extension options at the lease commencement date. MoJ reassesses this if there are significant events or changes in circumstances that were not anticipated. In the event that a lease contract has expired, but MoJ remains in occupation pending negotiations for a renewed term, the lease term has been measured as the estimated time until the new contract will be agreed.

Initial recognition – the departmental group as lessee

At the commencement of a lease, the department recognises a right of use asset and a lease liability. Under HM Treasury’s IFRS 16 Application Guidance, irrecoverable VAT on lease payments is not included in the initial measurement of right of use assets and lease liabilities. Where rental invoices state that the charge is exempt from VAT, the full amount is included in the lease liability.

Lease liability

The lease liability is measured at the value of the remaining lease payments discounted either by the interest rate implicit in the lease or, where this is not readily determinable, the department’s incremental rate of borrowing. This rate is advised annually by HM Treasury (0.95% for leases that commenced, transitioned or were remeasured in the calendar year 2022, 3.51% for those commencing or remeasured in 2023).

The measurement of lease payments excludes any VAT payable, and irrecoverable VAT is expensed at the point it falls due in line with IFRIC 21 Levies.

Where a lease includes variable lease payments tied to an inflation index, this is included in the measurement by inflating using HMT CPI inflation rates as published in the Public Expenditure System (PES) Papers for the relevant year. This is the approach set out in the FReM IFRS 16 Application Guidance.

Right of use asset

The right of use asset is measured at the value of the lease liability, adjusted for:

any lease payments made before the commencement date
any lease incentives received
any incremental costs of obtaining the lease, and
any costs of removing the asset and restoring the site at the end of the lease

However, in accordance with the FReM, where the lease requires nil or nominal consideration (usually referred to as a ‘peppercorn’ lease) the asset will instead be measured at its existing use value, using market prices or rentals for equivalent land and properties, with the difference between the carrying amount of the right of use asset and lease liability treated, upon transition, as notional income.

Enhancements to leased assets, such as alterations to a leased building, are not classified within right of use assets but are classified as property, plant and equipment in accordance with the FReM.

Subsequent measurement – the departmental group as lessee

After initial recognition, the right of use asset will be measured using the fair value model. The departmental group considers that the cost model (measurement by reference to the lease liability) is a reasonable proxy for fair value, in the case of non-property leases, and also for property leases of less than five years or with regular rent reviews. For other leases, the asset will be carried at a revalued amount.

The value of the asset is adjusted for subsequent depreciation and impairment, and for reassessments and modifications of the lease liability as described below. Where the amount of a reduction to the asset exceeds the carrying value of the asset, the excess amount is recognised as expenditure in the CSoCNE.

The lease liability will be adjusted for the accrual of interest, repayments, reassessments and modifications. Reassessments are reappraisals of the probability of the options given by the existing lease contract, for example where we no longer expect to exercise an option; modifications are changes to the lease contract.

Reassessments and modifications are accounted for by either by:

recalculating the lease term under any new contract terms, taking account of the reasonable certainty or otherwise of exercising an option; or
applying a new discount rate where applicable.

Expenditure charged to the CSoCNE for each financial year includes interest on the lease liability and a straight-line depreciation charge on the right of use asset over the life of the lease, together with any impairment of the right of use asset and any change in variable lease payments, that was not included in the measurement of the lease payments during the period in which the triggering event occurred. Lease payments are debited against the liability. Rental payments in respect of leases of low value items, or with a term under twelve months, are also expensed.

Finance and operating leases – the departmental group as lessor

Where the department acts as a lessor, the arrangement will be assessed to determine whether it constitutes a finance lease, this being where the risks and rewards incidental to ownership of an underlying asset are substantially transferred to the lessee. For these leases the asset is derecognised, and a receivable is recognised, with accrued interest being treated as income over its life. All other leases are treated as operating leases and rental income is recognised in the CSoCNE on a straight-line basis.

Estimates and judgements

In assessing the lease MoJ needs to make estimates and judgements:

where a lease is embedded in a contract for services, the amount to be recognised as the right of use asset and lease liability should be the stand-alone price of the lease component only. Where this is not readily observable, a determination will be made by reference for other observable data, such as the fair value of similar assets or price of contracts for similar non-lease components
MoJ has determined the lease term by assessing the level of certainty as to whether termination or extension options will be exercised. In making these judgements, reliance has been placed on the professional judgement of estates staff, supported by information on corporate asset management plans, other business strategies, investment already made in the underlying asset, ongoing business needs and market conditions
MoJ has determined that the cost model is a reasonable proxy for fair value in most cases because the rents payable are aligned to open market rates. In the case of longer leases, where there are not regular rent reviews, there is a greater chance of divergence between cost and fair value, hence a professional revaluation is appropriate
MoJ also leases various non-property assets such as vehicles and IT equipment. It has determined that, at the present time, all non-property leases which are not individually low value, are immaterial. Consequently, no non-property leases have been recognised in these accounts. Non- property leases include assets such as vehicles and IT equipment

1.12 Service Concession Arrangements

Service Concession Arrangements (SCAs), including Private Finance Initiative (PFI) arrangements, are where private sector operators are contractually obliged to provide services to the public in relation to certain infrastructure assets. MoJ defines such arrangements as SCAs if they meet the conditions set out in the FReM and IFRIC 12 Service Concession Arrangements.

The future payment streams of SCAs are assessed to separately identify the infrastructure interest and service components.

MoJ recognises the infrastructure asset at fair value (or the present value of the future minimum infrastructure payments, if lower) as a non-current asset in the CSoFP with a corresponding liability for future payments under the agreement.

The interest element is charged to the CSoCNE over the contract period to produce a constant periodic rate of interest on the remaining balance of the liability. The service element is charged to the CSoCNE in the period in which the services are rendered by the operator.

For budgeting purposes, SCAs are evaluated according to the balance of risks and reward of ownership as defined by European System of Accounts (ESA) 10. This means that some SCAs recognised in the accounts are treated differently for budgetary purposes against HM Treasury budgeting controls.

1.13 Employee benefits

Short term benefits such as salaries and wages or post-employment benefits resulting from employment and long term benefits such as long service awards, including termination benefits (for example early departure costs) and pension benefits are recognised at the cost of providing the benefit in the period in which it is earned by the employee, rather than when it is paid or becomes payable.

IAS 19 ‘Employee Benefits’ requires MoJ to recognise the expected cost of the annual leave entitlement of its employees that is accrued at the end of each financial year.

Defined benefit pension schemes

Principal Civil Service Pension Scheme and Judicial Pension Scheme

The provisions of the Principal Civil Service Pension Scheme (PCSPS) cover most past and present employees; salaried and fee-paid judicial office holders are covered by the Judicial Pension Scheme (JPS). Both the PCSPS and the JPS are unfunded defined benefit schemes although, in accordance with the FReM paragraph 8.2 adaptation of IAS 19, the department accounts for these as defined contribution schemes and recognises contributions it pays as an expense in the year in which they are incurred. The legal or constructive obligation is limited to the amount that it agrees to contribute to the fund.

The department is responsible for the administration of the JPS that provides for the pension entitlements of salaried and fee-paid judicial office holders of six other participating bodies.

Pension entitlements are provided to salaried judges under the JPS. In September 2005, a retired fee-paid judicial office holder brought a claim in the Employment Tribunal seeking retrospective parity of treatment with salaried judicial office holders by claiming pension entitlements under the Part Time Workers Regulations.

A UK Supreme Court hearing on 6 February 2013 ruled that a retired fee-paid judicial office holder is entitled to a pension on terms equivalent to those of a salaried judicial office holder. This lead case set the precedent for other stayed cases. Consistent with the accounting for salaried judicial office holders, and in accordance with FReM 8.2, we account for employer contributions payable to the JPS for eligible fee-paid judicial office holders as they are incurred but do not recognise a liability in respect of back payments or the pension liability arising pursuant to the claim. Accordingly, provision for the fee-paid pension entitlement is recognised in the JPS Accounts.

Provisions have been recognised in the department’s accounts for both the liability to fee-paid judicial office holders in respect of the Judicial Service Award, and the separate element of the pension liability relating to fee-paid judges, as neither of these is a liability covered by the JPS and its governing acts.

The JPS is not consolidated within these accounts and further information can be found in the JPS accounts.

Further information about these provisions is set out in Note 20.

Funded pension schemes

Unlike the schemes described above, funded pension schemes are accounted for through the department’s CSoFP, applying IAS 19 Employee Benefits in full. These accounts contain the Local Government Pension Scheme (LGPS) for HMPPS probation staff and past employees of the probation trusts (including those who transferred to community rehabilitation companies (CRCs) and/or community rehabilitation services (CRSs), the Children and Family Court Advisory and Support Service (Cafcass) and the Legal Services Commission Pension Scheme (LSCPS). The cost of providing benefits is determined using the projected unit credit method, with formal actuarial valuations being carried out at the end of every third reporting period (the most recent valuations being as at 31 March 2022). The results of the valuations as at 31 March 2022 were shown in actuarial reports published on 31 March 2023 and were reflected in the 2022-23 accounts.

Past employees of the Probation Trusts, and LGPS probation staff who transferred to CRCs and HMPPS NPS are covered by the provisions of LGPS via one pension fund administered by the Greater Manchester Pension Fund (GMPF). The Secretary of State for Justice has provided a guarantee to GMPF in respect of the CRSs’ participation in the GMPF for pension liabilities that transferred to the CRSs.

The liability or asset recognised in the CSoFP is the present value of the defined benefit obligation at the reporting date less the fair value of plan assets. Any surplus is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan (the ‘asset ceiling’).

The present values of the schemes are calculated by estimating the amount of future benefits that employees have earned in return for their service in the current and prior periods. The benefit is discounted to determine its present value, and the fair values of plan assets are deducted.

Remeasurements (comprising actuarial gains and losses), the effect of the asset ceiling (including irrecoverable surplus adjustments), and the return on plan assets (excluding interest) are recognised within Other Comprehensive Expenditure in the period in which they arise. Under the requirements of IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, the value of any net pension surplus which was determined under IAS 19 is limited in the financial statements to reflect that the full economic benefit of the surplus in the GMPF is not realisable by HMPPS; this restriction is known as the asset ceiling.

In the case of the LSCPS, MoJ is able to recognise a pension asset as it has an unconditional right to a refund from the LSC during the life of the plan. MoJ can elect to withdraw money out of the fund, to the extent that the funding level doesn’t drop below 105%. Therefore, in the event of a surplus no asset ceiling is applied.

Service costs

Service costs are recognised in the CSoCNE and are spread systematically over the working lives of the employees. The net interest charge to the CSoCNE is calculated by applying the discount rate to the net defined benefit liability or asset.

Other defined benefit pension schemes

The department has separate schemes that are ‘by-analogy’ or similar to the PCSPS. However, they are funded by provisions from the department’s vote and pension payments are administered by the department and made via the payroll system.

Early departure and injury benefit costs

The department is required to pay the additional cost of benefits beyond the normal PCSPS and LGPS benefits in respect of employees who retire early. The total cost is provided in full when the early departure programme has been announced and is binding on the department.

The Civil Service Injury Benefits Scheme (CSIBS) requires the department to pay benefits to any individual who is injured in connection with their employment. Benefits are paid only in respect of loss of earning capacity, and a provision is made for expected future costs.

The early departure and injury benefit provisions are discounted using the rate disclosed in Note 1.18.

1.14 Income

IFRS15 Revenue from Contracts with Customers and the FReM require that, when applying income recognition policies, legislation and regulations which enable an entity to receive cash or another financial asset from another entity should be assessed for performance obligations to match revenue to the performance obligation.

Income is generated directly from the operating activities of the departmental group and includes both budgetary and non-budgetary income. Non-budgetary income is outside the ambit of the departmental group and is surrendered to the Consolidated Fund as CFERs (refer to Annex A, SOPS 4).

Income is stated net of VAT and comprises mainly fees and charges for services which are set on a full cost recovery basis.

MoJ recognises revenue from a number of different sources, primarily from: fees collected by HM Courts and Tribunals Service (HMCTS) in relation to court fees for services rendered to civil, family court and tribunal users; Legal Aid Agency (LAA) civil representation and criminal case recoveries; Office of the Public Guardian (OPG) fees (largely Power of Attorney fees); HM Prison and Probation Service (HMPPS) income (largely prison related) as well as recoveries from other government departments.

Fee Income

HMCTS fee income

The majority of fees paid to HMCTS are for an application to commence the administration of a process or, to a lesser extent, for a court process or for a particular stage of the administration of the court process. The payment of a fee does not convey the right to a decision, or a particular outcome from the court, nor does it set out the timescale or process which will be followed by the court or tribunal, which is at the discretion of the judge. It is a fundamental principle of an independent judiciary that judges do not hold performance obligations to individuals or organisations in relation to court and tribunal activities.

The power to charge fees is conferred by section 92 of the Courts Acts 2003, and the power to charge enhanced fees is conferred by section 180 of the Anti-Social Behaviour Crime and Policing Act 2014. This is the legislation against which HMCTS assesses its performance obligations. This legislation also provides for statutory instruments to set out a price list for the fees to be charged. These statutory instruments, determined in the FReM adaption as contracts under IFRS 15, are interpreted as the performance obligations on HMCTS in respect of the individual fees charged. This does not place a performance obligation on the judiciary.

HMCTS has therefore adopted an income policy which recognises that in the administration of the courts system, HMCTS, whose role is to support the judiciary in their administration of justice, bears a responsibility to applicants to ensure their application is progressed upon receipt of the correct fee.

In recognition of this obligation, HMCTS defers most of its revenue until the issue of an application is completed, or any other obligations are completed that are required as part of the statutory instrument.

Civil fees make up the majority of HMCTS income and can be disaggregated into broad jurisdictional categories. Within each category, there are three significant common performance recognition points: issue, hearing and enforcement.

OPG fee income

For OPG fees and charges, revenue from contracts with customers comprises fees for services which are set based on an OPG full cost recovery basis. Fee income consists of amounts for services rendered from Power of Attorney (POA) applications, supervision of court appointed deputies, and copies of POA certificates.

Fines and penalties

MoJ also collects fines, criminal court charges and fixed penalties imposed by the judiciary or police, and is permitted to retain part of the value of fines and penalties collected. The HMCTS Trust Statement accounts for fines and penalties imposed by the criminal justice system as revenue ultimately payable to the Consolidated Fund, on a gross basis. It also accounts for the cash and balances payable to the Consolidated Fund and third parties in relation to the collection of the fines and penalties amounts.

As there are no specific performance obligations associated with receiving revenue from fines and penalties, the revenue is considered to be a non-exchange transaction and therefore outside the scope of IFRS 15. They are measured at the fair value of amounts received, or receivable, net of judicial cancellations and remissions. Revenue is recognised at the full value of the imposition when a fine or penalty is validly imposed and an obligation to pay arises. Where a penalty is cancelled due to attendance at a training course, as a result of an appeal or for other legal reasons or as a result of settlement by other valid means including imprisonment, revenue is derecognised and the derecognition of revenue is recorded as a reduction against revenue.

The victim surcharge

An additional surcharge is added to fines that are imposed. HMCTS is responsible for collecting the victim surcharge and passing the receipts to MoJ justice reform directorate to fund victims’ services. Revenue is recognised on the same basis as fines.

Recoveries from other government departments and income from the NHS and other healthcare providers

Recoveries from other government departments relate to the recharge of expenditure to other government departments. HMPPS receives income from the NHS in relation to healthcare funding and from the Home Office in relation to Immigration Removal Centres. HMCTS receives funding from DWP and HMRC in respect of the operations of the First Tier Tribunal (Social Security and Child Support). The performance obligation is met, and the revenue recognised, at the time that the services are rendered or goods delivered.

Retail sales

Retail income is generated within HMPPS from retail sales in prison shops. Revenue is recognised at the point the goods are received by the prisoner.

Levy income of the Office of Legal Complaints (OLC) and Legal Services Board (LSB)

The Legal Services Act 2007 (the Act) makes provision for the costs of OLC and LSB to be recovered through the imposition of a levy on the legal profession’s approved regulators. In accounting for levy income, section 175 of the Act requires all levy income collected by OLC and LSB to be surrendered to the Consolidated Fund. In return, OLC and LSB receive Grant-in-Aid funding from the core department equal to the income surrendered. Accordingly, a notional transfer to the Consolidated Fund has been shown in the Statement of Changes in Taxpayers’ Equity and an equal amount is shown as a notional Grant-in-Aid receipt from MoJ as the sponsoring department.

LSB and OLC, in conjunction with the department and HM Treasury, are seeking to identify a suitable legislative vehicle to make an amendment to section 175 of the 2007 Act to enable them to retain the levy income and not surrender it in return for an equal grant.

Other income

Through HMPPS, the department receives a financial allocation for delivery of resettlement services to offenders. The funding is used to support offenders considered hard to reach, in both custody and community settings, to increase employability and provide opportunities to access mainstream services. Funding is matched to eligible expenditure on an accruals basis. The performance obligation is met and income recognised when expenditure is incurred that meets the funding payment criteria.

1.15 Grants payable and paid

Grant-in-Aid financing to the department’s NDPBs is reported on a cash basis in the period in which payments are made. Co-funding grants from other government departments are paid to NDPBs via the core department and are included as part of the Grant-in-Aid funding for the year. All Grant-in-Aid and supply funding made by the core department to its agencies and NDPBs is fully eliminated within the departmental group.

The department also makes a small number of grants to a variety of public sector, private sector and voluntary bodies. These grants are recognised at the point at which an authorised request is received from the recipient body, in accordance with the terms of the relevant financial memoranda.

1.16 Costs borne by the Consolidated Fund

The salary and social security costs of senior judges are included in these accounts as a cost and are funded from the Consolidated Fund. Senior judges also receive service award payments under an agreement with the department which are paid from the Consolidated Fund.

1.17 Notional costs

Notional costs comprise statutory auditor’s remuneration, which represents the National Audit Office’s cost for the audit of the department and executive agencies’ accounts, and notional costs for corporate overheads which are recharged to business areas. Such notional costs are credited directly to the General Fund. The majority of the notional recharge costs relate to IT services, estates costs, and shared services processing charges that are centrally managed on behalf of the group, and are eliminated on consolidation.

1.18 Provisions

Provisions are recognised in accordance with IAS 37 Provisions, contingent liabilities and contingent assets. Provisions are recognised when:

MoJ has a present legal or constructive obligation, as a result of past events
it is probable that an outflow of economic benefits will be required to settle the obligation, and
a reliable estimate can be made for the amount of the obligation

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation. Where the effect of discounting is material, provisions are measured at their present value using the current discount rates set by HM Treasury based on the underlying cash flows: 3.27%, 3.20% and 3.51% for short-term, medium-term and long-term cash flows respectively.

Early departure and injury benefit provisions are discounted using the HM Treasury post-employment benefits real discount rate of 1.70% (2021-22: -1.03%).

The increase in the provision due to passage of time is recognised as interest expense.

1.19 Contingent assets and liabilities

A contingent liability is disclosed when the likelihood of a payment is less than probable, but more than remote, or the obligation cannot be measured reliably. Where the time value of money is material, contingent liabilities required to be disclosed under IAS 37 Provisions, Contingent Liabilities and Contingent Assets are stated at discounted amounts.

A contingent asset is a potential asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of MoJ. A contingent asset is disclosed where an inflow of economic benefits is probable.

1.20 Value Added Tax

Most of the MoJ’s activities are outside the scope of VAT and, in general, output tax does not apply and input tax on purchases is not recoverable, except as allowed by HM Treasury’s Contracting Out Direction. Irrecoverable VAT is charged to the relevant expenditure category or included in the capitalised purchase costs of non-current assets, except leases (which are discussed in Note 1.11). Where output tax is charged or input tax is recoverable, the amounts are stated net of VAT.

1.21 Third party assets

MoJ holds, as custodian or trustee, certain assets belonging to third parties. In line with FReM requirements, these assets are not recognised in the CSoFP and are disclosed within Note 28 since neither the department nor the government has a direct beneficial interest in them.

1.22 Financial instruments

Recognition

Financial assets and financial liabilities which arise from contracts for the purchase and sale of non-financial items (such as goods or services), which are entered into in accordance with MoJ’s normal purchase, sale or usage requirements, are recognised when, and to the extent to which, performance occurs. All other financial assets and liabilities are recognised when MoJ becomes party to the contractual provisions to receive or make cash payments.

De-recognition

Financial assets are de-recognised when the contractual rights to receive future cash flows have expired or MoJ has transferred substantially all the risks and rewards of ownership to another entity. Financial liabilities are de-recognised when the obligation is discharged, cancelled or expires.

Classification and measurement of financial assets

In addition to cash and cash equivalents, MoJ has two categories of financial assets:

Financial assets at fair value through profit and loss

Fair value is equal to the market value at the reporting date, and the movement in the value of the assets is recognised immediately in the CSoCNE, as income or as an expense.

Receivables relating to LAA’s statutory charge are measured at fair value in line with the requirements of IFRS 13 Fair Value Measurement as they are not solely payments of principal and interest, and therefore do not meet the tests set out in IFRS 9. The practical application of IFRS 13 in respect of LAA’s assets applies the consideration of the three hierarchies set under the standard for determining fair value. This is explained in further detail in the Legal Aid Agency’s Annual Report and Accounts 2022-23, including detail on key assumptions which support the most significant fair value estimates.

MoJ, through HMPPS, holds share investments of £0.4 million (2021-22: £0.4 million) in milk companies due to the milk producing prison farms run by HMPPS at HMP Usk. They are held as financial assets at fair value through profit and loss. Fair value is equal to market value at the reporting date, and the movement in the value of assets is recognised immediately in the SoCNE, as income or as an expense.

Financial assets at amortised cost

Cash and trade and other receivables are held at amortised cost. For assets at amortised cost, the amortised cost balance was reduced where appropriate by an allowance for amounts which were considered to be impaired or uncollectable.

MoJ recognises a provision for expected credit losses on financial assets measured at amortised cost. Any interest receivable or loss arising on impairment is recognised in the Statement of Comprehensive Net Expenditure.

Trade receivables are generally due for settlement within 30 days and are therefore classed as current. A proportion of MoJ’s receivables relate to other government departments and other public bodies. These bodies are funded by Parliament and there is historical evidence to show that this debt is collected. MoJ is therefore not exposed to significant credit risk on these balances.

Receivables that are not due from other public bodies are grouped together for the purpose of working out the expected credit loss. For trade receivables with no significant financing components, IFRS 9 Financial Instruments allows an entity to use a simplified method for calculating expected losses using historical default rates over the expected life of the trade receivables and adjusting for forward-looking estimates. Receivables are shown net of expected credit loss using this approach.

Impairment of financial assets

At the end of each reporting period, MoJ assesses whether there is objective evidence that a financial asset or a group of financial assets is impaired. If there is objective evidence that an impairment loss on such an asset has been incurred, MoJ recognises this in the CSoCNE as the difference between the asset’s carrying amount and the present value of estimated future cash flows.

Classification and measurement – financial liabilities

MoJ has financial liabilities, comprising finance lease liabilities, trade payables, other payables and accruals. All financial liabilities are recognised initially at fair value, net of any transaction costs incurred, and then measured at amortised cost using the effective interest rate method. Where the effect is material, the estimated cash flows of financial liabilities are discounted.

1.23 Cash and cash equivalents

Cash and cash equivalents recorded in the CSoFP and Consolidated Statement of Cash Flows include cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less at inception and bank overdrafts.

1b) Critical accounting estimates and judgements

Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions

The preparation of the financial statements requires the use of judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenditure during the reporting period. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

Revaluation and impairment of non-current assets

Subsequent to initial recognition land and buildings (including dwellings) are recorded at fair value, as interpreted by the FReM, based on professional valuations which are conducted for each property at least once every five years by the Valuation Office Agency, who are independent of MoJ, in accordance with the Royal Institute of Chartered Surveyors Appraisal and Valuation Manual. The value of land and buildings fluctuates with changes in construction costs and the current market conditions.

The majority of operational buildings are specialised and are therefore valued at depreciated replacement cost (DRC) to a modern equivalent basis. This modern equivalent is assumed to be in the same location with the same internal area as the existing property. All other buildings are measured at fair value determined from market-based evidence.

All assets other than land and buildings and assets under construction are revalued at each reporting date using the Producer Price Index prepared by the ONS.

Intangible assets include internally generated software and software licences. Internally generated software is initially recognised as assets under construction in the financial statements based on the cost (for example capitalised staff and consultancy costs) of creating that software, which could be a bespoke IT system or a modified existing system. When the system becomes available for use the asset is transferred to Intangible IT and an impairment review is carried out. Subsequently, these assets are revalued using indices as an estimate of the current value of these assets and amortised over the useful life of the asset as estimated by the asset owners.

The carrying amounts of these assets are shown in Notes 13, 15 and 16.

Right of use assets

The cost model has been determined as a reasonable proxy for fair value in most cases, because the rents payable are aligned to open market rates. In the case of longer leases where there are not regular rent reviews, there is a greater chance of divergence between cost and fair value, hence a professional revaluation is appropriate.

In the event that a lease contract has expired, but MoJ remains in occupation pending negotiations for a renewed term, the lease term has been measured as the estimated time until the new contract will be agreed.

Net pension assets and liabilities

The present value of the net pension liability detailed in Note 25 depends on a number of actuarially derived assumptions about inflation, salary and pension trends, discount factors and mortality rates. The estimated net liability or asset is subject to fluctuation and uncertainty due to changes in these assumptions over time and differences between assumptions and actual events. Sensitivity analysis in relation to the key assumptions used in the calculation of the gross pension liability is provided in Note 25.

The pension liabilities for 2022-23 reflect the appropriate assumptions. As a result of the large increase in the discount rate used at 31 March 2022, this has significantly reduced the pension liability for all Local Government Pension Scheme (LGPS) employers. All assumptions are reviewed on an ongoing basis, and at least annually.

Provisions for liabilities and charges

The recognition and measurement of provisions rely on the application of professional judgement, historical experience, and other factors expected to influence future events. Where the likelihood of a liability crystallising is deemed probable and can be measured with reasonable certainty, a provision is recognised. Provision balances which contain regular, homogeneous transactions are often derived from complex financial models. Estimates and assumptions applied in these models are regularly evaluated and reviewed. Where assumptions are significant, a sensitivity analysis has been included to demonstrate how a change in each assumption would affect the assessment. Further information is set out in Note 20.

LAA financial assets

LAA recognises an impairment for expected credit losses on financial assets measured at amortised cost under IFRS 9 Financial instruments. This includes receivables from legal aid providers and clients who are not subject to the statutory charge. Subsequent to initial recognition, at fair value, these assets are carried at amortised cost using the effective interest rate method, less any impairment. Any interest receivable or loss arising on impairment is recognised in the Statement of Comprehensive Net Expenditure.

LAA derecognises a financial asset only when the contractual rights to the cash flows for the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.

For assets held at amortised cost, IFRS 9 requires LAA to recognise at amortised cost and to then recognise expected credit losses based on historic experience and adjusted for reasonable and supportable forward-looking information such as management’s assessment of likely recoveries. This assessment may be of individual assets (individual impairment) or of a portfolio of assets (collective impairment). An assessment of collective impairment is made of financial assets with similar risk characteristics. For these assets, LAA’s previous experience of losses in each portfolio is used to estimate the degree of impairment on that asset class.

Where such an estimate is made, impairment provisions are made to reduce the carrying value of financial assets accordingly. LAA apply the ‘simplified model’ and recognise lifetime expected credit losses.

The measurement of expected credit loss involves complexity and judgement. Further detail on the valuation model used to generate this estimate and the actual impairments against LAA’s receivables is included in Note 24 to these financial statements.

Default is determined by reference to one or more missed contractual payments but also includes arrangements in place to pay less than contractual payments, fraud and bankruptcy or other indicators. The key areas in which management make estimations and assumptions are trade and other receivables (Note 17 and Note 24) and provisions for liabilities and charges (Note 20).

Critical judgements in applying accounting policies

LAA financial assets

The estimates and associated assumptions included within the financial statements are based on data held by LAA, historical experience and various other factors. These are believed to provide a reasonable basis on which the carrying values of assets and liabilities that are not readily apparent from other sources can be estimated.

The key areas in which management make estimations and assumptions are trade and other receivables (Note 17 and Note 24) and provisions for liabilities and charges (Note 20).

Service Concession Arrangements

The classification of arrangements as Service Concession Arrangements requires MoJ to determine, based on an evaluation of the terms and conditions of the arrangements, whether it controls the infrastructure. Where MoJ is judged to control the infrastructure, the contract assets are reflected in the SoFP.

2. Operating expenditure by operating segment

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM), that is, categorised according to business group.

The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Committee (ExCo). The segmental analysis presents the financial information based on the structure reported to ExCo.

The segments are:

Centrally held – centrally managed budgets and the departmental unallocated provision
Policy and Corporate Services – departmental headquarters functions and the department’s NDPBs
HMCTS
HMPPS
Other delivery agencies – LAA, OPG and CICA

ExCo does not receive a CSoFP analysed by operating segment and therefore such an analysis is not presented here.

2. Operating expenditure by operating segment (continued)

2022-23

	Centrally held	Policy and corporate services	HMCTS	HMPPS	Other delivery agencies	Gross total (pre-eliminations)
	£000	£000	£000	£000	£000	£000
Income
Income from external customers	(858)	(131,906)	(57,557)	(218,920)	(57,580)	(466,821)
Internal MoJ income	-	(149,581)	-	-	-	(149,581)
Interest	-	(236)	-	-	-	(236)
EU grants	-	-	-	(32,821)	-	(32,821)
CFERs	-	(20,942)	-	-	-	(20,942)
Fee income	(353,238)	(30,001)	(725,128)	-	(85,100)	(1,193,467)
Total income	(354,096)	(332,666)	(782,685)	(251,741)	(142,680)	(1,863,868)
Expenditure
Staff costs	4,824	729,521	656,936	3,054,332	117,605	4,563,218
Judiciary costs	21	10,458	631,745	-	-	642,224
Accommodation, maintenance and utilities	2	41,496	308,312	605,206	5,280	960,296
Offender related costs	-	-	-	619,766	-	619,766
Service concession charges	-	-	33,495	670,020	-	703,515
IT services and telecommunications (nonservice concession arrangements)	5	228,101	226,790	32,934	582	488,412
Contracted probation services (CRCs)	-	-	-	69,876	-	69,876
Payments of grant-in-aid to MoJ NDPBs (eliminated on consolidation)	-	288,031	-	-	-	288,031
Cost of legal services and disbursements (civil)	-	-	-	-	6,420	6,420
Cost of legal services and disbursements (crime)	-	-	-	-	4,462	4,462
Provisions provided for in year	(5,324)	3,253	(79,396)	(29,168)	197,130	86,495
Legal Aid funded provisions	-	-	-	-	1,924,930	1,924,930
Rentals under operating leases	-	7,018	11,832	2,075	475	21,400
Finance charges on leases and service concession arrangements	-	7,018	14,734	12,268	194	34,214
Current grants	-	286,689	25	4,434	-	291,148
Corporation tax	-	45	-	-	-	45
Corporate recharges	-	(586,137)	84,568	452,265	49,304	-
Depreciation	-	49,026	238,747	395,186	4,657	687,616
Amortisation	-	14,997	75,639	9,717	6,947	107,300
SoCNE impairments	-	-	262	(4,455)	1,014	(3,179)
Individually immaterial items of expenditure	11,908	400,834	120,600	274,852	70,676	878,870
Total expenditure	11,436	1,480,350	2,324,289	6,169,308	2,389,676	12,375,059

2021-22

	Centrally held	Policy and corporate services	HMCTS	HMPPS	Other delivery agencies	Gross total (preeliminations)
	£000	£000	£000	£000	£000	£000
Income
Income from external customers	(3,947)	(95,297)	(53,831)	(240,636)	(35,227)	(428,938)
Internal MoJ income	-	(157,629)	-	-	(19)	(157,648)
EU grants	-	-	-	(41,539)	-	(41,539)
CFERs	-	(20,624)	-	-	-	(20,624)
Fee income	(377,931)	(29,999)	(669,467)	-	(68,557)	(1,145,954)
Total income	(381,878)	(303,549)	(723,298)	(282,175)	(103,803)	(1,794,703)
Expenditure
Staff costs	(4,181)	650,181	658,534	2,733,734	110,436	4,148,704
Judiciary costs	106	9,961	603,439	-	-	613,506
Accommodation, maintenance and utilities	-	41,353	324,081	568,180	5,436	939,050
Offender related costs	-	-	-	578,515	-	578,515
Service concession charges	-	78,200	32,807	618,341	-	729,348
IT services and telecommunications (nonservice concession arrangements)	158	115,993	189,623	39,530	329	345,633
Costs of Community Rehabilitation Companies	-	-	-	179,462	-	179,462
Payments of grant-in-aid to MoJ NDPBs (eliminated on consolidation)	-	272,480	-	-	-	272,480
Cost of legal services and disbursements (civil)	-	-	-	-	7,162	7,162
Cost of legal services and disbursements (crime)	-	-	-	-	3,780	3,780
Provisions provided for in year	40,989	(354)	43,029	29,527	160,473	273,664
Legal Aid funded provisions	-	-	-	-	1,742,315	1,742,315
Rentals under operating leases	1	5,686	22,034	1,787	1,124	30,362
Finance charges on leases and service concession arrangements	-	7,933	15,057	13,551	93	36,634
Current grants	-	243,394	25	4,713	-	248,132
Corporate recharges	-	(513,902)	93,376	378,128	42,398	-
Depreciation	-	73,699	215,174	336,581	2,731	628,185
Amortisation	-	11,868	47,654	9,912	9,907	79,341
SoCNE impairments	-	5,609	3,889	95,687	95	105,280
Individually immaterial items of expenditure	19,904	328,891	195,901	275,913	43,716	864,325
Total expenditure	56,977	1,330,992	2,444,623	5,863,561	2,129,995	11,826,148

3. Revenue from contracts with customers

		2022-23		2021-22
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Fines receipts	383,239	383,239	407,924	407,924
Fee income	843,642	843,642	744,061	744,067
Victim surcharge	41,351	41,351	37,864	37,864
Legal Aid - civil representation recoveries	14,141	14,141	16,412	16,412
Legal Aid - criminal cases recoveries	21,989	21,989	17,506	17,506
Remand income	29,962	29,962	32,054	32,137
Income from NHS and other healthcare providers	59,779	59,779	53,927	53,927
Recoveries from other government departments	90,506	89,896	127,411	127,013
CICA income from the Scottish Government	19,143	19,143	-	-
External sales of prison industries	15,423	15,423	13,747	13,747
Retail prison shop income	72,187	72,187	67,265	67,265
In-cell TV income	1,560	1,560	547	547
Training	9,511	9,511	1,294	1,294
Compensation	4,629	4,629	5,053	5,053
Internal customers	1,736	1,736	1,509	1,509
Miscellaneous income	17,582	17,574	16,167	15,417
Revenue within MoJ’s ambit	1,626,380	1,625,762	1,542,741	1,541,682
CFER receipts	1,552	20,942	2,820	20,624
Total	1,627,932	1,646,704	1,545,561	1,562,306

4. Other operating income

		2022-23		2021-22
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Rental income	31,270	31,270	31,705	31,705
European Social Fund and other European funding	32,821	32,821	41,539	41,539
Miscellaneous income	-	241	-	(1)
Total	64,091	64,332	73,244	73,243

5. Staff and judiciary costs

Staff costs

				2022-23	2021-22 ^{[footnote 1]}
	Permanently employed staff	Other	Ministers	Total	Total
£000	£000	£000	£000	£000
Wages and salaries	3,072,023	242,199	394	3,314,616	3,008,041
Social security costs	339,814	1,619	45	341,478	286,789
Other pension costs	888,580	31	-	888,611	840,616
Sub total	4,300,417	243,849	439	4,544,705	4,135,446
Early departure costs	25,268	-	-	25,268	15,159
Add inward secondments	15,746	(1,786)	-	13,960	30,741
Less recoveries in respect of outward secondments	(20,750)	-	-	(20,750)	(32,769)
Total Net Costs	4,320,681	242,063	439	4,563,183	4,148,577
Of which:
Core department and agencies	4,086,296	216,714	439	4,303,449	3,895,744
NDPBs	234,385	25,349	-	259,734	252,833
Total	4,320,681	242,063	439	4,563,183	4,148,577

Judiciary costs

				2022-23	2021-22
	Senior judicial salaries	Other judicial salaries	Fee-paid judiciary	Total	Total
	£000	£000	£000	£000	£000
Wages and salaries	145,757	111,460	146,183	403,400	391,769
Social security costs	20,546	15,571	15,788	51,905	47,972
Other pension costs	74,202	57,298	55,419	186,919	173,765
Total	240,505	184,329	217,390	642,224	613,506

All judiciary costs are within the core department and agencies.

Staff and judiciary numbers and further details of related costs, including exit packages, are reported in the Remuneration and Staff Report within the Accountability section.

6. Purchase of goods and services

		2022-23		2021-22
	Core department and agencies	Departmental group	Core department and agencies (reclassified)	Departmental group (reclassified)
	£000	£000	£000	£000
Lease/service concession charges:
PFI service charges*	566,928	566,928	600,817	600,817
Other service concession charges	136,587	136,587	128,531	128,531
Rentals under operating leases	21,378	21,400	30,589	30,632
Other services:
Accommodation, maintenance and utilities	955,170	810,548	934,029	780,975
Communications, office supplies and services	57,791	59,264	54,849	56,589
Travel, subsistence and hospitality	57,568	61,098	36,255	38,489
Training and other staff related costs	99,024	103,516	74,507	78,062
IT services and telecommunications (nonservice concession arrangements)	480,061	488,244	337,018	345,053
Professional services	83,182	87,816	78,952	83,154
Other contracted out services	152,414	160,274	120,983	130,421
Shared service outsourcing	-	-	-	293
Auditor’s remuneration and expenses	-	521	-	481
Other legal aid service costs	-	61	-	16
Non-cash services:
Auditor’s remuneration and expenses**	1,973	1,973	1,707	1,707
Total	2,612,076	2,498,230	2,398,237	2,275,220

*2021-22 PFI service charges have been reclassified to include £94.2 million reclassified managed prison charges, previously reported within offender related costs in Note 11 Other operating expenditure.
**Non-cash external auditor’s remuneration and expenses represents the statutory audit fees of the core department and agencies. Refer to page 92 in the Governance Statement, for details of total statutory audit fees for the group.

7. Depreciation, amortisation and impairment charges

		2022-23		2021-22
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Depreciation	684,114	687,616	624,554	628,185
Amortisation	104,463	107,300	76,673	79,341
Impairment of:
Property, plant and equipment	(4,984)	(4,984)	99,819	99,826
Intangible assets	1,518	1,518	5,503	5,504
Right of use assets	287	287	(50)	(50)
Increase in receivables impairment	10,076	10,089	13,090	13,085
Total	795,474	801,826	819,589	825,891

8. Provision expense

		2022-23		2021-22
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Provisions provided in year net of release	85,751	86,495	273,921	273,664
Civil legal help and representation – solicitors’ charges, counsel fees and disbursements	1,011,854	1,011,854	907,473	907,473
Criminal cases – solicitors’ charges, counsel fees and disbursements	913,076	913,076	834,842	834,842
Total	2,010,681	2,011,425	2,016,236	2,015,979

Not included in the provisions expense note are employment tribunal refunds, which are charged against income, and dilapidations provisions which have been capitalised and added to right of use assets.

9. Net (gain)/loss on disposal of assets

		2022-23		2021-22
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Net (gain)/loss on disposal of:
Property, plant and equipment	(11,356)	(11,349)	1,872	1,963
Intangible assets	-	24	(25)	39
Right of use assets	(93)	(93)	-	-
Assets held for sale	(1,301)	(1,301)	(1,104)	(1,104)
Total	(12,750)	(12,719)	743	898

On 30 September 2022, MoJ transferred the headlease of its main headquarters building, 102 Petty France, to the Government Property Agency (GPA), along with subleasing arrangements that MoJ had previously with other organisations, leasing back a smaller portion of the building from GPA. Under IFRS 16 Leases this requires the right of use asset and corresponding liability to be remeasured separately, with the difference being accounted for in the statement of comprehensive net expenditure. The carrying amount of the liability exceeded that of the right of use asset and this has resulted in £12.1 million credit to profit on disposal.

Alongside the transfer of the 102 Petty France headlease to GPA, fitout works were also transferred, resulting in a £10.7 million debit to capital grants in Note 11.

10. Revaluation of non-current and financial assets charged to CSoCNE

		2022-23		2021-22
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
(Increase)/decrease in the valuation of:
Property, plant and equipment	(14,406)	(14,406)	62,874	62,874
Intangible assets	(412)	(415)	194	194
Assets held for sale	(7)	(7)	(94)	(94)
Investments	(1)	(1)	260	260
Total	(14,826)	(14,829)	63,234	63,234

11. Other operating expenditure

		2022-23		2021-22
	Core department and agencies	Departmental group	Core department and agencies (reclassified)	Departmental group (reclassified)
	£000	£000	£000	£000
Grants:
Current	202,605	291,148	165,836	248,132
Capital	15,961	15,961	-	-
Criminal justice costs:
Offender related costs	619,766	619,766	578,515	578,515
Youth offender costs	45,739	45,739	52,903	52,905
Contracted probation services	69,876	69,876	179,462	179,462
Judicial and juror costs	57,239	57,239	51,883	51,883
Cost of legal services and disbursements (civil)	6,420	6,420	7,162	7,162
Cost of legal services and disbursements (crime)	4,462	4,462	3,780	3,780
Cost from Central Funds	13,967	13,967	12,291	12,291
Compensation payments	31,116	31,116	28,404	28,404
Other administrative expenditure	13,424	13,601	15,794	15,938
Other programme costs	103,743	188,496	105,485	197,801
Grant-in-aid to NDPBs	307,609	-	272,480	-
Non-cash operating expense:
Corporate notional overhead charge	(3,722)	-	(3,037)	-
Other pension costs	541	541	707	707
Other non-cash	4,268	4,259	(21,069)	(21,041)
Total	1,493,014	1,362,591	1,450,596	1,355,939

12. Finance expense

		2022-23		2021-22
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Finance charges on leases and service concession arrangements	34,133	34,214	36,636	36,634
Local authority loan interest	727	727	756	756
Non-cash finance expense:
Net interest on pension schemes	42,262	48,520	47,626	54,195
Total	77,122	83,461	85,018	91,585

13. Property, plant and equipment

Departmental group 2022-23

	Land	Buildings	Dwellings	Information technology	Plant and equipment	Furniture, fixtures and fittings	Assets under construction	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Cost or valuation
At 1 April 2022	1,782,971	9,835,001	53,533	615,062	500,931	39,523	1,212,460	14,039,481
Additions	1,200	40,443	-	47,268	14,725	(112)	1,035,646	1,139,170
Disposals	(5,250)	(11,582)	-	(9,382)	(15,005)	(452)	13	(41,658)
Reclassifications	(5,198)	381,173	(301)	38,864	18,138	2,094	(468,025)	(33,255)
Restatements	-	(18)	-	-	(13)	-	-	(31)
Revaluations	26,625	335,746	(7,600)	19,030	58,992	4,066	-	436,859
Transfers	-	-	-	54	-	-	(870)	(816)
Impairments	(287)	12,797	-	166	(171)	-	(7,521)	4,984
At 31 March 2023	1,800,061	10,593,560	45,632	711,062	577,597	45,119	1,771,703	15,544,734
Depreciation
At 1 April 2022	-	(1,955)	(12)	(448,000)	(317,221)	(29,548)	-	(796,736)
Charged in year	(528)	(444,010)	(825)	(57,980)	(37,821)	(1,752)	-	(542,916)
Disposals	-	919	-	9,068	13,361	438	-	23,786
Reclassifications	-	(737)	5	(335)	(25)	25	-	(1,067)
Restatements	-	9	-	2	7	(1)	-	17
Revaluations	528	442,368	830	(13,748)	(43,167)	(3,069)	-	383,742
At 31 March 2023	-	(3,406)	(2)	(510,993)	(384,866)	(33,907)	-	(933,174)
Carrying amount at 31 March 2023	1,800,061	10,590,154	45,630	200,069	192,731	11,212	1,771,703	14,611,560
Carrying amount at 1 April 2022	1,782,971	9,833,046	53,521	167,062	183,710	9,975	1,212,460	13,242,745
Asset financing
Owned	1,635,508	8,660,578	45,630	200,069	146,460	11,212	1,771,703	12,471,160
Finance leased	-	-	-	-	46,271	-	-	46,271
On-balance sheet PFI and other SCAs	164,553	1,929,576	-	-	-	-	-	2,094,129
Carrying amount at 31 March 2023	1,800,061	10,590,154	45,630	200,069	192,731	11,212	1,771,703	14,611,560
Of the total
Core department and agencies	1,800,061	10,589,414	45,630	198,984	192,724	11,073	1,770,533	14,608,419
NDPBs	-	740	-	1,085	7	139	1,170	3,141
Carrying amount at 31 March 2023	1,800,061	10,590,154	45,630	200,069	192,731	11,212	1,771,703	14,611,560

Seven prisons are run by private sector operators under manage and maintain contracts. Assets covered by these contracts were reported as ‘owned’ in prior years but have been reclassified to ‘on-balance sheet PFI and other service concession arrangements (SCAs)’ in accordance with IFRIC 12 Service Concession Arrangements for 2022-23; the 31 March 2022 balances have been restated. Further details relating to these SCAs are disclosed in Note 21.

Per Note 1b, Critical accounting estimates and judgements, the split of property value at 31 March 2023 by valuation basis is shown in the table below.

Property values at 31 March 2023	£000
Property values at depreciated replacement cost	11,287,143
Property values at existing use value	854,631
Properties at market value	29,353
Total	12,171,126

The above does not include leasehold improvements as these are not professionally valued by the Valuation Office Agency. Also reported here are land assets associated with buildings that are not ready for use. The building elements are reported within assets under construction. Assets under construction will not be valued until ready to be made live and are therefore excluded from the analysis by valuation type.

Departmental group 2021-22

	Land	Buildings	Dwellings	Information technology	Plant and equipment	Furniture, fixtures and fittings	Assets under construction	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Cost or valuation
At 1 April 2021	1,609,080	9,120,029	42,747	540,770	434,635	31,248	1,083,287	12,861,796
Adoption of IRFS 16 - reclassification	(1,200)	(115,892)	(987)	-	-	-	-	(118,079)
Restated balance at 1 April 2021	1,607,880	9,004,137	41,760	540,770	434,635	31,248	1,083,287	12,743,717
Additions	56,160	138,364	-	46,155	71,001	3,585	866,083	1,181,348
Disposals	(1,236)	(1,433)	-	(1,248)	(15,491)	(271)	21	(19,658)
Reclassifications	(8,166)	642,753	7,362	69,419	19,210	3,379	(746,771)	(12,814)
Revaluations	127,899	108,125	4,411	(7,700)	26,308	1,582	-	260,625
Transfers	-	24	-	-	(25)	-	19	18
Impairments	434	(56,969)	-	(32,334)	(34,707)	-	9,821	(113,755)
At 31 March 2022	1,782,971	9,835,001	53,533	615,062	500,931	39,523	1,212,460	14,039,481
Depreciation
At 1 April 2021	-	(1,854)	-	(398,555)	(280,309)	(27,250)	-	(707,968)
Charged in year	(583)	(400,027)	(1,095)	(70,643)	(31,299)	(1,211)	-	(504,858)
Disposals	-	361	-	1,234	14,691	269	-	16,555
Reclassifications	-	143	3	-	-	-	-	146
Revaluations	583	399,422	1,080	6,046	(20,313)	(1,358)	-	385,460
Transfers	-	-	-	-	-	-	-	-
Impairments	-	-	-	13,918	9	2	-	13,929
At 31 March 2022	-	(1,955)	(12)	(448,000)	(317,221)	(29,548)	-	(796,736)
Carrying amount at 31 March 2022	1,782,971	9,833,046	53,521	167,062	183,710	9,975	1,212,460	13,242,745
Carrying amount at 1 April 2021	1,609,080	9,118,175	42,747	142,215	154,326	3,998	1,083,287	12,153,828
Asset financing (restated)
Owned	1,620,253	8,067,490	53,521	167,062	134,851	9,975	1,212,460	11,265,612
On-balance sheet PFI and other SCAs	162,718	1,765,556	-	-	48,859	-	-	1,977,133
Carrying amount at 31 March 2022	1,782,971	9,833,046	53,521	167,062	183,710	9,975	1,212,460	13,242,745
Of the total
Core department and agencies	1,782,971	9,832,412	53,521	165,516	183,708	9,789	1,212,460	13,240,377
NDPBs	-	634	-	1,546	2	186	-	2,368
Carrying amount at 31 March 2022	1,782,971	9,833,046	53,521	167,062	183,710	9,975	1,212,460	13,242,745

The £118.1 million restated opening balance is due to the reclassification to right of use assets of £45.9 million of leased property (peppercorn leases) within HMCTS, and £72.2 million of finance leases within MoJ Core, under IFRS 16.

14. Right of use leased assets

Departmental group 2022-23

	Land	Buildings	Total
	£000	£000	£000
Cost or valuation
At 1 April 2022	1,207,527	347,280	1,554,807
Additions	34,016	90,108	124,124
Disposals	(925)	(6,421)	(7,346)
Reclassifications	(2,960)	(16,709)	(19,669)
Remeasurements	-	37	37
Revaluations	8,622	(53)	8,569
Impairments	-	(287)	(287)
At 31 March 2023	1,246,280	413,955	1,660,235
Depreciation
At 1 April 2022	(79,374)	(42,927)	(122,301)
Charged in year	(88,348)	(56,352)	(144,700)
Disposals	781	195	976
Reclassifications	-	(263)	(263)
Remeasurements	-	(15)	(15)
Revaluations	6,673	4,486	11,159
At 31 March 2023	(160,268)	(94,876)	(255,144)
Carrying amount at 31 March 2023	1,086,012	319,079	1,405,091
Carrying amount at 1 April 2022	1,128,153	304,353	1,432,506
Of the total
Core department and agencies	1,086,012	305,216	1,391,228
NDPBs	-	13,863	13,863
Carrying amount at 31 March 2023	1,086,012	319,079	1,405,091

The group’s lease contracts comprise leases of operational land and buildings. A maturity analysis of lease liabilities is given within Note 19, Trade payables and other financial liabilities.

On 30 September 2022, MoJ transferred the headlease of its main headquarters building, 102 Petty France, to GPA, along with subleasing arrangements that MoJ had previously with other organisations, leasing back a smaller portion of the building from GPA. This has led to a £6.4 million disposal under right of use assets, reflecting the reduction in the scope of the lease.

Departmental group 2021-22

	Land	Buildings	Total
	£000	£000	£000
Cost or valuation
At 1 April 2021
Initial recognition on implementation of IFRS 16	1,199,803	275,349	1,475,152
Additions	93,700	74,450	168,150
Reclassifications	483	(559)	(76)
Revaluations	(86,459)	(2,010)	(88,469)
Impairments	-	50	50
At 31 March 2022	1,207,527	347,280	1,554,807
Depreciation
At 1 April 2021
Charged in year	(79,029)	(44,298)	(123,327)
Reclassifications	-	(52)	(52)
Revaluations	(345)	1,423	1,078
At 31 March 2022	(79,374)	(42,927)	(122,301)
Carrying amount at 31 March 2022	1,128,153	304,353	1,432,506
Carrying amount at 1 April 2021	-	-	-
Of the total
Core department and agencies	1,128,153	295,240	1,423,393
NDPBs	-	9,113	9,113
Carrying amount at 31 March 2022	1,128,153	304,353	1,432,506

MoJ adopted IFRS 16 Leases from 1 April 2021. As required by the FReM, we implemented it using the cumulative catch-up method, without restatement of prior year figures. The majority of leases, treated as operating leases until 31 March 2021, were recognised on-balance sheet as right of use assets and lease liabilities. As a result, we recognised an additional £1,475.2 million of right of use assets and £1,506.5 million of lease liabilities.

Amounts recognised in the Consolidated Statement of Comprehensive Net Expenditure

		2022-23		2021-22
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Sub-leasing income	-	-	(24,880)	(24,880)
Depreciation	92,320	94,458	120,690	123,019
Interest expense	11,636	11,742	19,554	19,627
Low value and short term leases	6,138	6,201	8,347	8,347
Non-recoverable VAT	11,965	11,965	13,535	13,535
Total	122,059	124,366	137,246	139,648

Amounts recognised in the Consolidated Statement of Cash Flows

		2022-23		2021-22
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Right of use assets	1,758	1,780	18,670	18,670
Interest expense	11,636	11,742	19,554	19,627
Repayment of principal on leases	85,851	87,444	127,924	130,135
Total	99,245	100,966	166,148	168,432

15. Intangible assets

Departmental group 2022-23

	Software licences	Information technology	Internally generated software	Assets under construction	Total
	£000	£000	£000	£000	£000
Cost or valuation
At 1 April 2022	60,707	443,001	752,684	177,454	1,433,846
Additions	758	2,558	4,119	99,855	107,290
Disposals	(422)	31	(4,369)	(6)	(4,766)
Reclassifications	(2,237)	1,983	169,735	(120,027)	49,454
Revaluations	1,496	11,845	19,952	-	33,293
Transfers	-	-	-	817	817
Impairments	-	100	-	(1,618)	(1,518)
At 31 March 2023	60,302	459,518	942,121	156,475	1,618,416
Amortisation
At 1 April 2022	(41,229)	(378,993)	(350,531)	-	(770,753)
Charged in year	(5,045)	(15,366)	(86,889)	-	(107,300)
Disposals	391	(32)	4,381	-	4,740
Reclassifications	540	(239)	34	-	335
Revaluations	(1,212)	(10,556)	(11,683)	-	(23,451)
At 31 March 2023	(46,555)	(405,186)	(444,688)	-	(896,429)
Carrying amount at 31 March 2023	13,747	54,332	497,433	156,475	721,987
Carrying amount at 1 April 2022	19,478	64,008	402,153	177,454	663,093
Asset financing
Owned	13,747	54,332	497,433	156,475	721,987
Carrying amount at 31 March 2023	13,747	54,332	497,433	156,475	721,987
Of the total
Core department and agencies	13,311	52,928	492,436	156,350	715,025
NDPBs	436	1,404	4,997	125	6,962
Carrying amount at 31 March 2023	13,747	54,332	497,433	156,475	721,987

Departmental group 2021-22

	Software licences	Information technology	Internally generated software	Assets under construction	Total
	£000	£000	£000	£000	£000
Cost or valuation
At 1 April 2021	42,768	451,365	460,259	382,488	1,336,880
Additions	19,683	160	7,265	112,860	139,968
Disposals	(776)	(6,363)	(6,250)	(600)	(13,989)
Reclassifications	(593)	3,832	303,221	(312,573)	(6,113)
Revaluations	(506)	(5,992)	(5,000)	-	(11,498)
Transfers	-	-	-	(20)	(20)
Impairments	131	(1)	(6,811)	(4,701)	(11,382)
At 31 March 2022	60,707	443,001	752,684	177,454	1,433,846
Amortisation
At 1 April 2021	(37,187)	(372,241)	(310,437)	-	(719,865)
Charged in year	(4,789)	(18,615)	(55,937)	-	(79,341)
Disposals	712	6,362	6,250	-	13,324
Reclassifications	(359)	359	-	-	-
Revaluations	394	5,142	3,714	-	9,250
Transfers	-	-	1	-	1
Impairments	-	-	5,878	-	5,878
At 31 March 2022	(41,229)	(378,993)	(350,531)	-	(770,753)
Carrying amount at 31 March 2022	19,478	64,008	402,153	177,454	663,093
Carrying amount at 1 April 2021	5,581	79,124	149,822	382,488	617,015
Asset financing
Owned	19,478	64,008	402,153	177,454	663,093
Carrying amount at 31 March 2022	19,478	64,008	402,153	177,454	663,093
Of the total
Core department and agencies	18,781	62,490	396,477	176,625	654,373
NDPBs	697	1,518	5,676	829	8,720
Carrying amount at 31 March 2022	19,478	64,008	402,153	177,454	663,093

At 31 March 2023 and 31 March 2022 there were no individually material intangible assets.

16. Assets held for sale

		31 March 2023		31 March 2022
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Balance at 1 April	6,465	6,465	9,713	9,713
Reclassifications	4,464	4,464	(1,021)	(1,021)
Disposals	(1,312)	(1,312)	(2,298)	(2,298)
Revaluations	(502)	(502)	71	71
Balance at 31 March	9,115	9,115	6,465	6,465

HMPPS has committed to a plan to sell surplus properties, which are to be sold for commercial use and domestic dwellings. These sites have a combined value of £9.1 million (2021-22: £6.2 million).

As part of an ongoing court rationalisation review, HMCTS sold a number of surplus properties (land and buildings) that were previously used to provide court services. These sites had a combined net book value at 31 March 2022 of £0.3 million.

17. Trade and other receivables

		31 March 2023		31 March 2022
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Amounts falling due within one year
Trade receivables	66,265	66,442	71,179	71,326
Other receivables	168,442	170,189	179,496	181,153
Contributions due from funded clients	959	959	631	631
Statutory charge and interest	11,380	11,380	12,494	12,494
Amounts due from service providers	28,812	28,812	30,664	30,664
VAT receivables	72,448	72,448	76,728	76,728
Deposits and advances	38	100	40	81
Prepayments and accrued income	149,550	151,275	103,799	106,178
Intra-departmental receivables	1,279	-	560	-
Current total	499,173	501,605	475,591	479,255
Amounts falling due after more than one year
Sub-leasing receivables	-	-	64,760	64,760
Other receivables	32,789	32,789	36,395	36,395
Prepayments and accrued income	719	723	49	54
Contributions due from funded clients	4,420	4,420	4,860	4,860
Statutory charge and interest	84,326	84,326	82,468	82,468
Non-current total	122,254	122,258	188,532	188,537
Total	621,427	623,863	664,123	667,792

The above includes a receivables impairment provision of £247.8 million (2021-22: £246.6 million) for LAA. For further detail on the LAA impairment provision refer to Note 24.

Other receivables includes £103.8 million (2021-22: £109.1 million) from the HMCTS Trust Statement.

Sub-leasing receivables at 31 March 2022 included £64.8 million in respect of the sub-lease of 102 Petty France, the head-lease of which has since been transferred to GPA.

18. Cash and cash equivalents

		31 March 2023		31 March 2022
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Balance at 1 April	181,685	222,894	214,590	266,618
Net change in cash and cash equivalents	121,108	136,488	(32,905)	(43,724)
Balance at 31 March	302,793	359,382	181,685	222,894
Of which:
Government Banking Service	271,663	302,693	154,587	182,109
Commercial banks and cash in hand	31,130	56,689	27,098	40,785
Total	302,793	359,382	181,685	222,894

18.1 Reconciliation of liabilities arising from financing activities

Amendments to IAS 7 introduced a requirement for an entity to provide disclosures that enabled users of the financial statements to evaluate changes in liabilities arising from financing activities, including both cash and non-cash changes. The table below provides a breakdown of movements in liabilities arising from financing activities.

Departmental group

	Opening liabilities at 1 April 2022	Cash flows (out)/in	Interest charged	Capital repayment	Interest paid	Net additions and IFRS 16 adjustments	Closing liabilities at 31 March 2023
	£000	£000	£000	£000	£000	£000	£000
Capital element of finance leases and on-balance sheet PFI contracts	-	(177,796)	-	177,796	-	-	-
Repayment of local authority loans	-	(1,529)	-	1,529	-	-	-
Interest paid	-	(34,941)	(34,941)	-	34,941	-	-
Longterm borrowings	20,751	-	746	(1,529)	(746)	-	19,222
Lease liabilities	1,596,864	-	20,014	(139,329)	(20,014)	40,479	1,498,014
PFI and SCA liabilities	317,639	-	14,181	(38,467)	(14,181)	-	279,172
Total	1,935,254	(214,266)	-	-	-	40,479	1,796,408

Departmental group

	Opening liabilities at 1 April 2021	Cash flows (out)/in	Interest charged	Capital repayment	Interest paid	Adjustments upon adoption of IFRS16	Closing liabilities at 31 March 2022
	£000	£000	£000	£000	£000	£000	£000
Capital element of finance leases and on-balance sheet PFI contracts	-	(23,868)	-	23,868	-	-	-
Repayment of local authority loans	-	(1,600)	-	1,600	-	-	-
Interest paid	-	(37,390)	(37,390)	-	37,390	-	-
Longterm borrowings	22,351	-	756	(1,600)	(756)	-	20,751
Finance lease liabilities	97,013	-	7,935	93,668	(7,935)	(190,681)	-
Lease liabilities	-	-	11,692	(130,135)	(11,692)	1,726,999	1,596,864
PFI and SCA liabilities	305,040	-	17,007	12,599	(17,007)	-	317,639
Total	424,404	(62,858)	-	-	-	1,536,318	1,935,254

19. Trade payables and other financial liabilities

19.1 Payables

		31 March 2023		31 March 2022
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Amounts falling due within one year
Trade payables	119,634	127,295	100,546	109,766
Taxation and social security	82,106	88,098	76,205	80,583
Capital payables	195,521	195,548	184,085	184,137
Other payables	102,435	103,352	95,649	96,561
Accruals	775,618	792,937	803,545	820,899
Deferred income	95,549	95,773	88,799	89,048
Amounts due to solicitors, counsel and advice agencies	70,875	70,875	59,638	59,638
Contribution refunds to funded clients	2,048	2,048	1,284	1,284
Creditor for pension transfer deficit: amounts payable to LGPS	-	-	4,219	4,219
Amounts issued from the Consolidated Fund for supply but not spent at year end	283,368	283,368	179,503	179,503
CFERs due to be paid to the Consolidated Fund:
- received	19,425	19,425	2,182	19,986
- receivable	-	-	-	-
Intra-departmental payables	33,711	-	27,916	-
Current total	1,780,290	1,778,719	1,623,571	1,645,624
Amounts falling due after more than one year
Local authority loan balances	19,222	19,222	20,751	20,751
Deferred income	-	911	-	1,110
Other payables	18,134	18,181	16,283	16,283
Non-current total	37,356	38,314	37,034	38,144
Total	1,817,646	1,817,033	1,660,605	1,683,768

19.2 Other financial liabilities

		31 March 2023		31 March 2022
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Amounts falling due within one year
Lease incentive creditors	87	87	87	87
Lease liabilities	131,537	133,880	138,972	141,013
Imputed finance lease element of onbalance sheet PFI contracts	35,836	35,836	38,466	38,466
Current total	167,460	169,803	177,525	179,566
Amounts falling due after more than one year
Lease liabilities	1,352,193	1,364,134	1,448,486	1,455,851
Imputed finance lease element of onbalance sheet PFI contracts	243,336	243,336	279,173	279,173
Non-current total	1,595,529	1,607,470	1,727,659	1,735,024
Total	1,762,989	1,777,273	1,905,184	1,914,590

20. Provisions for liabilities and charges

		2022-23		2021-22
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Balance at 1 April	1,611,695	1,616,040	1,554,681	1,559,109
Provided in the year	2,213,725	2,215,444	2,117,726	2,119,285
Provisions not required written back	(195,626)	(196,437)	(79,498)	(80,867)
Provisions utilised in the year	(2,047,896)	(2,048,096)	(1,984,899)	(1,985,172)
Borrowing costs (unwinding of discount)	(1,238)	(1,238)	3,685	3,685
Balance at 31 March	1,580,660	1,585,713	1,611,695	1,616,040
Analysis of expected timing of discounted cash flows
Not later than one year	1,076,090	1,079,836	916,691	920,237
Later than one year but not later than five years	275,952	277,186	329,706	330,474
Later than five years	228,618	228,691	365,298	365,329
Balance at 31 March	1,580,660	1,585,713	1,611,695	1,616,040

Provisions by type 2022-23

	Judicial Service Award	Injury benefit scheme	Early departure costs	Costs from Central Funds	Legal claims	Repayment schemes (OPG and HMCTS)	CICA pre-tariff scheme	CICA tariff scheme	Leasehold dilapidations	LAA outstanding balances on funded cases	Other	Total
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Balance at 1 April 2022	162,760	164,774	80,408	25,463	104,436	17,535	524	164,765	87,002	710,947	97,426	1,616,040
Provided in the year	-	1,732	-	45,692	81,018	747	864	150,654	6,400	1,924,930	3,047	2,215,444
Not required and written back	(31,681)	(51,881)	(18,799)	-	(17,293)	-	-	(279)	(3,411)	-	(73,093)	(196,437)
Utilised in the year	(14,183)	(6,097)	(4,191)	(42,424)	(22,139)	(3,366)	(700)	(146,301)	(1,930)	(1,805,566)	(1,199)	(2,048,096)
Reclassifications between provisions categories	-	-	-	-	77	-	-	-	-	-	(77)	-
Borrowing costs (unwinding of discount)	600	-	1,179	-	(3,388)	-	-	371	-	-	-	(1,238)
Balance at 31 March 2023	117,496	108,528	58,597	28,731	142,711	14,916	688	169,210	88,061	830,311	26,464	1,585,713
Analysis of expected timing of discounted cash flows
Not later than one year	28,700	5,962	4,319	28,731	24,688	5,441	688	132,878	15,728	830,311	2,390	1,079,836
Later than one year but not later than five years	52,000	21,938	15,313	-	112,746	9,475	-	36,332	22,775	-	6,607	277,186
Later than five years	36,796	80,628	38,965	-	5,277	-	-	-	49,558	-	17,467	228,691
Balance at 31 March 2023	117,496	108,528	58,597	28,731	142,711	14,916	688	169,210	88,061	830,311	26,464	1,585,713

Judicial Service Award and fee-paid judicial claims

The Judicial Service Award (JSA) was created to equalise the tax position of judicial pensions affected by the provisions of the Finance Act 2004. Following the introduction of the Fee-Paid Judicial Pensions Scheme on 1 April 2017, the provision held for JSAs covers the liability to both salaried and fee-paid judges. The provision is calculated by the Government Actuary’s Department (GAD), taking into account the number of reckonable years served by the existing judiciary and the projected final salaries or fee earnings of existing members. JSA benefits ceased to accrue on 31 March 2022, as a result of the introduction of the Reformed 2022 Judicial Pension Scheme. JSAs accrued before that date remain the liability of MoJ and where members continue in active service remain linked to salaries or fee-rates at retirement.

The JSA provision takes into account liabilities arising from recent litigation. In November 2018 the Court of Justice of the European Union (CJEU) extended the period of service to be taken into account in calculating pensions for eligible fee-paid judges, and in December 2019 the UK Supreme Court ruled that the time limit to make a pension claim ran from three months from the date of retirement rather than from the end of fee-paid service, thereby extending the number of potential eligible claimants.

In June 2019, the Supreme Court refused the government permission to appeal the McCloud and Sergeant cases, which decided that the transitional protection provisions in the Judicial Pension Scheme (JPS) 2015 Regulations were unlawful on grounds of age discrimination.

The JSA provision of £117.5 million can be analysed as follows:

	£m
Salaried judicial office holders	60.9
Fee-paid judicial office holders	25.1
Transitional protection	20.0
Length of service protection	11.5
Total	117.5

Sensitivity analysis

A sensitivity analysis for the JSA provision was undertaken by GAD to identify the impact of changes in the assumptions used to calculate the liability as at 31 March 2023. Each change is shown separately to enable the reader to understand the impact that an adjustment would have on the accounts. The following assumptions are used in the calculation of this provision:

Discount rate: The liability is accounted for under IAS 37 Provisions, Contingent Liabilities and Contingent Assets and uses the general provisions discount rate as published by HM Treasury. The discount rate is used to calculate the present value of expected future cash flows. The sensitivity analysis shows the impact of a +0.5% change in the discount rate for the short term, medium term and long term. A +0.5% change in the rate which would result in a reduction in the liability of 2.0% or £1.7 million.
(Long-term) salary increase: A long-term salary increase of CPI +2.0% pa is used to calculate the provision. This is in keeping with the Judicial Pension Scheme resource accounts. The sensitivity analysis shows the impact of a +0.5% change in the earnings assumptions which would result in an increase in the liability of 2.5% or £2.2 million.
Post-employment rates: This sensitivity shows the impact of calculating the provision using the post-employment benefits discount rate of 4.15% rather than the general provisions rates. This would increase the liability by 1.5% or £1.3 million.
Retirement age: This is the unweighted average age at which members are assumed to retire on grounds other than ill health in each of the Judicial Pension Schemes. A one-year increase in the retirement age assumption would have a negligible impact on the liability.
Inflation: A service award is paid when a member retires and is dependent on the earnings assumptions but not inflation.

		Approximate effect on total liability
Change in assumption	%	£m
1. Discount rate: +0.5% per annum	+2.0	- £1.7
2. (Long-term) salary increase: +0.5% per annum	+2.5	+£2.2
3. Post-employment rates	- 1.5	- £1.3
4. Retirement age: all members retire 1 year later	Nil	Nil
5. Inflation: +0.5% per annum	Nil	Nil

MoJ was required to compensate eligible retired fee-paid judges for the additional pension benefits due, including interest where applicable, until the Judicial Pension Scheme (JPS) was amended by legislation to allow full benefits to be paid from the scheme. The scheme was amended on 1 April 2023 and the remaining payments will be made by JPS. MoJ has retained a provision of £1.9 million for compensation of an interest like nature which is not payable by JPS. This is included within the total for ‘Other Provisions’.

Injury benefits scheme

HMPPS meets the costs of the Civil Service Injury Benefit Scheme (CSIBS) for payments granted under the scheme after 1 April 1998. The scheme pays benefits to any PCSPS member who suffers disease or injury, which is wholly or partially attributable to the nature of their duty, or who suffers an attack or similar act which is directly attributable to employment within the service. Benefits are paid only in respect of loss of earning capacity, and a provision is made for expected future costs. The Government Actuary’s Department (GAD) provides HMPPS with annuity rates each year covering whole of life (for total liability value), 1 year and 1 to 5 years (for cash flow values). These assumptions take the time value of money into account.

Early departure costs

The department meets the additional costs of benefits beyond normal PCSPS benefits for employees who retire early. This involves paying amounts determined by the pension administrator annually to PCSPS over the period between early departure and normal retirement date. The department provides for this in full when the early retirement programme becomes binding on the department by establishing a provision for the estimated payments discounted at the HM Treasury nominal rate of 4.5% (2021-22: 1.55%).

Costs from Central Funds

Under the terms of the Prosecution of Offences Act 1985, acquitted defendants who have applied for legal aid and been found ineligible may, in limited circumstances, obtain an order from the Crown Court to recover their costs. LAA estimates the value of unbilled costs to arrive at the amount disclosed in the accounts as a provision. The amount is an estimate of the expenditure required to settle any obligation at the reporting period end date.

Legal claims

Provision has been made for all known claims where legal advice indicates that it is more likely than not that the claim will be successful, and the amount of the claim can be reliably estimated. The figures represent the best estimate of the amount payable. Legal claims which are likely to succeed with a lesser degree of certainty or cannot be estimated reliably are disclosed as contingent liabilities in Note 26.

CICA pre-tariff schemes

The pre-tariff scheme provision reflects CICA’s liabilities in respect of all outstanding cases incurred prior to 1996 which remain to be settled in future years. In accordance with CICA’s accounting policies, the provision is reviewed annually and reflects the likely settlement values at the year-end based on the circumstances of each application at that time. CICA’s estimate of the likely settlement requires judgement and the final payment may differ from this estimate.

Pre-tariff scheme award values are assessed by the First-Tier Tribunal (FTT). This assessment includes the application of a discount rate (the Lord Chancellor’s discount rate, which is currently -0.25%). The award values assessed by the FTT are not then further discounted by CICA, due to uncertainties surrounding both the final liability and the settlement date. Additionally, due to these uncertainties, all pre-tariff liabilities are classed as falling due within one year, and have not been discounted by HM Treasury’s discount rate.

CICA does not hold any assets in respect of these liabilities; compensation will be paid from Parliamentary funding in the year of settlement.

CICA tariff schemes

The provision for tariff schemes is reflective of CICA’s liabilities under the 1996, 2001, 2008 and 2012 Schemes. CICA recognises liabilities that are based upon an evaluation of total applications that are currently known and received by CICA but have not yet been processed through to award; these are referred to as claims reported but not completed (CRBNC). The overall liability for the tariff scheme is £205.7 million with £169.2 million included in this provisions note and £36.5 million included as a tariff scheme accrual within Note 19 (31 March 2022: £164.8 million and £30.1 million). Where an event has occurred on or before the reporting date, but an application has not yet been made, CICA recognises this as an unquantifiable contingent liability. This is because no legal obligation as a result of a past event exists. It is only where an application for compensation has been received that an obligation is recognised in relation to the Scheme.

The provision model for tariff schemes estimates a provision for three different categories of case:

Not Decided: These are cases which are still under assessment by CICA and therefore a potential monetary value has not yet been determined. In order to estimate a provision for these cases, the model builds historical profiles of average award values, aggregated by tariff band and case age, which are then applied to the population of outstanding cases. A further adjustment is made to account for the fact that a subset of the live case population will be ‘nil-assessed’ i.e. will not attract a monetary award. The proportion of such cases is determined based upon an assessment of the historical proportion of nil-assessed cases within each tariff band.
Decided: These are live cases that have been sufficiently assessed to determine their potential monetary value, but where a decision letter has not been issued to the applicant. Until a decision letter is issued, the monetary value may be subject to revision arising from changes in the circumstances of the applicant, checks by CICA resulting in the identification of error or a change in value determined by the timing at which an offer is made to the applicant. Additionally, until the decision letter is issued there is uncertainty over the timing of discharge of the liability. Where a decision letter has been sent to the applicant, the award is classified as ‘on offer’ and accrued for, rather than included in the tariff provision.
On Offer Not Accrued: Once an offer is made, the award value is accrued and therefore no provision is required. However, in a small proportion of such cases the applicant does not accept the compensation offered and an adjustment is made to account for this. The proportion is removed from the total ‘on offer’ accrual and added back into the value of the provision. The percentage is determined based upon an assessment of the historical level of the proportion of cases where this occurs.

Since applications are determined under the scheme in force at the date of application, the tariff provision model calculates the provision for pre-2012 schemes (1996, 2001 and 2008) and the current 2012 scheme separately.

The number of remaining live cases for the pre-2012 schemes is low and decreasing. As at 31 March 2023, the provision model has therefore been adjusted to estimate value based on operational judgments around the likely compensation for each individual case, with an adjustment for likely changes to currently assessed values on appeal, which is calculated based on appeal rates for cases resolved in the past three years.

The following key assumptions underpin the provision for post-2012 tariff schemes:

Average value: average value profiles for both tariff bands and case age are derived from historical case data.
% nil value: the proportion of cases which will be assessed at nil value is derived from historical case data.
Decided to offer: the calculation assumes that decided cases will be paid out at 100% of their decided value.
Tariff profiles: profiles are created by using data for years in which at least 95% of cases have been decided.
Timing: the expected timing in which the liability is discharged is calculated on the basis of operational capacity.
Discounting: the liabilities are discounted, based on the expected timing of discharge, at HM Treasury’s nominal discount rate. The real rate is not used, as tariff schemes compensation payments are not subject to inflationary pressures. The discount is unwound over the life of the provision, with the unwinding disclosed as a finance charge in the Statement of comprehensive net expenditure.

HM Treasury discount rates used are as follows:

	31 March 2023	31 March 2022
Years	%	%
1 to 5	3.27	0.47
6 to 10	3.20	0.70
11+	3.51	0.95

CICA does not hold any assets in respect of tariff schemes liabilities; compensation will be paid from Parliamentary funding in the year of settlement.

Tariff schemes sensitivity analysis

A sensitivity analysis for the tariff provision has been undertaken to identify the impact of any changes to key assumptions. Each assumption within the provision model has been identified, a reasonable change identified and the impact on the overall financial liability calculated. These changes include flexing historical data trends to show the potential impact on the provision. For each assumption which is being analysed for sensitivity, only that assumption is changed. If two or more assumptions are changed at one time, the actual sensitivity of a change in assumption may be obscured because of the potential interrelation of the assumptions.

The following tables show the impact of adjusting the key assumptions. The ranges of the sensitivity tests shown are based on the variability of past data. They do not represent the maxima or minima of past observed values nor the full range of possible outcomes, but they do capture future values that could plausibly occur. Each change is shown separately but in practice combinations are possible as different assumptions can be correlated.

		Pre-2012 Change	2012 Change	Total Change
	Assumption	£000	£000	£000
Average value	Low profile	(1)	(10,416)	(10,417)
Average value	High profile	1	10,416	10,417
% nil value	+5%	-	(15,375)	(15,375)
% nil value	- 5%	-	15,375	15,375
Decided to offer	- 5%	-	(189)	(189)
Decided to offer	+5%	-	189	189
Tariff profiles	Max	-	2,114	2,114
Tariff profiles	75% decided	-	725	725
Tariff profiles	50% decided	-	(232)	(232)
Timing	All year one	43	1,311	1,354
Timing	All year three	(293)	(8,987)	(9,280)
Timing	Even over three years	(126)	(3,865)	(3,991)

Leasehold dilapidations

Dilapidation costs are an estimate of the expenditure required to return vacated leased buildings to their original condition as at the date of commencement of the lease. The movement in the year is as a result of updated information relating to property vacations, new properties leased during the year, and changes in the cost per square metre of the properties leased due to the general market conditions’ impact on prices.

LAA outstanding balances on funded cases

The LAA funds legal aid across four main schemes: Civil Representation, Legal Help, Crime Higher and Crime Lower. Provisions for work in progress on funded cases, by scheme category, are as follows:

At 31 March 2023	£000
Civil Representation	298,891
Legal Help	47,460
Crime Lower	46,296
Crime Higher	437,664
Total	830,311

At any point in time there will be unbilled costs for each of these schemes, pertaining to live cases. The value of unbilled work and costs is estimated each year using complex models and based on the latest data available. The resulting work in progress (WIP) provisions are estimates of the expenditure required to settle any obligation in existence at the end of the reporting period. As per IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’, WIP liabilities are recognised as provisions, rather than as payables, due to the measurement uncertainty.

As all liabilities for funded cases are expected to be settled within the next 12 months, no discounting of provisions for the time value of money is applied.

In recognition of the uncertainty inherent in estimates, a sensitivity analysis is performed for each major class of funded WIP provision. Reasonable changes are made to the key assumptions in the models and the impact on the final WIP balance calculated. Assumptions have been changed to either represent those that would have been used by the model based on historical data trends or flexed by a percentage that is considered appropriate by management to show the impact on the provision. For each assumption that is being analysed for sensitivity, only that assumption is changed: if two or more assumptions are changed at one time, the actual sensitivity of a change in assumption is obscured because of the potential interaction between the assumptions.

Overarching assumptions

Underlying the estimates of liabilities for unbilled work across all of the Legal Aid funding schemes, and Central Funds, is the modelling assumption that costs accrue at a constant rate throughout the lifetime of cases. This is a simplifying modelling assumption. In reality, it is accepted that costs are generally concentrated towards the beginning and the end of legal matters. LAA have demonstrated, however, that over a sufficiently large population of cases, this concentration of costs averages out to be equivalent to the assumption used within the modelling, that costs accrue at a constant rate.

Further information on the assumptions for the civil representation and crime higher provisions, which are material to the MoJ financial statements, is provided below. Equivalent information for the legal help and crime lower provisions is available in LAA’s Annual Report and Accounts.

Civil representation valuation methodology

Civil Representation relates to legal aid for representation by barristers and solicitors in civil cases that go to court. The Civil Representation WIP provision is calculated using past patterns of activity taken from completed transactions and assuming that these are a reasonable indicator of likely activity on live cases. Within the Civil Representation funding scheme, cases can attract payments at multiple stages throughout their duration. In estimating the WIP provision, historical information is used to derive profiles that indicate the length of time that passes between subsequent transactions, and separate profiles that indicate the average value of payments relative to their distance in time from any prior transaction. These profiles are derived for each distinct category of law funded within Civil Representation, independently for each expenditure stream within the scheme. These profiles are then combined to produce probabilistic estimates of the value of work likely to have been conducted on cases upon which the previous transaction (or the case start date) was a given number of days before the estimate, and these estimates are then applied to the population of cases that are live at the end of the accounting period to determine the estimate of liability.

Civil representation: key assumptions

The impact of COVID-19 was taken into account when estimating the liabilities within the Legal Aid funding schemes. For Civil Representation the following amendments have been made:

Duration profile: The model implicitly assumes that recent historical billing timing profiles are an indicator of future timing profiles for equivalent workstreams. The model also assumes that bill volumes beyond 1,500 days from a prior transaction are negligible.
Final billing duration: it can take some time for providers to compile and submit their bills to LAA once work has completed on a case: the estimate assumes that the average delay will be equivalent to that seen in the preceding quarter, however this does vary to a small degree over time.
Average bill value: The model implicitly assumes that recent historical bill values are an indicator of future bill values for equivalent workstreams.
Provider COVID-19 billing behaviour: the COVID-19 pandemic prompted significant changes in the pattern of provider billing, with more frequent claims throughout the lifetime of cases. In addition to this, the cost of cases for work in the family courts has increased at an accelerated rate. These two relatively sudden changes would not ordinarily have been picked up through the model’s consideration of historical billing patterns, so an adjustment has been applied to the model to amend the billing profiles to reflect these more recent developments. This adjustment is applied through assessing the extent to which billing frequency and price have varied before and after the COVID-19 pandemic and adjusting the profiles that are generated based on pre-pandemic data to account for this movement. The effect of this is to assume that liabilities for work in progress tend to be held for less time due to the increased billing frequency, but for higher values due to increased case costs.

Civil representation: sensitivity analysis

The Civil Representation work in progress provision is calculated on a case-by-case basis using past patterns of activity, with multiple potential duration and cost outcomes. The calculations are segmented between the different expenditure streams and between different milestones in a case’s lifecycle. The model estimates activity to the next financial event in each expenditure stream, reflecting the business realities of billing timing.

The reasonable alternative assumptions below have been arrived at by observing the maximum historical high and low points within the actual source data of the respective models, adjusted for projected future trends.

The impact of the following reasonable alternatives to these inputs has been quantified:

		Increase in net financial liability		(Decrease) in net financial liability
Assumptions tested	Assumption	£m	Assumption	£m
Duration profile¹	Max duration + 1 year	25.6	Max duration - 1 year	(25.6)
Final billing duration²	+15 days	0.2	- 15 days	(0.2)
Average final bill value	+15%	46.4	- 15%	(46.4)
Profile variance³	- 15%	21.9	+15%	(34.9)

¹ Duration profile: In order to estimate the provision, profiles outlining the timing and magnitude of costs on civil representation cases are calculated. There is a degree of uncertainty in the calculation of these profiles, particularly due to the inherent time lag. LAA therefore make the assumption that the level of variance could be equal to the variance if this year’s profile was extended by 1 year. LAA have assumed this degree of variance can be seen in either direction.

² Final billing duration: it can take some time for Legal Aid providers to compile and submit their bills to LAA once work has completed on a case. The estimate of the provision assumes that the average delay will be equivalent to that seen in the preceding quarter, however this does vary to a small degree over time. LAA therefore make the assumption that this delay could vary by up to 15 days in either direction.

³ Profile variance: In estimating the provision, LAA have made an adjustment to calculated billing profiles to account for recent changes in value and billing duration. These adjustments are based on emerging trends and therefore are subject to some uncertainty, which this variance represents.

Using these reasonable alternative assumptions, the fair value of the financial liabilities at 31 March 2023 could be higher by up to +22.3% (£94.1 million) or lower by up to -25.4% (-£107.1 million).

The above inputs are case data driven, with an overlay of management judgement, for example, choosing the number of years’ historical case data to use in creating historical profiles. It should be noted the inherent sensitivity of the Civil Representation WIP provision is such that relatively small percentage movements in the above inputs could lead to the estimate crystallising at a significantly different amount. All assumptions are reviewed periodically to ensure they remain appropriate.

Crime higher valuation methodology

The Crime Higher Graduated Fee Scheme WIP estimates are calculated by considering cohorts of case starts and modelling their progress through the legal aid system, considering when the case completes, when the work is done on the case and the different types of bills that may be incurred in order to reflect the way the scheme operates as closely as possible. A separate calculation is then done to estimate the amount that has already been paid on these cases through interim payments.

Key assumptions in the Crime Higher WIP model are as follows:

Duration profile: the model implicitly assumes that recent case duration profiles are an indicator of future case duration profiles for equivalent workstreams.
Completion rates: the model implicitly assumes that historical representation order completion rates are indicative of future completion rates
Interim completions: the model implicitly assumes that the proportion of cases that have received an interim bill that later go on to have further bills remains consistent over time.
Average bill value: the model implicitly assumes that recent historical bill values are an indicator of future bill values for equivalent workstreams.

Since the start of the COVID-19 pandemic, model profiles have been constructed entirely from data relating to cases that finished prior to March 2020, with any adjustments deemed necessary due to ongoing pandemic-driven effects overlaid. Beyond March 2020 the impacts of the pandemic on levels of demand and court activity created various effects in the data that it was deemed were not representative of likely behaviour going forwards, and so did not form a reliable profile baseline. In 2022-23, activity in the Crown Court has sufficiently stabilised that LAA now have a sufficient baseline of post-pandemic data to construct profiles driven entirely by these more recent data, and so profiles have been updated on this basis.

The Crime Higher graduated fee schemes allow for Legal Aid providers to claim disbursements for incidental and third-party costs. Where the value of these disbursements exceeds £100, providers can claim on an interim basis as and when the expense arises. On this basis, in prior years LAA’s provision for unbilled work did not account for disbursement costs. Recent analysis suggests that a majority of disbursements are not claimed on an interim basis, and the decision has therefore been taken that providing for those costs that do not take advantage of interim billing is appropriate. However, sufficient information to be able to profile the billing behaviour of these costs does not exist. The liability for these costs has therefore been estimated using billing behaviour profiles derived from the core graduated fee scheme costs.

Crime higher: sensitivity analysis

Below are the reasonable alternative scenarios modelled. These relate to the flexing of certain assumptions, such as the number of cases expected to close or the amount of time a case takes to go through the system.

		Increase in net financial liability		(Decrease) in net financial liability
Assumptions tested	Assumption	£m	Assumption	£m
Price profiles¹	+10.0%	41	- 10.0%	(41)
Completion rates²	+2.5%	39	- 2.5%	(35)
Case durations³	+10.0%	30	- 10.0%	(32)

¹ Price profiles: there is a degree of uncertainty in assuming that future prices will follow historical patterns, as prices vary to a small degree over time. The sensitivity analysis considers that prices could vary by as much as 10% in either direction.

² Completion rates: a number of representation orders never attract a bill, and so do not close. The model uses historical data to determine the likely proportion that these cases represent of the live case population. There is inherent uncertainty in assuming that the proportion will be similar to that seen historically, which this sensitivity represents. The proportion is flexed by 2.5% in either direction, representing the variance that is seen in the proportion over time.

³ Case durations: the estimate of the provision assumes that average case durations will be consistent with those seen in recent prior periods, however durations do vary to a small degree over time. LAA therefore make the assumption that durations could vary by up to 10% in either direction.

Using these reasonable alternative assumptions, the fair value of the financial liabilities at 31 March 2023 could be higher by up to +25.1% (£110 million) or lower by up to -24.6% (-£107.8 million).

Other provisions

OPG repayment scheme: Provision has been made for the estimated cost of repayment for Power of Attorney (POA) and supervision fees recovered in excess of costs. The estimated cost of POA scheme refunds is based on the volume of cases and value of surplus for each year from 1 April 2013 to 31 March 2017. The estimated cost of supervision scheme refunds is based on the number of assessments and supervisions which took place between 1 April 2008 and 31 March 2015.

The provision is reviewed annually and reflects the likely settlement values at the year end.

Employment Tribunals and Employment Appeal Tribunal Fee Repayment Scheme: this scheme arises from a Supreme Court judgment on 26 July 2017 quashing the Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013/1893. HMCTS identified £32.2 million in fees paid and to date have refunded £18.6 million including interest. As HMCTS are not able to reliably estimate the probability that the remaining fees will be claimed and refunded no provision is recognised, but a contingent liability of £13.8 million is disclosed.

In July 2018 the Court of Protection, Civil Proceedings and Magistrates’ Courts Fees (Amendment) Order 2018 became law. The statutory order reduced a small number of fees which were mistakenly set above cost. These changes affect fees charged for certain proceedings in the Court of Protection (COP), particular fees relating to civil proceedings in the magistrates’ courts (including Council Tax Liability Orders – CLTOs), fees for general applications in insolvency proceedings and the fees charged for High Court Judges sittings as arbitrators. The refund scheme applicable to these cases was launched by MoJ in January 2020.

The CTLO liability remains as a provision for £3.7 million due to uncertainty of timing to discharge the liability to each recipient. In 2022-23 HMCTS refunded £2 million (2021-22: HMCTS refunded £31 million and recognised an accrual of £0.5 million).

Following an internal review of fees, it was determined that an incorrect fee for low value personal injury claims was charged; the error arose as a result of a single flat fee being charged for cases which should have been treated as money claims and had a sliding fee scale applied. This has resulted in an overcharge of £16.4 million for which a refund scheme was launched in October 2020.

The refund provisions for Personal injury and other claims (COP, Insolvency, RCJ and other fees) at 31 March 2023 were estimated at £4.5 million, and HMCTS continues to accept the liability for all claims until the end of the qualifying period. The balance of the liability is shown as a contingent liability of £9.8 million for personal injury claims and £9.3 million for other claims (COP, Insolvency, RCJ and other fees).

Other provisions include a provision for an onerous lease of undeveloped land of £14.5 million (2021-22: £73.7 million). The decrease of £59.2 million relates to a change in the discount rate used to calculate the onerous lease provision.

21. Commitments under PFI and Service Concession Arrangements

21.1 Arrangements not recognised on the Consolidated Statement of Financial Position

As at 31 March 2023 there are no off-balance sheet PFI commitments.

21.2 Arrangements recognised on the Consolidated Statement of Financial Position

Project name	Entity	Contract start date	Duration (years)	Description
PFI contracts
Hereford and Worcester Magistrates’ Courts	HM Courts and Tribunals Service	March 2000	25	Provision of serviced accommodation for magistrates’ courts at Bromsgrove, Kidderminster, Worcester and Redditch. The contract term can be extended by mutual agreement for another 10 years. At the end of the contract term the buildings shall revert to HMCTS at no cost.
Humberside Magistrates’ Courts	HM Courts and Tribunals Service	March 2000	25	Provision of serviced magistrates’ courthouses in Hull, Beverley and Bridlington. On expiry, HMCTS has the option of taking the assets back for a nominal amount of £3 million.
Manchester Magistrates’ Court	HM Courts and Tribunals Service	March 2001	25	Provision of serviced accommodation at Manchester Magistrates’ Court at Spinningfields in Manchester. The contract term can be extended by mutual agreement by up to ten years. At the end of the contract term the building shall revert to HMCTS at no cost.
Derbyshire Magistrates’ Courts	HM Courts and Tribunals Service	August 2001	27	Provision of serviced accommodation for magistrates’ courts at New Mills, Chesterfield and Derby. The contract term can be extended (subject to agreement of mutually acceptable terms) by up to five years. At the end of the contract term the buildings shall revert to HMCTS at no cost.
East Anglia	HM Courts and Tribunals Service	October 2002	25	Provision of Crown Court centres in Ipswich (five criminal courtrooms) and Cambridge (three criminal courtrooms). At the end of the contract term the buildings in Ipswich and Cambridge will revert to HMCTS at no cost.
Exeter	HM Courts and Tribunals Service	November 2002	30	Provision of a courthouse comprising four criminal courts, one civil court and four District Judge hearing rooms. At the end of the contract term the building will revert to HMCTS at no cost.
Sheffield	HM Courts and Tribunals Service	November 2002	25	Provision of a Family Hearing Centre in Sheffield. At the end of the contract term HMCTS has the option of acquiring the under lease at the lower of its open market value or £2 million.
Avon and Somerset Magistrates’ Court	HM Courts and Tribunals Service	August 2004	27	Provision of serviced accommodation at Bristol Magistrates Court, North Somerset Magistrates’ Court and Avon and Somerset Probation HQ and Training Centre, both at Worle. The contract term can be extended by mutual agreement by up to five years. At the end of the contract term the buildings shall revert to HMCTS at no cost.
HMP Ashfield	HMPPS	November 1999	25	Design, build, finance and operate a 400-place young offenders and juveniles category B prison at Pucklechurch, near Bristol; converted in 2013 to hold adult offenders.
HMP Forest Bank	HMPPS	January 2000	25	Design, build, finance and operate an 800-place category B prison, HMP Forest Bank, on site of former Agecroft power station.
HMP Rye Hill	HMPPS	January 2001	25	Design, build, finance and operate a 600-place category B prison, HMP Rye Hill at Onley, near Rugby.
HMP Dovegate	HMPPS	July 2001	25	Design, build, finance and operate a 1,060-place category B prison and therapeutic community facility at HMP Dovegate, Marchington.
HMP Bronzefield	HMPPS	June 2004	25	Design, build, finance and operate a 500-place category B prison at Ashford in Middlesex.
HMP Peterborough	HMPPS	March 2005	25	Design, build, finance and operate an 840-place category B prison at Peterborough in Cambridgeshire.
HMP Thameside	HMPPS	March 2012	25	Design, build, finance and operate a 900-place category B prison at Woolwich in London.
Oakhill Secure Training Centre	HMPPS	May 2004	25	Design, construct and manage a secure training centre, located in Milton Keynes, Oakhill.
Prisoner Escort Custody Service	HMPPS	August 2020	10	The supply and running of the prison vans and escorts.
Other service concession arrangements
HMP Doncaster	HMPPS	October 2011	15	Manage and maintain a 1,145-place category B prison at Doncaster in South Yorkshire.
HMP Oakwood	HMPPS	April 2012	15	Manage and maintain a 2,100-place category C prison at Featherstone in the West Midlands.
HMP Northumberland	HMPPS	December 2013	15	Manage and maintain a 1,348-place category C prison at Morpeth in Northumberland.
HMP Five Wells	HMPPS	November 2020	10	Manage and maintain a 1,680-place category C prison at Wellingborough in Northampton.
HMP and YOI Parc	HMPPS	December 2022	10	Manage and maintain a 1,652-place category B prison and 60 place Young Offenders Institution at Bridgend in South Wales.
HMP Altcourse	HMPPS	December 2022	10	Manage and maintain a 1,164-place category B prison at HMP Altcourse, Liverpool (in mobilisation phase at 31 March 2023).
HMP Lowdham Grange	HMPPS	February 2023	10	Manage and maintain a 920-place category B prison at Lowdham in Nottingham.

The total amount charged in the CSoCNE in respect of the service element of on-balance sheet (SoFP) PFI or other service concession transactions was £703.5 million (2021-22: £635.1 million).

Seven prisons are run by private sector operators under Manage and Maintain contracts. Assets covered by these contracts were reported as ‘Owned’ in prior years but have been reclassified to ‘On-balance sheet (SoFP) PFI and other service concession arrangement contracts’ in accordance with IFRIC 12 Service Concession Arrangements.

Details of the imputed finance lease charges under service concession arrangements recognised on the CSoFP are given in the table below for each of the following periods:

		31 March 2023		31 March 2022
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Rentals due not later than one year	48,224	48,224	52,626	52,626
Rentals due later than one year but not later than five years	161,071	161,071	172,582	172,582
Rentals due later than five years	140,689	140,689	177,404	177,404
	349,984	349,984	402,612	402,612
Less: interest element	(70,812)	(70,812)	(84,973)	(84,973)
Present value of obligations	279,172	279,172	317,639	317,639

The present value of liabilities under service concession arrangements recognised on the CSoFP are given in the table below for each of the following periods:

		31 March 2023		31 March 2022
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Rentals due not later than one year	35,836	35,836	38,466	38,466
Rentals due later than one year but not later than five years	126,568	126,568	132,441	132,441
Rentals due later than five years	116,768	116,768	146,732	146,732
Present value of obligations	279,172	279,172	317,639	317,639

Details of the minimum service charge under service concession arrangements recognised on the CSoFP are given in the table below for each of the following periods:

		31 March 2023		31 March 2022
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Service charge due within one year	683,997	683,997	633,928	633,928
Service charge due later than one year but not later than five years	2,258,276	2,258,276	1,506,195	1,506,195
Service charge due later than five years	1,556,944	1,556,944	1,137,836	1,137,836
Total	4,499,217	4,499,217	3,277,959	3,277,959

22. Capital commitments

Capital expenditure contracted for at the end of the reporting period but not included in these financial statements is as follows:

		31 March 2023		31 March 2022
	Core department and agencies	Departmental group	Core department and agencies	Departmental group
	£000	£000	£000	£000
Property, plant and equipment	559,108	559,108	206,774	206,774
Intangible assets	11,240	11,240	17,116	17,116
Total	570,348	570,348	223,890	223,890

23. Other financial commitments

MoJ has entered into non-cancellable contracts (which are not leases or PFI contracts), for the provision of services including the management of prisons and other contracted out services.

The payments to which MoJ is committed are as follows:

		31 March 2023		31 March 2022
	Core department and agencies	Departmental group	Core department and agencies (Restated)	Departmental group (Restated)
	£000	£000	£000	£000
Not later than one year	128,783	131,191	283,262	286,312
Later than one year but not later than five years	111,739	115,411	147,733	148,111
Total	240,522	246,602	430,995	434,423

The 31 March 2022 figures have been restated to exclude the commitments under Manage and Maintain contracts which are now disclosed within Note 21.

24. Financial instruments

IFRS 7 ‘Financial Instruments: Disclosures’, requires disclosure of the role that financial instruments have had during the year in creating or changing risks an entity faces in carrying out its business.

As the cash requirements of MoJ are met through the Parliamentary Supply Estimates process, financial instruments play a more limited role in creating and managing risk than would apply to a non-public sector body of a similar size. MoJ’s exposure to financial risk is mainly in respect of credit risk in relation to LAA’s receivables.

LAA receivables

The LAA is exposed to minimal market, liquidity or interest rate risk: exposure to financial risk is mainly in respect of credit risk in relation to receivables.

Under the Legal Aid Act 1974, the Legal Aid Act 1988, the Access to Justice Act 1999 and the LASPO Act 2012, where funded clients have recovered or preserved property rather than obtaining damages, recoverable costs may be secured by a charge against the property. Under the Community Legal Service (Financial) Regulations 2000 as amended by the Community Legal Service (Financial) (Amendment) Regulations 2005 and the Civil Legal Aid (Statutory Charge) Regulations 2013, some of these debts are interest bearing debts that have interest due on the outstanding balance at 8% per annum.

The income for statutory charge, statutory charge interest, contributions due from funded clients and recovery of defence costs are initially recognised under IFRS 15 ‘Revenue from Contracts with Customers’.

LAA receivables risk identification and management

The LAA has an inherent risk within trade and other receivables, as these are not predisposed to straightforward cash collections. The LAA recognises this risk and mitigates it in the case of statutory charge debts, where enforcement of the debt may be deferred, by securing land charges and using active credit management policies to recover unsecured debts. In some cases the debt collection activities are outsourced to commercial debt collectors.

The size of the risk is reflected in the receivables impairment provision and cumulative fair value losses that total £247.8 million (31 March 2022: £246.6 million).

LAA receivables valuation

The valuation of trade and other receivables includes an element of estimation.

Statutory charge and interest receivables are measured at fair value through the profit and loss in accordance with IFRS 13 Fair Value Measurement, as they are not solely payments of principal and interests, and therefore do not meet the tests set out in IFRS 9, Financial Instruments. These receivables are measured using techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

Other LAA receivables are measure at amortised cost, and LAA recognises an impairment for credit losses, using the effective interest rate method, less any impairment. Any loss arising on impairment is recognised in the Statement of Comprehensive Net Expenditure.

The LAA provides for impairment of receivables based on historical cash collection experience and management assessment of likely recoveries, for each category of debt. This analysis is also used to inform the expected cash flows for trade and other receivables that are measured at fair value. This assumes that future performance will be reflective of past performance and there will be no significant change in the payment profile or recovery rates within each identified group of receivables. To address the risk that this assumption is incorrect, the LAA undertakes a rollback review to compare previous estimated repayment profiles with the actual experience in subsequent years, to assess the accuracy of the profile and resulting impairment, adjusting assumptions where required. There have been no material adjustments to the assumptions as a result of this review at 31 March 2023.

Past payment profiles used in the estimation of the receivables impairment have been adjusted to ignore variations in repayment profiles seen during the COVID-19 pandemic, since LAA do not believe that repayment behaviour from this period is representative of likely behaviour going forwards.

LAA’s receivables have been discounted over the period from the reporting date to the expected date of collection, to reflect the effect of the time value of money. This has a material impact on their present value. Each class of receivable is discounted over periods commensurate with historical cash flow patterns, at a rates mandated by HM Treasury. At 31 March 2023 these were: 1.9% nominal and (1.1%) and (0.2%) in excess of RPI real until February 2030 and post February 2030 respectively (31 March 2022: 1.9% nominal and (1.1%) and (0.2%) in excess of RPI real until February 2030 and post February 2030 respectively).

LAA receivables sensitivity analysis

LAA’s receivables impairment models use historical recovery profiles by debt category to estimate the provision required against debt balances. The impairment model is underpinned by specific assumptions including: the life of debt, the expected remittance profiles, and the discount rates above.

The impact of the following reasonable possible alternatives to these assumptions has been considered:

cash received evenly throughout the year rather than at the end of the year
predicted cash receipts used to calculate the impairment provision cashflows +/- 10%
discount rate +/- 1%

Increase/(decrease) in net financial assets

		31 March 2023	31 March 2022
	Assumption	£m	£m
Income received	Evenly through the year	2.4	1.7
Expected cash inflows based on historic repayment profiles	+10%	9.7	14.6
Expected cash inflows based on historic repayment profiles	- 10%	(10.3)	(14.7)
Discount rate	+1%	(9.1)	(8.4)
Discount rate	- 1%	10.5	9.4
Highest change		22.6	25.7
Lowest change		(19.3)	(23.1)

These assumptions are reviewed annually and changed if management believe alternative assumptions are a better reflection of the underlying trends.

Other credit risks

Credit risk related to fines and penalties collection and banking activities is explained in the HMCTS Trust Statement.

The department is exposed to minimal credit risk in respect of other financial assets. The maximum exposure to credit risk is equal to the carrying amount of outstanding receivable balances. The department manages its credit risk by undertaking background and credit checks prior to establishing a debtor relationship.

The IFRS 9 approach to impairment provisioning is a forward-looking ‘expected loss’ approach. Expected losses on the department’s financial assets are not considered to be material.

Fair values

In accordance with IFRS 9 each financial asset is classified at initial recognition, or at the point of first adoption of IFRS 9, into one of three categories:

financial assets at fair value through profit and loss (‘FVTPL’)
financial assets at fair value through other comprehensive income (‘FVOCI’) or
financial assets at amortised cost

For assets at amortised cost, the amortised cost balance was reduced where appropriate by an allowance for amounts which were considered to be impaired or uncollectible.

Financial liabilities are classified into one of two categories:

financial liabilities at FVTPL
financial liabilities at amortised cost

Categories of financial assets and financial liabilities: carrying value compared to fair value

The following tables summarise the carrying amounts and fair values of financial assets and liabilities.

				31 March 2023
	Assets at FVTPL	Assets at FVOCI	Assets at amortised cost	Total
Financial assets:	£000	£000	£000	£000
Cash at bank and in hand	-	-	359,382	359,382
Trade and other receivables	93,994	-	395,158	489,152
Other financial assets	382	-	-	382
Total	94,376	-	754,540	848,916
		Liabilities at FVTPL	Liabilities at amortised cost	Total
Financial liabilities:		£000	£000	£000
Trade and other payables		-	1,238,242	1,238,242
Other financial liabilities		-	1,777,273	1,777,273
Total		-	3,015,515	3,015,515

				31 March 2022
	Assets at FVTPL	Assets at FVOCI	Assets at amortised cost	Total
Financial assets:	£000	£000	£000	£000
Cash at bank and in hand	-	-	222,894	222,894
Trade and other receivables	93,727	-	389,306	483,033
Other financial assets	381	-	-	381
Total	94,108	-	612,200	706,308
		Liabilities at FVTPL	Liabilities at amortised cost	Total
Financial liabilities:		£000	£000	£000
Trade and other payables		-	1,217,246	1,217,246
Other financial liabilities		-	1,914,590	1,914,590
Total		-	3,131,836	3,131,836

MoJ considers that the carrying amounts for cash and cash equivalents, trade payables and other liabilities approximate to their fair value due to the short-term maturities of these instruments.

Fair value hierarchy

MoJ uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data

All of the financial assets and liabilities measured at fair value fall within level 3.

25. Pension costs

Reconciliation of net pension (liability)/asset 2022-23:

			Cafcass Pension			LSC Pension			Probation Pension
	Present value of obligation	Fair value of plan assets	Net (liability)/asset	Present value of obligation	Fair value of plan assets	Net (liability)/asset	Present value of obligation	Fair value of plan assets	Net (liability)/asset
	£000	£000	£000	£000	£000	£000	£000	£000	£000
Balance at 1 April 2022	(917,308)	681,041	(236,267)	(350,793)	463,255	112,462	(6,774,717)	5,143,874	(1,630,843)
Current service cost	(35,746)	-	(35,746)	-	-	-	(252,798)	-	(252,798)
Past service cost	(13)	-	(13)	-	-	-	(4,695)	-	(4,695)
Settlements	-	-	-	(541)	-	(541)	-	-	-
Net interest	(24,551)	18,397	(6,154)	(9,339)	12,368	3,029	(184,516)	139,246	(45,270)
Total recognised in the CSoCNE	(60,310)	18,397	(41,913)	(9,880)	12,368	2,488	(442,009)	139,246	(302,763)
Scheme participants’ contributions	(5,956)	5,956	-	-	-	-	(34,391)	34,391	-
Employer contributions	-	16,775	16,775	-	-	-	-	162,924	162,924
Benefits paid after net transfers	22,451	(22,451)	-	10,428	(10,428)	-	163,141	(163,141)	-
Total cash flows	16,495	280	16,775	10,428	(10,428)	-	128,750	34,174	162,924
Actuarial gains/(losses) Changes in demographic assumptions	(4,441)	-	(4,441)	7,045	-	7,045	149,141	-	149,141
Changes in financial assumptions	342,679	-	342,679	117,066	-	117,066	2,603,910	-	2,603,910
Experience gains/(losses)	(78,627)	-	(78,627)	(24,709)	-	(24,709)	(406,774)	(70,674)	(477,448)
Return on assets excluding amounts included in net interest	-	(10,289)	(10,289)	-	(147,931)	(147,931)	-	(48,610)	(48,610)
Gain/(loss) due to effects of asset ceiling under IFRIC 14	-	-	-	-	-	-	-	(257,329)	(257,329)
Remeasurements through Other Comprehensive Net Expenditure	259,611	(10,289)	249,322	99,402	(147,931)	(48,529)	2,346,277	(376,613)	1,969,664
Balance at 31 March 2023	(701,512)	689,429	(12,083)	(250,843)	317,264	66,421	(4,741,699)	4,940,681	198,982
Of which
Core department and agencies	-	-	-	(250,843)	317,264	66,421	(4,741,699)	4,940,681	198,982
NDPBs	(701,512)	689,429	(12,083)	-	-	-	-	-	-
Balance at 31 March 2023	(701,512)	689,429	(12,083)	(250,843)	317,264	66,421	(4,741,699)	4,940,681	198,982

Reconciliation of net pension (liability)/asset 2021-22:

			Cafcass Pension			LSC Pension			Probation Pension
	Present value of obligation	Fair value of plan assets	Net (liability)/asset	Present value of obligation	Fair value of plan assets	Net (liability)/asset	Present value of obligation	Fair value of plan assets	Net (liability)/asset
	£000	£000	£000	£000	£000	£000	£000	£000	£000
Balance at 1 April 2021	(930,080)	613,113	(316,967)	(366,206)	455,093	88,887	(7,010,827)	4,600,816	(2,410,011)
Current service cost	(37,287)	-	(37,287)	-	-	-	(275,730)	-	(275,730)
Past service cost	-	-	-	-	-	-	(3,240)	-	(3,240)
Administration costs	-	-	-	(556)	-	(556)	-	-	-
Net interest	(19,382)	12,895	(6,487)	(7,226)	8,998	1,772	(141,598)	92,218	(49,380)
Total recognised in the CSoCNE	(56,669)	12,895	(43,774)	(7,782)	8,998	1,216	(420,568)	92,218	(328,350)
Scheme participants’ contributions	(5,607)	5,607	-	-	-	-	(33,886)	33,886	-
Employer contributions	-	16,206	16,206	-	-	-	-	156,960	156,960
Benefits paid after net transfers	20,247	(20,247)	-	10,409	(10,409)	-	164,149	(164,149)	-
Total cash flows	14,640	1,566	16,206	10,409	(10,409)	-	130,263	26,697	156,960
Actuarial gains/(losses) Changes in demographic assumptions	9,263	-	9,263	727	-	727	40,708	-	40,708
Changes in financial assumptions	48,785	-	48,785	22,791	-	22,791	498,074	-	498,074
Experience gains/(losses)	(3,247)	-	(3,247)	(10,732)	-	(10,732)	(12,367)	-	(12,367)
Return on assets excluding amounts included in net interest	-	53,467	53,467	-	9,573	9,573	-	424,143	424,143
Remeasurements through Other Comprehensive Net Expenditure	54,801	53,467	108,268	12,786	9,573	22,359	526,415	424,143	950,558
Balance at 31 March 2022	(917,308)	681,041	(236,267)	(350,793)	463,255	112,462	(6,774,717)	5,143,874	(1,630,843)
Of which
Core department and agencies	-	-	-	(350,793)	463,255	112,462	(6,774,717)	5,143,874	(1,630,843)
NDPBs	(917,308)	681,041	(236,267)	-	-	-	-	-	-
Balance at 31 March 2022	(917,308)	681,041	(236,267)	(350,793)	463,255	112,462	(6,774,717)	5,143,874	(1,630,843)

The assumptions used by the actuaries were:

	Cafcass Pension	LSC Pension	Probation Pension	Cafcass Pension	LSC Pension	Probation Pension
	2022-23	2022-23	2022-23	2021-22	2021-22	2021-22
	%	%	%	%	%	%
Inflation assumption	2.70	2.80	n/a	3.00	3.25	n/a
Rate of increase in salaries	3.95	n/a	3.75	4.25	n/a	3.95
Pension increase rate	2.70	2.80	2.95	3.00	3.25	3.20
Discount rate	4.70	4.75	4.75	2.70	2.70	2.70
Pension accounts revaluation rate	2.70	n/a	n/a	3.00	n/a	n/a

The major categories of scheme assets for 2022-23 were:

				Cafcass Pension				LSC Pension				Probation Pension
	Quoted	Unquoted	Total	Value as a percentage of total scheme assets	Quoted	Unquoted	Total	Value as a percentage of total scheme assets	Quoted	Unquoted	Total	Value as a percentage of total scheme assets
	£000	£000	£000	%	£000	£000	£000	%	£000	£000	£000	%
Equities	455,713	101,346	557,059	80.8	52,999	-	52,999	16.7	1,986,070	-	1,986,070	38.2
Gilts	47,571	-	47,571	6.9	193,089	-	193,089	60.9	-	-	-	-
Corporate bonds	31,714	-	31,714	4.6	64,028	-	64,028	20.2	486,096	-	486,096	9.4
Property	7,584	15,167	22,751	3.3	-	-	-	-	-	202,234	202,234	3.9
Cash and cash equivalents	-	15,857	15,857	2.3	3,640	-	3,640	1.1	131,861	-	131,861	2.5
Investment funds and unit trusts	-	-	-	-	-	-	-	-	865,649	1,137,285	2,002,934	38.5
Other	-	14,478	14,478	2.1	-	3,508	3,508	1.1	-	388,815	388,815	7.5
Total	542,582	146,848	689,430	100.0	313,756	3,508	317,264	100.0	3,469,676	1,728,334	5,198,010	100.0

The major categories of scheme assets for 2021-22 were:

				Cafcass Pension				LSC Pension				Probation Pension
	Quoted	Unquoted	Total	Value as a percentage of total scheme assets	Quoted	Unquoted	Total	Value as a percentage of total scheme assets	Quoted	Unquoted	Total	Value as a percentage of total scheme assets
	£000	£000	£000	%	£000	£000	£000	%	£000	£000	£000	%
Equities	461,746	81,725	543,471	79.8	104,724	-	104,724	22.6	2,151,612	-	2,151,612	41.8
Gilts	50,397	-	50,397	7.4	328,514	-	328,514	70.9	-	-	-	-
Corporate bonds	32,690	-	32,690	4.8	-	-	-	-	446,376	-	446,376	8.7
Property	10,897	16,345	27,242	4.0	-	-	-	-	-	199,278	199,278	3.9
Cash and cash equivalents	-	19,750	19,750	2.9	25,170	-	25,170	5.4	160,864	-	160,864	3.1
Investment funds and unit trusts	-	-	-	-	-	-	-	-	940,294	882,041	1,822,335	35.4
Other	-	7,491	7,491	1.1	-	4,847	4,847	1.1	-	363,409	363,409	7.1
Total	555,729	125,312	681,041	100.0	458,408	4,847	463,255	100.0	3,699,146	1,444,728	5,143,874	100.0

Sensitivity analysis – change in assumptions relative to 31 March 2023 actuarial assumptions for Cafcass pension liabilities (based on the change in liabilities):

The sensitivity analysis is intended to provide an indication of the impact on the value of the scheme’s liabilities from the risks highlighted below.

	Actuarial value of liabilities on 31 March 2023	Actuarial value of liabilities on 31 March 2022
	£000	£000
0.1% decrease in discount rate	713,438	934,737
0.1% increase in the salary increase rate	702,214	919,143
1 year decrease in post retirement mortality age rating*	719,751	885,202
0.1% increase to pension increase rate	712,035	932,902

*A rating of +1 year means that members are assumed to follow the mortality pattern of the base table for an individual that is one year older than them.

Sensitivity analysis – change in assumptions relative to 31 March 2023 actuarial assumptions for LSC pension liabilities (based on total liabilities):

	Actuarial value of liabilities on 31 March 2023	Actuarial value of liabilities on 31 March 2022
	£000	£000
Base case	250,843	n/a
0.5% decrease in discount rate	269,499	384,329
1 year increase in life expectancy	260,877	364,825
0.5% p.a. increase in inflation	267,252	380,056

Sensitivity analysis – change in assumptions relative to 31 March 2023 actuarial assumptions for Probation Pension liabilities (based on total liabilities):

	Actuarial value of liabilities on 31 March 2023	Actuarial value of liabilities on 31 March 2022
	£000	£000
Base case	4,741,699	6,774,717
0.1% decrease in Real Discount Rate	4,827,199	6,910,590
1 year increase in member life expectancy	4,931,367	7,045,706
0.1% increase in the Salary Increase Rate	4,752,380	6,789,259
0.1% increase in the Pension Increase Rate (CPI)	4,817,743	6,894,947

The principal demographic assumption is the mortality assumption (i.e. member life expectancy). For sensitivity purposes, actuaries estimate that a one-year increase in life expectancy would approximately increase the employer’s defined benefit obligation by around 3% to 5%. In practice the actual cost of a one-year increase in life expectancy will depend on the structure of the revised assumption (i.e. if improvements to survival rates predominantly apply at younger or older ages). For 2022-23, a one-year increase in member life expectancy would increase the liability by 4% or £189.7 million.

25.1 Cafcass pension scheme

Employees of Cafcass are members of the Local Government Pension Scheme (LGPS) through the West Yorkshire Pension Fund (WYPF). The scheme provides funded defined benefits based on pensionable salary. The assets of the scheme are held separately from those of Cafcass and are invested in managed funds. Employer contribution rates are determined by a qualified actuary and on the basis of triennial valuations.

The scheme assets are measured at fair value. Scheme liabilities are measured using a projected unit method and discounted at the current rate of return on a high-quality corporate bond of equivalent term and currency to the liability.

The pension scheme surplus (to the extent that it is considered recoverable) or deficit is recognised in full on the face of the Statement of Financial Position. The movement in the scheme surplus/deficit is split between operating charges (within staff costs) and reserves in the case of actuarial gains and losses.

Funding/governance arrangements of the LGPS

The funded nature of the LGPS requires participating employers and its employees to pay contributions into the fund, calculated at a level intended to balance the pension liabilities with investment assets. Information on the framework for calculating contributions to be paid is set out in LGPS Regulations 2013 and the fund’s ‘Funding strategy statement’. The employer contribution rate for 2022-23 was 19.4% (plus an additional lump sum payment of £0.19 million).

The last actuarial valuation was at 31 March 2022 and the contributions to be paid until 31 March 2026 resulting from that valuation are set out in the fund’s ‘Rates and adjustment certificate’ (employer contributions over this period will be: 2023-24: 19.1%; 2024-25: 18.6% and 2025-26 18.1%).

The Fund Administering Authority, City of Bradford Metropolitan District Council, is responsible for the governance of the fund.

Assets

The assets allocated to the employer in the fund are notional and are assumed to be invested in line with the investments of the fund for the purposes of calculating the return over the accounting period. The fund holds a significant proportion of its assets in liquid investments. As a consequence, there will be no significant restriction on realising assets if a large payment is required to be paid from the fund in relation to an employer’s liabilities. The assets are invested in a diversified spread of investments and the approximate split of assets for the fund as a whole (based on data supplied by the Fund Administering Authority) is shown in the disclosures.

The Fund Administering Authority may invest a small proportion of the fund’s investments in the assets of some of the employers participating in the fund if it forms part of their balanced investment strategy.

Duration of liabilities

The duration of liabilities is the average period between the calculation date and the date at which benefit payments fall due. The calculated duration, based on the output of the most recent valuation exercise at 31 March 2022, is 16.6 years.

Risks associated with the fund in relation to accounting

Asset volatility

The liabilities used for accounting purposes are calculated using a discount rate set with reference to corporate bond yields. If assets underperform this yield this will create a deficit in the accounts. The fund holds a significant proportion of growth assets which, while expected to outperform corporate bonds in the long term, creates volatility and risk in the short term in relation to the accounting figures.

Changes in bond yield

A decrease in corporate bond yields will increase the value placed on the liabilities for accounting purposes although this will be marginally offset by the increase in the assets as a result (to the extent the fund invests in corporate bonds).

Inflation risk

The majority of the pension liabilities are linked to either pay or price inflation. Higher inflation expectations will lead to a higher liability value. The assets are not perfectly correlated with inflation meaning that an increase in inflation will increase the deficit.

Life expectancy

The majority of the fund’s obligations are to provide benefits for the life of the member following retirement, so increases in life expectancy will result in an increase in the liabilities.

Exiting employers

Employers who leave the fund (or their guarantor) may have to make an exit payment to meet any shortfall in assets against their pension liabilities. If the employer (or guarantor) is not able to meet this exit payment the liability may in certain circumstances fall on other employers in the fund. Further the assets at exit in respect of ‘orphan liabilities’ may, in retrospect, not be sufficient to meet the liabilities. This risk may fall on other employers. ‘Orphan liabilities’ are currently a small proportion of the overall liabilities in the fund. The ‘Funding strategy statement’ sets out the risk management strategies for the risks that impact on the funding strategy of the Pension Fund. One of these strategies, for example, is that the Fund Administering Authority has diversified investments held to mitigate the risk of asset volatility.

25.2 LSC pension scheme (LSCPS) – closed

On 1 April 2013, under the Legal Aid, Sentencing and Punishment of Offenders Act, the LSC was abolished and replaced by an executive agency of the department, LAA.

Nature of benefits, regulatory framework, and other entity’s responsibilities for governance of the LSCPS

The LSCPS is a registered defined benefit final salary scheme. The average duration of the LSCPS scheme liabilities as at 31 March 2023 was 14.7 years. It has a crown guarantee, with the department as the sponsoring employer, but in effect retains most of the UK regulatory framework for pensions including ‘scheme specific funding’. The LSCPS is operated under trust and as such, the trustees of the Scheme are responsible for operating the Scheme and have a statutory responsibility to act in accordance with the Scheme’s ‘Trust deed and rules’, in the interests of the beneficiaries of the LSCPS and UK legislation (including trust law). Any contributions that are paid to the LSCPS are defined by a funding arrangement between the trustees and the department.

Risks to which the LSCPS exposes the department

The nature of the LSCPS exposes the department to the risk of paying unanticipated contributions to the Scheme in times of adverse experience. The most financially significant risks are likely to be:

members living for longer than expected
higher than expected actual inflation
lower than expected investment returns
the risk that movements in the value of the Scheme’s liabilities are not met by corresponding movements in the value of the Scheme’s assets
the LSCPS hedges 90% of its interest rate and inflation exposure as assessed on a gilts basis using index-linked and fixed-interest gilts
the LSCPS also holds a historical buy-in policy (approximatively 1% of scheme accounts) which fully matches benefits covered by the policy

The trustees of the LSCPS maintain a risk register which they use to determine appropriate responses to mitigate the risks identified. These include maintaining a high level of hedging for interest rate and inflation changes and a prudent approach when setting future longevity assumptions.

Expected contributions over the next accounting period and future funding arrangements

The department does expect to contribute to the LSCPS for the year to 31 March 2023. The ‘Schedule of contributions’ dated 2 November 2016 sets out the current contributions payable by the department to the Scheme. Future contributions depend on the Scheme’s funding position at each formal valuation and are set out in the Scheme’s funding framework.

The funding arrangements and asset ceiling are set out in Section 18 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012. Where the value of the Scheme assets is more than 105% of the value of the Scheme’s technical provisions on the effective date of an actuarial valuation, this constitutes a refundable surplus. The department can request payment of amounts not exceeding the refundable surplus.

The Scheme would be required to make payment unless advised by the actuary that, because of events subsequent to the date of the actuarial valuation, payment would reduce the value of the assets of the Scheme to less than 105% of the value of the Scheme’s technical provisions.

25.3 Probation pension schemes

HMPPS offers retirement benefits within the Local Government Pension Scheme (LGPS) to probation staff working within the Probation Service (PS).

With effect from 1 June 2014, HMPPS is responsible for the overall pension liability for past and present LGPS employees employed in the Probation Service (formerly the NPS), including the former probation trusts and the former community rehabilitation companies (and their sub-contracted bodies) and, with effect from 26 June 2021, the current LGPS employees within the outsourced community rehabilitation service (CRS) providers. The total net pension position is recorded within the HMPPS accounts. The contracts with the CRS providers (and previously with the CRCs) were designed so that the CRSs paid a fixed fee, with the pension liability risk remaining with HMPPS. The total LGPS pension liability transferred to HMPPS on 1 June 2014, under absorption accounting and the transforming rehabilitation programme, which saw the creation of CRCs and NPS. Up to 31 May 2014, 35 probation trusts accounted for their pension liability separately via locally administered pension funds.

Under the transforming rehabilitation programme, the probation trusts were dissolved and the NPS (within HMPPS) and the outsourced CRCs were created on 1 June 2014. At this point, the community rehabilitation companies became LGPS admitted bodies under the responsibility of HMPPS who became the LGPS scheme employer.

Past employees of the probation trusts, and LGPS probation staff who transferred to community rehabilitation companies and HMPPS NPS are covered by the provisions of LGPS via one pension fund, GMPF, administered by their local authority council, Tameside Metropolitan Borough Council. The assets and liabilities from the former probation trusts’ own pension funds were transferred to GMPF.

From 25 June 2021, the contracts with the community rehabilitation companies ended and the majority of LGPS employees transferred into the Probation Service, with a few remaining LGPS employees transferred to 13 of the new outsourced CRS providers. The 13 outsourced providers became LGPS admitted bodies, under the responsibility of HMPPS as the scheme employer. The total pension liability will continue to be the responsibility of HMPPS and will be reported in the HMPPS annual report and accounts.

The LGPS is a statutory scheme primarily governed by the LGPS Regulations 2013 and the LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014. These are subject to amendment over time. The LGPS is a funded, multi-employer defined benefit scheme. An LGPS pension scheme liability is recognised in these accounts in accordance with IAS 19.

A liability arises as employees earn their future entitlement to payments when they retire. The pension fund is subject to an independent triennial actuarial valuation to determine each employer’s contribution rate. The contribution rates reflect benefits as they are accrued and reflect the past experience of the schemes. The LGPS provides benefits on a ‘final salary’ basis, up to 31 March 2014, at a normal retirement age of 65. For pensionable service up to 31 March 2008, benefits accrued at the rate of 1/80th of pensionable salary for each year of service. In addition, a lump sum equivalent to 3/80ths of final pay for every year of total membership is payable on retirement. Benefits accrued at the rate of 1/60th of pensionable salary for service from 1 April 2008 to 31 March 2014 with no automatic lump sum.

From 1 April 2014, the scheme provides benefits on a career average revalued earnings (CARE) basis. Benefits accrue at the rate of 1/49th of pensionable salary for each year of service.

The scheme permits employees to take a lump sum payment on retirement in exchange for a reduction in their future annual pension. Members pay contributions of between 5.5% and 12.5% of pensionable earnings. Member contributions changed from 1 April 2014 and benefits accrued from this date are on a CARE basis, with protections in place for those members in the scheme before the changes took effect.

For the year to 31 March 2023, HMPPS paid employers’ contributions of £174.7 million to GMPF, relating to current probation staff, at 29.6% (2021-22: £145.6 million at 29.6%). The increase in contributions paid is due to the former CRC employees transferring into HMPPS on 26 June 2021 and joining the LGPS.

Following the 2022 triennial valuation, the employer contribution rates for 2023-24 to 2025-26 will be 26.5%.

The pension position as at 31 March 2023, as detailed in the table, is based on the actuarial report from Hymans Robertson LLP, the independent actuary for GMPF, in compliance with IAS 19. There were no plan curtailments or settlements during the year. Full details of GMPF’s investment strategy statement ‘Funding strategy statement’, including its annual report and financial statements, and responsibilities of the GMPF management panel can be found on the GMPF website www.gmpf.org.uk. Tameside Metropolitan Borough Council is the administering authority of GMPF.

A number of assumptions are made as part of the actuarial valuation process and the major assumptions are set out in the table above. The assumptions underlying the calculation of the net liability as at 31 March 2022 are used for accounting purposes as required under IAS 19.

Risks associated with the fund in relation to accounting

The net pension position for 2022-23 is shown in the disclosure above. This reflects the appropriate assumptions; all assumptions remain subject to annual review. As the economic climate changes and more information becomes available assumptions will be updated to reflect this.

HMPPS is only liable for the pension obligations due to GMPF relating to Probation Service employees (and ultimately the CRS employees under the Secretary of State for Justice Pension Guarantee). HMPPS is not liable for pension obligations of other employers that participate in the LGPS with GMPF.

Should HMPPS move to another pension fund or pension scheme, any exit payment to cover the pension liability due would be determined by GMPF and their actuary. However, there are no plans to move to another pension fund or pension scheme.

Discount rate

The discount rate is the most significant financial assumption for assessing pension obligations. An increase in the discount rate results in a decrease in the value of the pension liability for accounting purposes and vice versa. The discount rate used in these financial statements, as required by IAS 19, is based on the market yields on high quality corporate bonds valued as at the reporting date of 31 March. Hymans corporate bond yield curve is based on the constituents of the iBoxx AA corporate bond index. The discount rate assumptions set by the actuary are considered appropriate. The large increase in discount rate compared to last year has resulted in a significant reduction in the pension liability.

Inflation

The inflation assumption is the second most significant financial assumption for assessing pension obligations and, typically, drives the assumption for salary growth and pension increases (to the extent they are inflation linked). A higher inflation assumption will lead to an increase in pension liabilities. The government announced the measure of Retail Price Index will change from 2030 to be in line with Consumer Prices Index including housing costs. This has been allowed for when deriving the inflation assumption. This has resulted in a decrease this year in the projection for future pension increases and salary growth. However, the actual increase in pension rate from April 2023 of 10.1% has resulted in an experience loss.

Mortality

The baseline mortality assumptions are based on analysis carried out by longevity experts Club Vita. Future life expectancy predictions use their continuous mortality investigation model. For 2022-23 the continuous mortality investigation (CMI) 2021 model has been used, which uses more up to date longevity data, including the temporary impact of COVID-19.

Risk mitigation strategies

The GMPF management panel carries out a similar role to the trustees of a pension scheme. They are key decision makers for:

investment strategy
monitoring investment activity and performance
overseeing administrative activities
guidance to officers in exercising delegated powers
reviewing governance arrangements

Each local authority within Greater Manchester is represented on the management panel, along with the department. There have been no concerns raised by MoJ to date on GMPF’s investment or funding strategy or asset performance.

McCloud judgment (impact on LGPS)

The December 2018 McCloud Judgment found that transitional arrangements put in place during the reform of firefighters and judges pension schemes were discriminatory on grounds of age. The government has confirmed this ruling also applies to the LPGS. Based on the findings of the Government Actuary’s Department, published in June 2019 and taking account of the proposed remedial action published by HM Treasury in July 2020 in their consultation document, Hymans Robertson LLP calculated an estimated past service cost applicable to HMPPS and Cafcass. The impact of the McCloud judgment was accounted for in the 2019-20 HMPPS and Cafcass accounts under IAS 19.

The government response to the consultation for unfunded pension schemes was published in February 2021 (updated for LGPS 6 April 2023). On 13 May 2021, a written Ministerial Statement on McCloud and LGPS was made. Further information can be found at https://questions-statements.parliament.uk/written-statements/detail/2021-05-13/hcws26.

For the 2022 valuation, McCloud liabilities were included as set out in Department for Levelling Up, Housing and Communities 2022 valuation letter. The actuary has advised that no further adjustment to the cost in the pension obligation is required for 2022-23. Further information on the McCloud Judgment can be found at www.civilservicepensionscheme.org.uk/your-pension/remedy/.

Accounting for a net pension surplus and asset ceiling restriction

The net pension position at 31 March 2023 was a net surplus of £456.3 million as set out in the actuary report provided by Hymans, under IAS 19.

IAS19 requires that the discount rate is determined by reference to market yields at the end of the reporting period, on high quality AA corporate bonds of a currency and duration consistent with the currency and duration of the benefit obligations. The discount rate at 31 March 2023 is much higher compared to the previous year, reflecting a higher yield on high-quality corporate bonds and significantly reducing the pension obligation. This is the primary reason for the overall net surplus at 31 March 2023.

Under the requirements of ‘IFRIC 14: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction’, HMPPS is required to consider whether it is appropriate to limit the amount of net pension surplus in the financial statements which was determined under IAS 19 if the full economic benefit cannot be obtained. IAS 19 provides a definition of an asset ceiling for these purposes as the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan, with the lower of the surplus and the asset ceiling being recognised. IFRIC 14 provides further guidance on calculating figures for an asset ceiling with reference to minimum funding requirements.

A refund would only be available to HMPPS on exiting the scheme. However, participation in the current pension scheme is dictated by statute meaning an exit would rely on the occurrence of an uncertain future event not wholly within HMPPS’ control, i.e. an act of Parliament. Therefore, HMPPS does not have an unconditional right to a refund of the surplus.

The appropriate method is therefore to consider the economic benefit available as a contribution reduction. HMPPS has concluded that primary contributions to the scheme (18.1%) and those related to ill health retirements (4.3%) establish a minimum funding requirement for future contributions under IFRIC 14. The economic benefit available as a reduction in future contributions is calculated as the sum of:

a) any amount that reduces future minimum funding requirement contributions for future service because the entity made a prepayment; and

b) the estimated future service cost less the estimated minimum funding requirement contributions that would be required for future service in those periods if there were no prepayment as described in (a).

In determining this, HMPPS made a number of judgments, most significantly:

HMPPS consider it appropriate to treat the current service charge and the primary contributions as continuing in perpetuity as there is no intention to cease operations of the probation service, nor to change the pension scheme available to employees of the service
the additional contributions to meet ill health retirement (IHR) costs are discretionary with the rate set as part of the triennial valuation. While HMPPS would anticipate continuing to fund early retirement on the grounds of ill health via this mechanism, the financial commitment only exists for the three year period covered by the valuation. In calculating minimum funding requirements under IFRIC 14 HMPPS therefore judge the appropriate period over which to include the IHR contributions to be three years

HMPPS is required to make contributions of 4.1% in relation to past service. IFRIC 14 requires that to the extent that the contributions payable will not be available after they are paid into the plan, the entity shall recognise a liability when the obligation arises. HMPPS has judged that the appropriate period over which to consider the secondary contributions is 20 years as the actuarial assessment indicates that this is how long it will take for the scheme to be fully funded and for these secondary contributions to therefore end.

Annuity rates for these three time periods were provided by the scheme’s actuary using the same assumptions as the IAS 19 calculation as described on page 241.

Having applied the IFRIC 14 in line with the above facts and judgments, based on the present value of expected reductions in future contributions to the plan, the IAS 19 surplus of £456.3 million was reduced to £199 million. Additional details of mortality assumptions and in year movements in the GMPF defined benefit obligation are given in Note 18 (Pensions) to the financial statements in the HMPPS Annual Report and Accounts 2022-23.

26. Contingent assets and liabilities

Contingent liabilities disclosed under IAS 37

MoJ has contingent liabilities as defined within IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Quantified contingent liabilities

	31 March 2023	31 March 2022
	£m	£m
Headquarters employment tribunals including judicial claims
The department is currently defending several employment tribunal claims at various stages	6.1	0.2 and unquantified
Headquarters European Court of Human Rights claims
The department is currently engaged in several cases at the European Court of Human Rights	0.5	0.5
Headquarters other legal claims
The department is engaged with a number of legal claims including judicial reviews challenging refusal to pay compensation for miscarriages of justice, and refusal to provide legal aid funding	0.4	Unquantified
Headquarters Data Protection Act
There are claims against the department for alleged failure to comply with the Data Protection Act	0.1	Unquantified
HMPPS injury claims
HMPPS failed claims for injury to staff prisoners and public, and for third party contract disputes	45.2	113.9
HMCTS fee refunds – employment tribunal fees
HMCTS operates a refund scheme following the quashing of the Employment Tribunals and Employment Appeal Tribunal Fees Order 2013/1893 in July 207	13.8	13.9
HMCTS fee refunds – low value personal injury claim fees
HMCTS operates a refund scheme to refund personal injury claim fees that were incorrectly charged as a flat rate rather than on a sliding scale	9.8	10.5
HMCTS fee refunds – other fees
HMCTS operates a refund scheme for fees charged for certain proceedings in the Court of Protection, the magistrates’ courts, insolvency proceedings and fees charged for High Court Judges sittings as arbitrators	9.3	9.3
HMCTS legal cases
HMCTS is involved in various legal cases dealing with ex gratia, compensation and other claims	0.8	1.4
Parole Board
The Parole Board is involved in a claim which may result in compensation	0.1	-
Total	86.1	149.7

The contingent liability disclosed for headquarters’ employment tribunals has increased significantly due to new evidence emerging during the course of on-going claims that has changed our assessment of whether a contingent liability exists and can be quantified, and new cases being brough in 2022-23.

The contingent liability disclosed for HMPPS for personal injury claims has decreased significantly due to the closure of one specific legal challenge in 2022-23.

Unquantified contingent liabilities

Judicial claims for fee-paid judges sitting in retirement: Following a legal challenge, the MoJ has conceded that the current policies for sitting in retirement (where a judge may retire and draw a pension from their salaried office, and then sit in a fee-paid office), do not apply equally to fee-paid judges. We intend to consult on changes to rectify this. In the interim, there is potential for affected judges to bring compensation claims in respect of this and in the longer term for pension benefits to become payable earlier, increasing the actuarial value of the pension liability. This effect cannot currently be estimated and, should there be a change to the pattern of retirement, will be reflected in the ongoing regular valuations process.

Judicial claims for discrimination between fee-paid and salaried judges: There are also a number of other legal claims in relation to discrimination between fee-paid and salaried judges, which may give rise to further pension claims. At present we are unable to provide a reliable estimate of the potential liability until the appeals process has been completed.

Incidents ‘incurred but not yet received’ (IBNYR): CICA holds an unquantifiable contingent liability in respect of a possible future obligation to individuals who have been victims of violent crime as of 31 March 2023. This liability depends upon uncertain future events occurring and an application being submitted to CICA which meets the criteria set out in the relevant scheme. Although CICA recognises that this contingent liability exists in respect of IBNYR, the amount of the obligation cannot be measured with sufficient reliability. This is because it is not possible to establish with any reliable certainty the total number of eligible victims who sustained eligible criminal injuries, the likelihood of an application being made and then qualifying for compensation, according to the multiple criteria contained in the Scheme, and thereafter predicting with any reasonable certainty the potential value of any award which may be made, and the timescale in which this may occur.

Offers not accepted within time limits: Under the Criminal Injuries Compensation Scheme 2012, a claimant’s legal entitlement to an award crystallises on the date on which CICA receives written notice of acceptance by the claimant. There are cases where the deadline for acceptance has passed but CICA has not yet withdrawn the offer. CICA may exercise its discretion under the Scheme in favour of the claimant, and not withdraw the offer even though the deadline has passed. The total value of cases ‘on-offer’ and passed the deadline is £0.4 million; any possible liability would therefore be below that value.

Quantified contingent assets

	31 March 2023	31 March 2022
	£m	£m
LAA costs orders
LAA has two contingent assets in relation to costs orders from legal proceedings	29.0	29.1
Total	29.0	29.1

Associated departments and other central government bodies

MoJ is the parent of LAA, HMCTS, HMPPS, CICA and OPG agencies and the sponsor of NDPBs as listed in Note 29. All of these bodies are related parties with which the department has had various material transactions during the year. In accordance with the requirements of the FReM these transactions have not been reported.

In addition, the department had a number of transactions with other government departments and central government bodies, as well as with local authorities. The most significant of these transactions have been with HM Revenue and Customs, Home Office, PCSPS and HM Treasury.

Management personnel

The brother of Nick Goodwin, the CEO of HMCTS, is a partner at Ward Hadaway, a law firm offering legal representation for cases that fall within the provision of the Legal Aid Agency. In 2022-23, Legal Aid Agency made payments totalling £2.2 million (202122: £1.6 million) to Ward Hadaway.

Other

Registry Trust Limited is a private company limited by guarantee with no share capital. It maintains the Register of County Court judgements on behalf of the Lord Chancellor and the Secretary of State for Justice. Revenue recognised from the Registry Trust Limited in the year amounted to £0.6 million (202122: £0.6 million) with a total debtor balance due to us as at 31 March 2023 of £0.0 million (202122: £0.0 million).

Other interests and related parties of ministers which do not concern the department are disclosed at: www.gov.uk/government/publications/list-of-ministers-interests.

During 2022-23 no other board members or related parties have undertaken any transactions with MoJ. Compensation paid to management, including taxable benefits, is disclosed in the Remuneration and Staff Report.

28. Third party assets

MoJ holds, as custodian or trustee, certain assets belonging to third parties. These assets are not recognised in the CSoFP and neither MoJ nor the government has a direct beneficial interest in them.

Funds in court

MoJ manages funds held in court on behalf of clients who may be involved in a civil legal action, patients who are under the Court of Protection because they are not able to manage their property and affairs, and children under the age of 18. Client assets held at year end comprised cash, an Equity Index Tracker Fund and securities.

Cash holdings represent funds invested by UK Debt Management Office on behalf of the Accountant General in the Court Funds Investment Account and foreign exchange balances held on behalf of clients.

	31 March 2023	31 March 2022
	£000	£000
Cash at bank and on deposit	2,282,065	2,611,167
Securities	75,043	82,512
Total	2,357,108	2,693,679

Other third party assets

	Official Solicitor and Public Trustee (OSPT)	Criminal injuries awards (CICA)	Pending legal aid amounts (LAA)	Bail monies (HMCTS)	Prisoner monies (HMPPS)	Total
	£000	£000	£000	£000	£000	£000
Cash	5,761	81,673	20,054	73,377	14,395	195,260
Investments	54,800	-	-	-	-	54,800
Non-cash assets	9,248	-	-	-	-	9,248
At 31 March 2023	69,809	81,673	20,054	73,377	14,395	259,308
At 31 March 2022	69,237	84,350	17,016	57,465	15,004	243,072

The rationale for each principal holding of third party assets is as follows:

The Official Solicitor (OS) administers trusts and estates as administrator/trustee of last resort. The OS acts as last resort litigation friend, and in some cases solicitor, for adults who lack mental capacity and children (other than those who are the subject of child welfare proceedings) in court proceedings because they lack decision making capacity in relation to the proceedings. The Public Trustee (PT) acts as executor or trustee where they have been appointed under a will or a new settlement with the aim of providing an effective executor and trustee service of last resort. The figures above represent the most up to date information available about assets managed by the OS and PT on behalf of clients
CICA holds third party compensation awards to minors. The purpose of this action is to ensure that the victim will be the sole beneficiary of the award (including accrued interest) when they reach their majority (18 years of age). Where appropriate, interim payments are made: requests for these are assessed on a case by case basis.
LAA holds funds in respect of damages awarded to legally aided civil law clients and contributions payable by legally aided defendants in Crown Court trials. The outcome of the case and final costs assessment determine whether these funds are retained by LAA or return to the clients.
HMCTS holds cash consisting of bail monies and monies held on behalf of court users while cases progress.
HMPPS holds cash on behalf of offenders.

29. The departmental boundary

Entities within the departmental boundary

Entities within the departmental boundary comprise supply financed agencies and those entities listed in the Government Resources and Accounts Act 2000 (Estimates and Accounts) Order 2022, known as the Designation Order, is set out below.

The core department

These are entities that are accounted for within the core accounting boundary. These entities are managed independently of the department.

Advisory Committees on Justices of the Peace in England and Wales
Assessor of Compensation for Miscarriages of Justice
Chief Coroner’s Office
Civil Justice Council
Civil Procedure Rule Committee
Criminal Procedure Rule Committee
Family Justice Council
Family Procedure Rule Committee
Independent Advisory Panel on Deaths in Custody
Independent Monitoring Boards of Prisons, Immigration Removal Centres and Short Term Holding Facilities
Judicial Appointments and Conduct Ombudsman
Judicial College
Judicial Conduct and Investigations Office
Judicial Office
Law Commission
Office of the Commissioner for Victims and Witnesses
Office of HM Inspectorate of Prisons
Office of HM Inspectorate of Probation
Office of the Judge Advocate General
Office of the Official Solicitor
Office of the Prisons and Probation Ombudsman for England and Wales
Prison Service Pay Review Body
Public Trustee
Recognition Panel
Sentencing Council for England and Wales
Tribunal Procedure Committee

Supply financed agencies

Criminal Injuries Compensation Authority
HM Courts and Tribunals Service
HM Prison and Probation Service
Legal Aid Agency
Office of the Public Guardian

Other entities captured in the Departmental group including Executive NDPBs

Children and Family Court Advisory and Support Service
Criminal Cases Review Commission
Gov Facility Services Limited
Independent Monitoring Authority for the Citizens’ Rights Agreements
Judicial Appointments Commission
Legal Services Board
Office for Legal Complaints
Parole Board for England and Wales
Youth Justice Board for England and Wales
Press Recognition Panel^{[footnote 2]}.

The Annual Reports and Accounts for the individual entities can be found at: www.gov.uk/official-documents

30. Events after the reporting period

In accordance with the requirements of IAS 10 Events After the Reporting Period, events are considered up to the date on which the accounts are authorised for issue. The date the accounts are authorised for issue is interpreted as the same date the accounts are certified by the Comptroller and Auditor General.

Reinforced Autoclaved Aerated Concrete (RAAC) is a lightweight form of precast concrete, less durable than traditional concrete. Its use was most prevalent in buildings built or extended between 1950-1990, though there are some limited examples of its continued use into 1990s. Ongoing surveys of our estate have, to date, not indicated a widespread use of RAAC, with the majority of the properties built outside the period when RAAC was routinely used. In the buildings where the presence of RAAC has now been confirmed, remediation works have commenced where guidance suggests that is the correct course of action. In all other cases RAAC is being monitored. There is a range of possible outcomes in terms of levels of remediation required in the event that RAAC is identified. Based on the outcomes of surveys completed to date and the estimated effect that the presence of RAAC has on building valuations, we do not expect a material impact on the valuations of buildings within the financial statements.

As part of the probation reform programme over 7,000 staff from the Community Rehabilitation Companies (CRCs), their parent organisations and supply chain, transferred into HMPPS in June 2021 on termination of the contracts with the CRCs. ↩
The 2017-18 Designation Order established the Press Recognition Panel (PRP) as part of the Ministry of Justice (MoJ) departmental boundary. This is an administrative action on behalf of government with no change to the Lord Chancellor’s responsibilities as stated under the Charter. DCMS remain the policy lead in relation to the PRP. ↩

			2022-23		2021-22
		Core department and agencies	Departmental group	Core department and agencies	Departmental group
	Note	£000	£000	£000	£000
Cash flows from operating activities
Net expenditure	CSoCNE	(10,213,200)	(10,223,160)	(9,727,783)	(9,758,965)
Adjustments for noncash transactions		2,840,748	2,858,221	1,547,172	1,552,009
Finance expense	12	34,860	34,941	37,392	37,390
Movements in pensions		90,187	108,854	110,068	130,843
(Increase)/decrease in trade and other receivables	17	42,696	43,929	(114,750)	(114,657)
Less: movements in receivables not passing through the CSoCNE and receivable impairments		(74,643)	(74,647)	(13,090)	(13,085)
(Increase) in inventories		(10,085)	(10,243)	(297)	(415)
Increase/(decrease) in trade and other payables	19	157,041	133,265	(162,600)	(174,444)
Less: movements in payables relating to items not passing through the CSoCNE		(131,109)	(113,710)	34,127	33,365
Increase/(decrease) in other financial liabilities	19	(142,195)	(137,317)	1,335,737	1,347,704
Less: movements in other financial liabilities relating to items not passing through the CSoCNE		142,195	137,317	-	-
Utilisation of provisions	20	(2,047,896)	(2,048,096)	(1,984,899)	(1,985,172)
Intra-departmental adjustment through SoCiTE (between MoJ core and agencies)		(1,996)	(2,617)	(7,689)	(7,912)
Other			-	2	-
Net cash outflow from operating activities		(9,313,397)	(9,293,263)	(8,946,610)	(8,953,339)
Cash flows from investing activities
Purchase of property, plant and equipment	13	(1,137,498)	(1,139,170)	(1,180,664)	(1,181,348)
Purchase of intangible assets	15	(106,323)	(107,290)	(139,049)	(139,968)
New PFI liabilities in year		-	-	41,538	41,538
Adjust for increase in capital payables		11,436	11,411	12,008	12,033
Proceeds on disposal of property, plant and equipment		6,371	6,371	1,094	1,140
Proceeds on disposal of intangible assets		-	2	625	626
Proceeds on disposal of assets held for sale		2,613	2,613	3,402	3,402
Net cash outflow from investing activities		(1,223,401)	(1,226,063)	(1,261,046)	(1,262,577)
Cash flows from financing activities
From the Consolidated Fund (Supply)		10,720,000	10,720,000	10,089,757	10,089,757
From the Consolidated Fund (non-Supply)		171,583	171,583	163,084	163,084
Capital element of finance leases and on-balance sheet PFI contracts		(175,785)	(177,796)	(21,307)	(23,868)
Repayment of local authority loans		(1,529)	(1,529)	(1,600)	(1,600)
Interest paid		(34,860)	(34,941)	(37,392)	(37,390)
Net cash inflow from financing activities		10,679,409	10,677,317	10,192,542	10,189,983
Net increase/(decrease) in cash and cash equivalents in the period before adjustment for receipts and payments to the Consolidated Fund		142,611	157,991	(15,114)	(25,933)
Payments of amounts due to the Consolidated Fund		(21,503)	(21,503)	(17,791)	(17,791)
Net increase/(decrease) in cash and cash equivalents in the period after adjustment for receipts and payments to the Consolidated Fund		121,108	136,488	(32,905)	(43,724)
Cash and cash equivalents at the beginning of the period	18	181,685	222,894	214,590	266,618
Cash and cash equivalents at the end of the period	18	302,793	359,382	181,685	222,894

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Consolidated Statement of Comprehensive Net Expenditure

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Consolidated Statement of Cash Flows

Consolidated Statement of Changes in Taxpayers’ Equity

Consolidated Statement of Changes in Taxpayers’ Equity

Notes to the accounts for the year ended 31 March 2023

1a) Statement of accounting policies

1.1 Basis of preparation

1.2 Going concern

1.3 Accounting convention

1.4 Basis of consolidation

1.5 Machinery of government changes and restatement of comparatives

1.6 Changes in accounting policy and disclosures

New standards, amendments and interpretations issued but not effective for the financial year beginning 1 April 2022 and not early adopted

1.7 Property, plant and equipment

Initial recognition and capitalisation threshold

Subsequent expenditure

Subsequent valuation method

Fair value hierarchy and inputs

Revaluation

Depreciation

Assets under construction

Disposal of non-current assets

1.8 Intangible assets

1.9 Impairment

1.10 Non-current assets held for sale

1.11 Leases

Scope and exclusions – the departmental group as lessee

Initial recognition – the departmental group as lessee

Lease liability

Right of use asset

Subsequent measurement – the departmental group as lessee

Finance and operating leases – the departmental group as lessor

Estimates and judgements

1.12 Service Concession Arrangements

1.13 Employee benefits

Defined benefit pension schemes

Principal Civil Service Pension Scheme and Judicial Pension Scheme

Funded pension schemes

Service costs

Other defined benefit pension schemes

Early departure and injury benefit costs

1.14 Income

Fee Income

HMCTS fee income

OPG fee income

Fines and penalties

The victim surcharge

Recoveries from other government departments and income from the NHS and other healthcare providers

Retail sales

Levy income of the Office of Legal Complaints (OLC) and Legal Services Board (LSB)

Other income

European Social Fund and other European funding

1.15 Grants payable and paid

1.16 Costs borne by the Consolidated Fund

1.17 Notional costs

1.18 Provisions

1.19 Contingent assets and liabilities

1.20 Value Added Tax

1.21 Third party assets

1.22 Financial instruments

Recognition

De-recognition

Classification and measurement of financial assets

Financial assets at fair value through profit and loss

Financial assets at amortised cost

Impairment of financial assets

Classification and measurement – financial liabilities

1.23 Cash and cash equivalents

1b) Critical accounting estimates and judgements

Critical accounting estimates and assumptions

Revaluation and impairment of non-current assets

Right of use assets

Net pension assets and liabilities

Provisions for liabilities and charges

LAA financial assets

Critical judgements in applying accounting policies

LAA financial assets

Consolidated Statement of
Comprehensive Net Expenditure

Consolidated Statement of
Financial Position

Notes to the accounts for the year ended
31 March 2023