Annual report and accounts 2021-22: Financial statements (HTML)

Question 1

Consolidated Statement of Comprehensive Net Expenditure

Accepted Answer

for the year ended 31 March 2022

			2021‑22		2020‑21
		Core department & agencies	Departmental group	Core department & agencies	Departmental group
	Note	£000	£000	£000	£000

Revenue from contracts with customers	3	(1,545,561)	(1,562,306)	(1,250,404)	(1,266,608)
Other operating income	4	(73,244)	(73,243)	(79,101)	(78,953)
Total operating Income		(1,618,805)	(1,635,549)	(1,329,505)	(1,345,561)
Staff costs	5	3,895,744	4,148,577	3,574,478	3,801,128
Judicial costs	5	613,506	613,506	579,978	579,978
Purchase of goods and services	6	2,304,037	2,181,020	2,280,264	2,167,789
Depreciation, amortisation and impairment charges	7	819,589	825,891	677,662	681,285
Provision expense	8	2,016,236	2,015,979	1,740,464	1,741,863
Net (gain)/loss on disposal of assets	9	743	898	(5,973)	(5,961)
Revaluation of non-current and financial assets	10	63,234	63,234	(5,224)	(5,224)
Other operating expenditure	11	1,544,796	1,450,139	1,739,555	1,648,254
Total Operating Expenditure		11,257,885	11,299,244	10,581,204	10,609,112
Net Operating Expenditure before financing		9,639,080	9,663,695	9,251,699	9,263,551
Finance income		-	-	-	-
Finance expense	12	85,018	91,585	62,293	68,264
Borrowing cost on provisions		3,685	3,685	(1,707)	(1,706)
Net Operating Expenditure before tax		9,727,783	9,758,965	9,312,285	9,330,109
Taxation		-	-	-	-
Net Expenditure for the year ended 31 March 2022		9,727,783	9,758,965	9,312,285	9,330,109
Other Comprehensive Net Expenditure
Items that will not be reclassified to operating expenditure:
Net (gain)/loss on revaluation of:
Property, plant and equipment		(708,990)	(708,978)	171,432	171,331
Right of use assets		87,391	87,391	-	-
Intangible assets		2,134	2,054	(4,645)	(4,846)
Assets for sale		23	23	1,358	1,358
Net (gain)/loss on impairment of:
Property, plant and equipment		-	-	-	176
Remeasurement of pension schemes:
Cafcass pension scheme		-	(108,268)	-	35,384
LSC pension scheme		(22,359)	(22,359)	29,512	29,512
By-analogy pension schemes		47	420	59	398
Probation pension schemes		(950,558)	(950,558)	704,781	704,781
Total Comprehensive Net Expenditure for the year ended 31 March 2022		8,135,471	8,058,690	10,214,782	10,268,203

The notes on pages 138 to 211 form part of these accounts.

Question 2

Consolidated Statement of Financial Position

Accepted Answer

as at 31 March 2022

			2021‑22		2020‑21
		Core department & agencies	Departmental group	Core department & agencies	Departmental group
	Note	£000	£000	£000	£000

Revenue from contracts with customers	3	(1,545,561)	(1,562,306)	(1,250,404)	(1,266,608)
Other operating income	4	(73,244)	(73,243)	(79,101)	(78,953)
Total operating Income		(1,618,805)	(1,635,549)	(1,329,505)	(1,345,561)
Staff costs	5	3,895,744	4,148,577	3,574,478	3,801,128
Judicial costs	5	613,506	613,506	579,978	579,978
Purchase of goods and services	6	2,304,037	2,181,020	2,280,264	2,167,789
Depreciation, amortisation and impairment charges	7	819,589	825,891	677,662	681,285
Provision expense	8	2,016,236	2,015,979	1,740,464	1,741,863
Net (gain)/loss on disposal of assets	9	743	898	(5,973)	(5,961)
Revaluation of non-current and financial assets	10	63,234	63,234	(5,224)	(5,224)
Other operating expenditure	11	1,544,796	1,450,139	1,739,555	1,648,254
Total Operating Expenditure		11,257,885	11,299,244	10,581,204	10,609,112
Net Operating Expenditure before financing		9,639,080	9,663,695	9,251,699	9,263,551
Finance income		-	-	-	-
Finance expense	12	85,018	91,585	62,293	68,264
Borrowing cost on provisions		3,685	3,685	(1,707)	(1,706)
Net Operating Expenditure before tax		9,727,783	9,758,965	9,312,285	9,330,109
Taxation		-	-	-	-
Net Expenditure for the year ended 31 March 2022		9,727,783	9,758,965	9,312,285	9,330,109
Other Comprehensive Net Expenditure
Items that will not be reclassified to operating expenditure:
Net (gain)/loss on revaluation of:
Property, plant and equipment		(708,990)	(708,978)	171,432	171,331
Right of use assets		87,391	87,391	-	-
Intangible assets		2,134	2,054	(4,645)	(4,846)
Assets for sale		23	23	1,358	1,358
Net (gain)/loss on impairment of:
Property, plant and equipment		-	-	-	176
Remeasurement of pension schemes:
Cafcass pension scheme		-	(108,268)	-	35,384
LSC pension scheme		(22,359)	(22,359)	29,512	29,512
By-analogy pension schemes		47	420	59	398
Probation pension schemes		(950,558)	(950,558)	704,781	704,781
Total Comprehensive Net Expenditure for the year ended 31 March 2022		8,135,471	8,058,690	10,214,782	10,268,203

The notes on pages 138 to 211 form part of these accounts.

Antonia Romeo

Principal Accounting Officer

12 December 2022

Question 3

Consolidated Statement of Cash Flows

Accepted Answer

for the year ended 31 March 2022

			2021‑22		2020‑21
		Core department & agencies	Departmental group	Core department & agencies	Departmental group
	Note	£000	£000	£000	£000

Revenue from contracts with customers	3	(1,545,561)	(1,562,306)	(1,250,404)	(1,266,608)
Other operating income	4	(73,244)	(73,243)	(79,101)	(78,953)
Total operating Income		(1,618,805)	(1,635,549)	(1,329,505)	(1,345,561)
Staff costs	5	3,895,744	4,148,577	3,574,478	3,801,128
Judicial costs	5	613,506	613,506	579,978	579,978
Purchase of goods and services	6	2,304,037	2,181,020	2,280,264	2,167,789
Depreciation, amortisation and impairment charges	7	819,589	825,891	677,662	681,285
Provision expense	8	2,016,236	2,015,979	1,740,464	1,741,863
Net (gain)/loss on disposal of assets	9	743	898	(5,973)	(5,961)
Revaluation of non-current and financial assets	10	63,234	63,234	(5,224)	(5,224)
Other operating expenditure	11	1,544,796	1,450,139	1,739,555	1,648,254
Total Operating Expenditure		11,257,885	11,299,244	10,581,204	10,609,112
Net Operating Expenditure before financing		9,639,080	9,663,695	9,251,699	9,263,551
Finance income		-	-	-	-
Finance expense	12	85,018	91,585	62,293	68,264
Borrowing cost on provisions		3,685	3,685	(1,707)	(1,706)
Net Operating Expenditure before tax		9,727,783	9,758,965	9,312,285	9,330,109
Taxation		-	-	-	-
Net Expenditure for the year ended 31 March 2022		9,727,783	9,758,965	9,312,285	9,330,109
Other Comprehensive Net Expenditure
Items that will not be reclassified to operating expenditure:
Net (gain)/loss on revaluation of:
Property, plant and equipment		(708,990)	(708,978)	171,432	171,331
Right of use assets		87,391	87,391	-	-
Intangible assets		2,134	2,054	(4,645)	(4,846)
Assets for sale		23	23	1,358	1,358
Net (gain)/loss on impairment of:
Property, plant and equipment		-	-	-	176
Remeasurement of pension schemes:
Cafcass pension scheme		-	(108,268)	-	35,384
LSC pension scheme		(22,359)	(22,359)	29,512	29,512
By-analogy pension schemes		47	420	59	398
Probation pension schemes		(950,558)	(950,558)	704,781	704,781
Total Comprehensive Net Expenditure for the year ended 31 March 2022		8,135,471	8,058,690	10,214,782	10,268,203

The notes on pages 138 to 211 form part of these accounts.

Question 4

Consolidated Statement of Changes in Taxpayers’ Equity

Accepted Answer

for the year ended 31 March 2022

			2021‑22		2020‑21
		Core department & agencies	Departmental group	Core department & agencies	Departmental group
	Note	£000	£000	£000	£000

Revenue from contracts with customers	3	(1,545,561)	(1,562,306)	(1,250,404)	(1,266,608)
Other operating income	4	(73,244)	(73,243)	(79,101)	(78,953)
Total operating Income		(1,618,805)	(1,635,549)	(1,329,505)	(1,345,561)
Staff costs	5	3,895,744	4,148,577	3,574,478	3,801,128
Judicial costs	5	613,506	613,506	579,978	579,978
Purchase of goods and services	6	2,304,037	2,181,020	2,280,264	2,167,789
Depreciation, amortisation and impairment charges	7	819,589	825,891	677,662	681,285
Provision expense	8	2,016,236	2,015,979	1,740,464	1,741,863
Net (gain)/loss on disposal of assets	9	743	898	(5,973)	(5,961)
Revaluation of non-current and financial assets	10	63,234	63,234	(5,224)	(5,224)
Other operating expenditure	11	1,544,796	1,450,139	1,739,555	1,648,254
Total Operating Expenditure		11,257,885	11,299,244	10,581,204	10,609,112
Net Operating Expenditure before financing		9,639,080	9,663,695	9,251,699	9,263,551
Finance income		-	-	-	-
Finance expense	12	85,018	91,585	62,293	68,264
Borrowing cost on provisions		3,685	3,685	(1,707)	(1,706)
Net Operating Expenditure before tax		9,727,783	9,758,965	9,312,285	9,330,109
Taxation		-	-	-	-
Net Expenditure for the year ended 31 March 2022		9,727,783	9,758,965	9,312,285	9,330,109
Other Comprehensive Net Expenditure
Items that will not be reclassified to operating expenditure:
Net (gain)/loss on revaluation of:
Property, plant and equipment		(708,990)	(708,978)	171,432	171,331
Right of use assets		87,391	87,391	-	-
Intangible assets		2,134	2,054	(4,645)	(4,846)
Assets for sale		23	23	1,358	1,358
Net (gain)/loss on impairment of:
Property, plant and equipment		-	-	-	176
Remeasurement of pension schemes:
Cafcass pension scheme		-	(108,268)	-	35,384
LSC pension scheme		(22,359)	(22,359)	29,512	29,512
By-analogy pension schemes		47	420	59	398
Probation pension schemes		(950,558)	(950,558)	704,781	704,781
Total Comprehensive Net Expenditure for the year ended 31 March 2022		8,135,471	8,058,690	10,214,782	10,268,203

Consolidated Statement of Changes in Taxpayers’ Equity

for the year ended 31 March 2021

				Core department & 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 2020		4,046,612	4,151,957	8,198,569	3,796,025	4,153,088	7,949,113
Net Parliamentary Funding – drawn down		9,237,140	-	9,237,140	9,237,140	-	9,237,140
Net Parliamentary Funding – deemed		192,387	-	192,387	192,387	-	192,387
Unspent Supply drawn down repayable to the Consolidated Fund		(214,504)	-	(214,504)	(214,504)	-	(214,504)
Consolidated Fund Standing Services
- Judicial salaries		155,694	-	155,694	155,694	-	155,694
- Lord Chancellor’s salary		76	-	76	76	-	76
- Utilisation of Judicial Service Award		8,128	-	8,128	8,128	-	8,128
CFERs payable to the Consolidated Fund		(267)	-	(267)	(17,334)	-	(17,334)
Net expenditure for the year	CSoCNE	(9,312,285)	-	(9,312,285)	(9,330,109)	-	(9,330,109)
Net gain/(loss) on revaluation of
- Property, plant and equipment		-	(171,432)	(171,432)	-	(171,331)	(171,331)
- Intangible assets		-	4,645	4,645	-	4,846	4,846
- Assets held for sale		-	(1,358)	(1,358)	-	(1,358)	(1,358)
Net gain/(loss) on impairment of
- Property, plant and equipment		-	-	-	-	(176)	(176)
Remeasurement of pension schemes
- Cafcass pension scheme	25	-	-	-	(35,384)	-	(35,384)
- LSC pension scheme	25	(29,512)	-	(29,512)	(29,512)	-	(29,512)
- By-analogy pension schemes		(59)	-	(59)	(398)	-	(398)
- Probation pension schemes	25	(704,781)	-	(704,781)	(704,781)	-	(704,781)
Assets transferred out of the group		-	-	-	(673)	-	(673)
Non‑cash adjustment
- Auditors’ remuneration	6	1,590	-	1,590	1,590	-	1,590
- Corporate overhead charges	11	(3,513)	-	(3,513)	-	-	-
Movements in reserves
- Transfers from Revaluation Reserve		164,391	(164,391)	-	164,426	(164,426)	-
Adjustment in respect of prior periods		(32,067)	6,379	(25,688)	(7,143)	6,379	(764)
Other		1,792	-	1,792	1,456	-	1,456
Balance at 31 March 2021		3,510,822	3,825,800	7,336,622	3,217,084	3,827,022	7,044,106

The notes on pages 138 to 211 form part of these accounts.

Question 5

Notes to the accounts for the year ended 31 March 2022

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) 2021-22 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 context.

Where the FReM permits a choice of accounting policy, the accounting policy which has been judged to be the most appropriate to the circumstances of the department for the purpose of giving a true and fair view has been selected. The accounting policies adopted by the department are described below.

They have been applied consistently in dealing with items that are considered material to the accounts.

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

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 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 2021-22 (none in 2020-21).

1.6 The impact of new International Financial Reporting Standards (IFRS) on the 2021-22 accounts

a) New and amended standards adopted

IFRS 16 Leases is due for adoption across government bodies reporting under the FReM from 1 April 2022. However, HMT has permitted the department to early adopt the standard from 1 April 2021, in these accounts. IFRS 16 introduces a single lease accounting model that requires a lessee to recognise assets and liabilities for all leases. This replaces the previous standard, IAS 17 Leases. Further details are disclosed in Note 1.11.

b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 April 2021 and not early adopted

IFRS 17 Insurance Contracts requires a discounted cash flow approach to accounting for insurance contracts. Subject to UK adoption, it may come into effect for accounting periods commencing on, or after, 1 January 2023 and should be included in the 2023-24 FReM at the earliest. 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, including subsequent expenditure on existing assets, are initially recognised at cost when it is probable that future economic benefits or service potential associated with the asset will flow to the departmental group and the cost of the asset can be measured reliably. All other repairs and maintenance are charged to the CSoCNE during the financial year in which they are incurred. 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. 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. All thresholds include irrecoverable VAT. 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 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. In between professional valuations, carrying values are adjusted by the application of indices or through desktop valuations.

Different indices are applied, depending on the assets, to reflect current value. For buildings and leasehold improvements, the index applied is the Building Cost Information Service Construction data Tender Price Index (TPI). Professional valuations are primarily undertaken by the Valuation Office Agency using the Royal Institution of Chartered Surveyors (RICS) appraisal and valuation manual, known as the ‘Red Book’.

Criminal courts, prisons and some parts of the probation estate are mostly classified as specialised buildings which cannot be sold on the open market. Specialised properties are valued at Depreciated Replacement Cost (DRC) to a modern equivalent basis in accordance with the FReM and RICS guidelines, taking into account the functional obsolescence of the property and other assumptions. Non-specialised properties are valued based on existing use or market value where there is an open market valuation for such properties.

Assets which were recently held for their service potential but are surplus, are valued at current value in existing use where there are restrictions on the department or the asset which would prevent access to the market at the reporting date. Otherwise, surplus assets are valued at fair value in accordance with IFRS 13 Fair Value Measurement.

In determining whether a non-operational asset is surplus, the department 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. Otherwise, the asset is assessed as being surplus and valued at fair value under IFRS 13 Fair Value Measurement.

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

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 lease period or 3 to 15 years
Plant and equipment	Shorter of remaining life or 3 to 15 years
Furniture, fixtures and fittings	Shorter of remaining lease period 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 the department 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 the department reviews the useful economic lives of its intangible assets each financial year.

Purchased software licences are recognised when it is probable that future service potential will flow to the department 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.

The department 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.

The thresholds across the departmental group range from £500 to £250,000 (including irrecoverable VAT).

Subsequent to initial recognition, intangible assets are recognised at fair value. As no active market exists for the department’s intangible assets, fair value is assessed as replacement cost less any accumulated amortisation and impairment losses. Intangible assets in service are revalued at each reporting date using the Producer Price Index (PPI) produced 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, the department 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.

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.

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 is due for adoption across government bodies reporting under the FReM from 1 April 2022. However, HMT have permitted the department to early adopt the standard from 1 April 2021, in these accounts. IFRS 16 this introduces a single lease accounting model that requires a lessee to recognise assets and liabilities for all leases (except for 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, in exchange for consideration, 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, incorporating both the right to obtain substantially all the economic benefits from the asset and 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.

When making the above assessments, the department excludes two types of leases. Firstly, 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. Secondly, contracts whose term (comprising the non-cancellable period together with any extension options the department is reasonably certain to exercise and any termination options the department is reasonably certain not to exercise) is less than twelve months.

Initial recognition – the departmental group as lessee

At the commencement of a lease (or on the date of transition to IFRS 16, if later), the department recognises a right of use asset and a 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 (0.91% for leases recognised in 2021, 0.95% for those in 2022). Where the lease includes extension or termination options, the lease payments will be for the non-cancellable period together with any extension options the department is reasonably certain to exercise and any termination options the department is reasonably certain not to exercise.

In the event that a lease contract has expired, but the department remains in occupation pending negotiations for a renewed term, the decision about whether the lease should be recognised factors in an assessment of the economic incentives for both the landlord and the lessee and how long the lease will be in place.

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.

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 as notional income (or on transition, a credit to the General Fund).

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. The transitional impact of adopting IFRS 16 are set out in Note 14.

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 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 will be 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 discounting the revised cash flows: using a revised discount rate where the department becomes or ceases to be reasonably certain to exercise or not exercise an extension or termination option, or the lease is modified to amend the non-cancellable period, change the term of the lease, change the consideration or the scope; or at the existing discount rate where there is a movement in an index or rate that will alter the cash flows, or the amount payable under a residual value guarantee changes.

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.

Transitional arrangements

We have applied a number of options and practical expedients on initial adoption of IFRS 16, these principally being mandated by the FReM.

IFRS 16 has been adopted retrospectively using the ‘cumulative catch-up’ approach, without restatement of comparative balances. Consequently, the financial statements for 2020-21 have been prepared in accordance with the previous standard, IAS 17 Leases.

There has been no reassessment of existing contracts that the department had previously assessed as containing or not containing a lease. However, new contracts will be classified according to the criteria given in IFRS 16.

For leases previously treated as operating leases, the right of use assets have been measured at the present value of the remaining lease payments, adjusted for any prepayment or accrual balances in respect of the lease payments. The department has used hindsight in determining the remaining term of leases and no adjustment has been made for leases whose term ends within twelve months of the date of first adoption.

For leases previously recognised as finance leases, the carrying amount of the lease liability and the right of use asset as at the date of first adoption are the respective carrying amounts of the lease liability and leased asset as determined immediately before that date, in accordance with IAS 17.

Where the department subleases a right of use asset, the classification of the sublease as a finance or operating lease has been reassessed. Where an arrangement previously treated as an operating lease is found to be a finance lease, it has been treated as a new lease, commencing on the date of first adoption.

In addition, the department has adopted the following practical expedient:

For leases that were previously onerous and provided for, the department has adjusted the right of use asset by the amount of that provision. Leased assets that are deemed surplus continue to be treated as such, with no right of use asset recognised.

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.

As described above, the department 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.

The department 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.

The department 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.

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. The department 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.

The department 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 the department 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 at www.gov.uk/government/publications/judicial-pensions-scheme-annual-report-and- accounts-2021-to-2022.

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 31 March 2019). The results of the valuation as at 31 March 2019 were shown in the actuarial report as at 31 March 2021 and were reflected in the 2020-21 accounts.

The Local Government Pension Scheme (LGPS) fund is 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 full in the period in which they arise. 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, so as 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.

The department recognises revenue from a number of different sources, primarily from: fees collected by HM Courts & 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 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), Supervision, and copies of POA certificates.

Fines and penalties

The department also collects fines, criminal court charges and fixed penalties imposed by the judiciary or police. The department 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.

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 of the department to fund victims’ services.

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 from the Home Office in relation to and 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).

Retail sales

Retail income is generated within HMPPS from retail sales in prison shops.

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 (GiA) 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.

The 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 auditors’ 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.

1.18 Provisions

Provisions are recognised in accordance with IAS 37 Provisions, contingent liabilities and contingent assets. Provisions are recognised when the department has a present legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation, and for which a reliable estimate can be made for the amount of 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: 0.47%, 0.70% and 0.95% 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 -1.03% (2020-21: -0.95%).

1.19 Contingent 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.

1.20 Value Added Tax

Most of the activities of the department are outside the scope of VAT and, in general, output tax does not apply and input tax on purchases is not recoverable. Irrecoverable VAT is charged to the relevant expenditure category or included in the capitalised purchase costs of non-current assets. Where output tax is charged or input tax is recoverable, the amounts are stated net of VAT.

1.21 Third party assets

The department 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.

Other third party monies held at the Government Banking Service (GBS) at 31 March 2022 are recognised as both cash and cash equivalents (Note 18) and trade and other payables (Note 19), and therefore have no net impact on the CSoFP.

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 the

department’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 the department 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 are transferred) and the department has transferred substantially all the risks and rewards of ownership. 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, the department 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 which applies the consideration of the three hierarchies set under the standard for determining fair value. The practical application of IFRS 13 with reference to the LAA’s assets is explained in further detail in the Legal Aid Agency’s Annual Report and Accounts 2021-22.

The department, through HMPPS, holds share investments of £0.4 million (2020-21: £0.6 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.

The department 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. The majority of the department’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. The department 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, the department 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, the department 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

The department 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 continually 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. 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.

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

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.

The pension liabilities for 2021-22 reflect the appropriate assumptions. As a result of the large increase in the discount rate at 31 March 2022, this has significantly reduced the pension liability for all Local Government Pension Scheme (LGPS) employers. All assumptions remain under constant review. As the economic climate changes and more information becomes available, assumptions will be updated to reflect this.

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 continually evaluated and reviewed. Further information is set out in Note 20.

Accounting for receivables impairment

Receivables are shown net of impairments in accordance with the requirements of the FReM.

Allowances are made for credit losses on an ‘expected loss’ basis. The amortised cost of receivables is determined by making an impairment to reduce the carrying value of receivables to the estimated future flow of repayments.

LAA financial assets

For assets held at amortised cost, IFRS 9 requires the LAA to recognise expected credit losses based on historic experience and adjust 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, the 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 increased complexity and judgement. Further detail on the valuation model used to generate this estimate and the actual impairments against the 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

Valuation of court buildings and prisons earmarked for closure

As part of an ongoing justice transformation strategy, ministers have identified a number of under- utilised court buildings and prisons no longer fit for purpose, for closure over the next few years. This has reduced the remaining estimated useful life of these assets.

Prior to the announcement of closure these buildings are considered specialised assets and are valued at depreciated replacement cost (DRC). The announcement of closure triggers the impairment event. The reduction in the remaining useful life of these assets represents an impairment indicator. All impairment expenditure is charged to the CSoCNE, with the balance of any revaluation reserve taken to the General Fund. The valuation method will be altered from DRC to the appropriate valuation methodology when the asset is transferred to ‘assets held for sale’ or when it becomes surplus.

LAA financial assets

For assets held at amortised cost, IFRS 9 requires the 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, the LAA’s previous experience of losses in each portfolio is used to estimate the degree of impairment on that asset class. However, past payment profiles have been adjusted to account for the exceptional circumstances arising from COVID-19: our expectation is that these extraordinary payment patterns will not be repeated in the future.

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 the department to determine, based on an evaluation of the terms and conditions of the arrangements, whether it controls the infrastructure. Where the department is judged to control the infrastructure, the contract assets are reflected in the SoFP.

2. Statement of 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).

These segments are: Centrally held; Policy and Corporate Services; HM Courts & Tribunals Service (HMCTS); HM Prison and Probation Service (HMPPS) and other delivery agencies.

The segmental analysis presents the financial information based on the structure reported to ExCo. Centrally held comprises centrally managed budgets and departmental unallocated provision.

Policy and Corporate Services includes departmental headquarters functions: Chief Finance Officer Group, Policy and Strategy Group, People Group and the department’s NDPBs.

The other delivery agencies are the department’s three remaining executive agencies: LAA; Criminal Injuries Compensation Authority and OPG.

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

2. Statement of Operating Expenditure by Operating Segment (continued)

	Centrally held	Policy and corporate services	HMCTS	HMPPS	Other delivery agencies	Gross total (pre‑eliminations)
	£000	£000	£000	£000	£000	£000
Income
Revenues from external customers	(3,947)	(95,297)	(53,831)	(240,636)	(35,227)	(428,938)
Revenues from transactions with other operating segments of the department	-	(157,629)			(19)	(157,648)
Interest revenue	-	-	-	-	-	-
Material items of income	-
EU Grant	-	-	-	(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)
Individual items of expenditure
Depreciation	-	73,699	215,174	336,581	2,731	628,185
Amortisation	-	11,868	47,654	9,912	9,907	79,341
Material items of expenditure
Staff costs	(4,181)	650,181	658,534	2,733,734	110,436	4,148,704
Costs of the judiciary	106	9,961	603,439	-	-	613,506
Accommodation, maintenance and utilities	-	41,353	324,081	568,180	5,436	939,050
Offender related costs	-			672,715		672,715
Service concession charges	-	78,200	32,807	524,141		635,148
IT services & telecommunications (non-service 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 NDPBs which eliminate with receipts of grant-in- aid by NDPBs
		272480		-		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	1,902,788	2,015,979
Corporation tax	-	-	-	-	-	-
Rentals under operating leases	1	5,686	22,034	1,787	1,124	30,632
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 Overhead recharge	-	(513,902)	93,376	378,128	42,398	-
SoCNE Impairments	-	5,609	3,889	95,687	95	105,280
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

	Centrally held	Policy and corporate services	HMCTS	HMPPS	Other delivery agencies	Gross total (pre‑eliminations)
	£000	£000	£000	£000	£000	£000
Income
Revenues from external customers	(2,345)	(85,991)	(62,061)	(203,697)	(26,651)	(380,745)
Revenues from transactions with other operating segments of the department	-	(144,517)	-	-	-	(144,517)
Interest revenue	-	(2)	-	-	-	(2)
Material items of income
EU Grant	-	-	-	(32,850)	-	(32,850)
CFERs	-	(17,334)	-	-	-	(17,334)
Fee Income	(260,622)	(30,000)	(563,202)	-	(62,262)	(916,086)
Total income	(262,967)	(277,844)	(625,263)	(236,547)	(88,913)	(1,491,534)
Individual items of expenditure
Depreciation	-	53,665	134,242	305,761	1,398	495,066
Amortisation	-	15,292	35,193	9,973	11,085	71,543
Material items of expenditure
Staff costs	53,462	563,048	625,064	2,450,721	108,876	3,801,171
Costs of the judiciary	129	6,164	573,685	-	-	579,978
Accommodation, maintenance and utilities	891	40,473	307,806	568,876	4,127	922,173
Offender related costs	-	-	-	702,805	-	702,805
Service concession charges	-	79,477	30,029	526,091	-	635,597
IT services & telecommunications (non-service concession arrangements)	-	86,825	156,042	28,310	410	271,587
Costs of Community Rehabilitation Companies	-	-	-	411,040	-	411,040
Payments of grant-in-aid to NDPBs which eliminate with receipts of grant-in- aid by NDPBs
	336	254,141	-	-	-	254,477
Cost of legal services and disbursements (civil)	-	-	-	-	4,739	4,739
Cost of legal services and disbursements (crime)	-	-	-	-	5,169	5,169
Provisions provided for in year	47,048	(4,273)	5,533	344	1,693,211	1,741,863
Corporation tax	-	-	-	-	-	-
Rentals under operating leases	(1,299)	26,001	90,859	1,774	1,706	119,041
Finance charges on leases and service concession arrangements	-	7,920	4,937	14,098	-	26,955
Current Grants	-	220,746	25	4,752	-	225,523
Corporate Overhead recharge	1	(453,126)	82,337	326,367	44,421	-
SoCNE Impairments	-	12,350	43,522	39,220	-	95,092
Immaterial items of expenditure	11,326	280,932	102,727	252,117	65,199	712,301
Total expenditure	111,894	1,189,635	2,192,001	5,642,249	1,940,341	11,076,120

3. Revenue from contracts with customers

		2021‑22		2020‑21
	Core department & agencies	Departmental group	Core department & agencies group	Departmental group
	£000	£000	£000	£000
Fines receipts	407,924	407,924	290,622	290,622
Fee income	744,061	744,067	622,955	622,955
Victim surcharge	37,864	37,864	35,393	35,393
Legal Aid Agency - Civil Representation recoveries	16,412	16,412	10,695	10,695
Legal Aid Agency - Criminal cases recoveries	17,506	17,506	14,958	14,958
Remand income	32,054	32,137	31,022	31,080
Income from NHS and other healthcare providers	53,927	53,927	49,622	49,622
Income from Community Rehabilitation Companies	-	-	-	-
Recoveries from other government departments	127,411	127,013	101,368	101,219
External sales of prison industries	13,747	13,747	9,771	9,771
Retail prison shop income	67,265	67,265	65,884	65,884
In-cell TV income	547	547	33	33
Training	1,294	1,294	1,557	1,557
Compensation	5,053	5,053	4,256	4,256
Internal customers	1,509	1,509	1,375	1,375
Miscellaneous income	16,167	15,417	10,626	9,854
Revenue from contracts with customers within the department’s ambit	1,542,741	1,541,682	1,250,137	1,249,274
CFER Receipts	2,820	20,624	267	17,334
Total Revenue from contracts with customers	1,545,561	1,562,306	1,250,404	1,266,608

4. Other operating income

		2021‑22		2020‑21
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£001	£002	£003
Rental income	31,705	31,705	46,251	46,251
European Social Fund and other European funding	41,539	41,539	32,850	32,850
Miscellaneous income	-	(1)	-	(148)
Other operating income within the department’s ambit	73,244	73,243	79,101	78,953
Consolidated Fund Extra Receipts	-	-	-	-
Total other operating income	73,244	73,243	79,101	78,953

5. Staff and judiciary costs

	2021-22				2020-21
	Permanently employed staff [71]	Other	Ministers	Total	Total
	£000	£000	£000	£000	£000
Wages and salaries	2,794,148	213,563	330	3,008,041	2,847,025
Social security costs	285,251	1,500	38	286,789	270,398
Other pension costs	840,601	15	-	840,616	670,887
Sub total	3,920,000	215,078	368	4,135,446	3,788,310
Early departure costs	15,159	-	-	15,159	9,990
Early departure provisions	-	-	-	-	43
Add inward secondments	17,578	13,163	-	30,741	16,355
Less recoveries in respect of outward secondments	(32,769)	-	-	(32,769)	(13,570)
Total Net Costs	3,919,968	228,241	368	4,148,577	3,801,128
Of which:
Core department and agencies	3,695,324	200,052	368	3,895,744	3,574,478
NDPBs	224,644	28,189	-	252,833	226,650
	3,919,968	228,241	368	4,148,577	3,801,128

	2021-22				2020-21
	Permanently employed staff [71]	Other	Ministers	Total	Total
	£0	£0	£0	£0	£0
Wages and salaries	137,958	111,870	141,941	391,769	366,546
Social security costs	18,517	14,843	14,612	47,972	44,588
Other pension costs	68,704	56,404	48,657	173,765	168,844
Sub total	225,179	183,117	205,210	613,506	579,978
Total Net Costs
Of which:
Core department and agencies	225,179	183,117	205,210	613,506	579,978
NDPBs	-	-	-	-	-
	225,179	183,117	205,210	613,506	579,978

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

		2021‑22		2020‑21
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£000	£000	£000
Lease/service concession charges:
PFI service charges	635,148	635,148	635,701	635,701
Other service concession service charges (non-PFI)	-	-	(104)	(104)
Rentals under operating leases	30,589	30,632	118,800	118,951
Other services:
Accommodation, maintenance and utilities	934,029	780,975	915,340	777,257
Communications, office supplies and services	54,849	56,589	51,832	53,467
Travel, subsistence and hospitality	36,255	38,489	20,518	21,709
Training and other staff related costs	74,507	78,062	73,918	77,072
IT services and telecommunications (non-service concession arrangements)
	337,018	345,053	263,536	270,953
Professional services	78,952	83,154	86,564	90,088
Other contracted out services	120,983	130,421	112,569	120,626
Shared Service outsourcing	-	293	-	-
External Auditor’s remuneration and expenses	-	481	-	427
Other legal aid service costs	-	16	-	52
Non-cash services:
External Auditor’s remuneration*	1,707	1,707	1,590	1,590
Total purchase of goods and services	2,304,037	2,181,020	2,280,264	2,167,789

*Non-cash external auditors’ remuneration represents the statutory audit fees of the core department and agencies. Refer to page 82 in the Governance Statement, for details of total statutory audit fees for the group.

7. Depreciation, amortisation and impairment charges

		2021‑22		2020‑21
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£000	£000	£000
Depreciation	624,554	628,185	494,030	495,066
Amortisation	76,673	79,341	68,987	71,543
Impairment charge on non-current assets:
Property, plant and equipment	99,819	99,826	76,562	76,647
Intangible assets	5,503	5,504	18,349	18,349
Assets held for sale	(50)	(50)	-	-
Investments	-	-	96	96
Increase/(decrease) in receivables impairment	-	-	-	-
	13,090	13,085	19,638	19,584
Total depreciation, amortisation and impairment charges	819,589	825,891	677,662	681,285

8. Provision expense

		2021‑22		2020‑21
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£000	£000	£000
Provisions provided in year net of release	273,921	273,664	195,869	197,268
Civil legal help and representation – solicitors’ charges, counsel fees and disbursements	907,473	907,473	848,216	848,216
Criminal cases – solicitors’ charges, counsel fees and disbursements	834,842	834,842	696,379	696,379
Total provision expense	2,016,236	2,015,979	1,740,464	1,741,863

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

		2021‑22		2020‑21
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
Net (gain)/loss on disposal of:
Property, plant and equipment	1,872	1,963	2,060	2,060
Intangible assets	(25)	39	716	728
Assets held for sale	(1,104)	(1,104)	(8,749)	(8,749)
Total net (gain)/loss on disposal of assets	743	898	(5,973)	(5,961)

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

		2021‑22		2020‑21
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
(Increase)/decrease in the valuation of:
Property, plant and equipment	62,874	62,874	(5,337)	(5,337)
Intangible assets	194	194	-	-
Assets held for sale	(94)	(94)	303	303
Investments	260	260	(190)	(190)
Total revaluation of non‑current and financial assets	63,234	63,234	(5,224)	(5,224)

11. Other operating expenditure

		2021‑22		2020‑21
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
Grants:
Current	165,836	248,132	150,385	225,523
Capital	-	-	3,901	3,901
Criminal justice costs:
Offender related costs	672,715	672,715	702,805	702,805
Youth offender costs	52,903	52,905	59,143	59,143
Contracted probation services*	179,462	179,462	411,040	411,040
Judicial and juror costs	51,883	51,883	30,421	30,421
Cost of legal services and disbursements (Civil)	7,162	7,162	4,739	4,739
Cost of legal services and disbursements (Crime)	3,780	3,780	5,169	5,169
Cost from Central Funds	12,291	12,291	9,405	9,405
Compensation payments	28,404	28,404	28,538	28,538
Other administrative expenditure	15,794	15,938	6,855	7,059
Other programme costs	105,485	197,801	52,397	136,753
Grant-in-Aid to NDPBs	272,480	-	254,477	-
Other PSP related personal protective equipment	-	-	24,035	24,035
Non-cash operating expense:
Notional charges	-	-	-	-
Corporate notional overhead charge	(3,037)	-	(3,513)	-
Other pension costs	707	707	1,205	1,205
Other non-cash	(21,069)	(21,041)	(1,447)	(1,482)
Total other operating expenditure	1,544,796	1,450,139	1,739,555	1,648,254

*The termination of the CRC contracts, and reunification of the Probation Service, changed the spending profile, removing costs from the single ‘Contracted probation services’ line and spreading across the various headings relevant to the costs now incurred directly by HMPPS, including staff costs.

12. Finance expense

		2021‑22		2020‑21
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
Finance charges on leases and service concession arrangements	36,636	36,634	26,955	26,955
Local authority loan interest	756	756	-	-
Non-cash finance expense:
Net interest on pension	47,626	54,195	35,338	41,309
Total finance expense	85,018	91,585	62,293	68,264

13. Property, plant and equipment

	Land	Buildings	Dwellings	Information technology	Plant and equipment	Furniture, fixtures and fittings	Payments on account and 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)	(1,4330)	-	(1,248)	(15491	(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)	(34707	-	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	‑	(1854	‑	(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)	(1358	-	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
Owned	1,647,093	8,828,716	53,521	167,062	134,851	9,975	1,212,460	12,053,678
Finance leased	-	-	-	-	-	-	-	-
On balance sheet PFI and other service concession arrangements	135,878	1,004,330	-	-	48,859	-	-	1,189,067

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.

	Land	Buildings	Dwellings	Information technology	Plant and equipment	Furniture, fixtures and fittings	Payments on account and assets under construction	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Cost or valuation
At 1 April 2020	1,561,842	9,550,583	43,532	467,383	368,814	30,809	531,821	12,554,784
Additions	4,392	82,927	-	52,129	71,917	149	768,659	980,173
Disposals	-	(610)	-	(1,739)	(7,187)	(2)	(948)	(10,486)
Reclassifications	4,200	149,586	(1,497)	7,525	37,640	243	(201,674)	(3,977)
Revaluations	40,003	(623,482)	712	15,471	(12,794)	49	-	(580,041)
Transfers	-	(1,765)	-	1	-	-	-	(1,764)
Impairments	(1,357)	(37,210)	-	-	(23,755)	-	(14,571)	(76,893)
At 31 March 2021	1,609,080	9,120,029	42,747	540,770	434,635	31,248	1,083,287	12,861,796
Depreciation
At 1 April 2020	‑	(2,160)	1	(335,267)	(272,272)	(26,292)	‑	(635,990)
Charged in year	(592)	(412,268)	(1,123)	(53,394)	(26,770)	(919)	-	(495,066)
Disposals	-	-	-	2,149	6,662	1	-	8,812
Reclassifications	-	14	19	(66)	1	1	-	(31)
Revaluations	592	412,313	1,103	(11,977)	12,057	(41)	-	414,047
Transfers	-	190	-	-	-	-	-	190
Impairments	-	57	-	-	13	-	-	70
At 31 March 2021	‑	(1,854)	‑	(398,555)	(280,309)	(27,250)	‑	(707,968)
Carrying amount at 31 March 2021	1,609,080	9,118,175	42,747	142,215	154,326	3,998	1,083,287	12,153,828
Carrying amount at 1 April 2020	1,561,842	9,548,423	43,533	132,116	96,542	4,517	531,821	11,918,794
Asset financing
Owned	1,529,172	7,735,236	37,562	141,335	94,591	3,998	1,083,287	10,625,181
Finance leased	59,572	410,883	5,185	-	2,202	-	-	477,842
On-balance sheet PFI and other SCAs	20,336	972,056	-	880	57,533	-	-	1,050,805
Carrying amount at 31 March 2021	1,609,080	9,118,175	42,747	142,215	154,326	3,998	1,083,287	12,153,828
Of the total
Core department and agencies	1,609,080	9,117,475	42,747	140,379	154,324	3,775	1,082,885	12,150,665
NDPBs	-	700	-	1,836	2	223	402	3,163
Carrying amount at 31 March 2021	1,609,080	9,118,175	42,747	142,215	154,326	3,998	1,083,287	12,153,828

Included in the carrying values above are non-operational sites with a combined value of £15.9 million (2020-21: £23.9 million). These sites are vacant, but do not yet meet the criteria for classification as assets held for sale.

14. Right of use leased assets

As explained in Note 1.11, the department adopted IFRS 16 ‘Leases’ from 1 April 2021. As required by the FReM, we have 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 have now been recognised on-balance sheet as right-of use assets and lease liabilities. As a result, we have recognised an additional £1,475.2 million of right of use assets and £1,506.5 million of lease liabilities.

The group’s lease contracts comprise leases of operational land and buildings.

	Land	Buildings	Total
	£0	£0	£0
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
Disposals	-	-	-
Reclassifications	483	(559)	(76)
Revaluations	(86,459)	(2,010)	(88,469)
Transfers	-	-	-
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)
Disposals	-	-	-
Reclassifications	-	(52)	(52)
Revaluations	(345)	1,423	1,078
Transfers	-	-	-
Impairments	-	-	-
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

A maturity analysis of lease liabilities is given within Note 19, Trade payables.

		2021‑22		2020‑21
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£000	£000	£000
Sub-leasing income	(24,880)	(24,880)	-	-
Depreciation	120,690	123,019	-	-
Interest expense	19,554	19,627	-	-
Low value and short term leases	8,347	8,347	-	-
Non-recoverable VAT	13,535	13,535	-	-
Total charged to the SoCNE	137,246	139,648	-	-

		2021‑22		2020‑21
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
Right of use assets	18,670	18,670	-	-
Interest expense	19,554	19,627	-	-
Repayment of principal on leases	127,924	130,135	-	-
Total cash outflow for leases	166,148	168,432	-	-

Reconciliation from IAS 17 to IFRS 16

This table reconciles the amounts of the department’s operating lease commitments as at 31 March 2021, to the lease liabilities as at 1 April 2021 immediately following adoption of IFRS 16. The operating lease commitments figure has been restated for arrangements not previously identified as leases. Thereafter, the material reconciling items are an adjustment for the impact of discounting and for the adjustment of irrecoverable VAT reported within IAS 17.

Opening lease liabilities are higher than right of use assets because there are additional adjustments for the differing assessments of the lease term (the previous operating lease commitment reflected amounts payable during the non-cancellable lease period, while the IFRS 16 lease term reflects the department’s assessment of the likelihood that it will exercise lease extension or cancellation options).

	Core department & agencies	Departmental group
Closing operating leases disclosed at 31 March 2021	1,574,947	1,584,600
Adjustments from IAS 17 to IFRS 16
Impact of discounting	(220,433)	(220,727)
Non-recoverable VAT	(209,977)	(210,872)
Assessments of lease extension periods and break clauses	31,644	31,629
Low value, short-term leases and intra-MoJ leases	(35,418)	(35,825)
Adjustments for straight lining and stepped increases	185,075	185,075
Finance lease liabilities as at 31 March 2021	121,474	121,474
Other	31,779	35,125
IFRS 16 opening balance lease liabilities	1,479,091	1,490,479

15. Intangible assets

	Software licences	Information technology	Internally generated software	Payments on account and 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

	Software licences	Information technology	Internally generated software	Payments on account and assets under construction	Total
	£000	£000	£000	£000	£000
Cost or valuation
At 1 April 2020	64,195	412,330	365,474	388,221	1,230,220
Additions	1,600	62	2,689	139,157	143,508
Disposals	(24,114)	(417)	(24,113)	(675)	(49,319)
Reclassifications	(132)	19,477	111,889	(125,862)	5,372
Revaluations	1,218	13,300	11,515	(2)	26,031
Transfers	1	6,613	(7,195)	(2)	(583)
Impairments	-	-	-	(18,349)	(18,349)
At 31 March 2021	42,768	451,365	460,259	382,488	1,336,880
Amortisation
At 1 April 2020	(56,195)	(341,531)	(278,688)	‑	(676,414)
Charged in year	(4,064)	(19,283)	(48,196)	-	(71,543)
Disposals	24,107	16	24,104	-	48,227
Reclassifications	64	403	-	-	467
Revaluations	(1,099)	(11,102)	(8,984)	-	(21,185)
Transfers	-	(744)	1,327	-	583
At 31 March 2021	(37,187)	(372,241)	(310,437)	‑	(719,865)
Carrying amount at 31 March 2021	5,581	79,124	149,822	382,488	617,015
Carrying amount at 1 April 2020	8,000	70,799	86,786	388,221	553,806
#Asset financing
Owned	5,581	79,124	149,822	382,488	617,015
Carrying amount at 31 March 2021	5,581	79,124	149,822	382,488	617,015
Of the total
Core department and agencies	4,884	76,824	143,041	381,812	606,561
NDPBs	697	2,300	6,781	676	10,454
Carrying amount at 31 March 2021	5,581	79,124	149,822	382,488	617,015

At 31 March 2022 and 31 March 2021 there were no individually material intangible assets.

16. Assets held for sale

		31 March 2022		31 March 2021
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£000	£000	£000
Balance at 1 April	9,713	9,713	23,228	23,228
Reclassifications	(1,021)	(1,021)	(1,831)	(1,831)
Disposals	(2,298)	(2,298)	(9,927)	(9,927)
Revaluations	71	71	(1,661)	(1,661)
Impairments	-	-	(96)	(96)
Balance at 31 March	6,465	6,465	9,713	9,713

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 £6.2 million.

In addition, as part of an ongoing court rationalisation review, HMCTS has committed to a plan to sell a number of surplus properties (land and buildings) that were previously used to provide court services. These sites have a combined net book value of £291,000. The properties are available for sale in their present condition and the sales are highly probable to occur within one year from the date of classification as an asset held for sale.

17. Trade and other receivables

		31 March 2022		31 March 2021
	Core department & agencies	Departmental group	Core department & agencies	Departmental group

	£000	£000	£000	£000
Amounts falling due within one year
Trade receivables	71,179	71,326	77,492	78,310
Other receivables	179,496	181,153	170,170	171,517
Contributions due from funded clients	631	631	6,047	6,047
Statutory charge and interest	12,494	12,494	90,971	90,971
Amounts due from service providers	30,664	30,664	27,062	27,062
VAT receivables	76,728	76,728	82,855	82,855
Deposits and advances	40	81	54	102
Prepayments and accrued income	103,799	106,178	90,602	92,918
Intra-departmental receivables	560	-	767	-
Receivables related to CFERs	-	-	-	-
	475,591	479,255	546,020	549,782
Amounts falling due after more than one year
Sub-leasing receivables	64,760	64,760	-	-
Other receivables	36,395	36,395	2,943	2,943
Prepayments and accrued income	49	54	410	410
Contributions due from funded clients	4,860	4,860	-	-
Statutory charge and interest	82,468	82,468	-	-
	188,532	188,537	3,353	3,353

The above includes a receivables impairment provision of £246.6 million (2020-21: £248.2 million) for LAA on the statutory charge and interest and the amounts due from service providers. For further detail regarding the LAA impairment provision refer to Note 24.

Other receivables includes £109.1 million (2020-21: £74.8 million) from the HMCTS Trust Statement.

18. Cash and cash equivalents

		31 March 2022		31 March 2021
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£000	£000	£000
Balance at 1 April	214,590	266,618	193,258	218,563
Net change in cash and cash equivalents	(32,905)	(43,724)	21,332	48,055
Balance at 31 March	181,685	222,894	214,590	266,618
Of which:
Government Banking Service (GBS)	154,587	182,109	195,996	224,616
Commercial banks and cash in hand	27,098	40,785	18,594	42,002
	181,685	222,894	214,590	266,618

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.

	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
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	-	-
Long-term 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 & SCA Liabilities	305,040	-	17,007	12,599	(17,007)	-	317,639
Total liabilities from financing activities	424,404	(62,858)	‑	‑	‑	1,536,318	1,935,254

	Opening liabilities at 1 April 2020	Cash flows (out)/in	Interest charged	Capital repayment	Interest paid	Closing liabilities at 31 March 2021
	£000	£000	£000	£000
Capital element of finance leases and on-balance sheet PFI contracts	-	17,798	-	(17,798)	-	-
Repayment of local authority loans	-	(1,734)	-	1,734	-	-
Interest paid	-	(27,893)	(27,893)	-	27,893	-
Long-term borrowings	24,085	-	938	(1,734)	(938)	22,351
Lease liabilities	107,318	-	8,491	(10,305)	(8,491)	97,013
PFI & SCA Liabilities	276,937	-	18,464	28,103	(18,464)	305,040
Total liabilities from financing activities	408,340	(11,829)	‑	‑	‑	424,404

19. Trade payables and other current liabilities

19.1 Payables - Analysis by type

		31 March 2022		31 March 2021
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£000	£000	£000
Amounts falling due within one year
Trade payables	100,546	109,766	109,659	118,365
Taxation and social security	76,205	80,583	67,799	73,910
Capital payables	184,085	184,137	172,077	172,104
Other payables	95,649	96,561	90,303	92,415
Accruals	803,545	820,899	946,598	968,501
Deferred income	88,799	89,048	82,977	83,314
Amounts due to solicitors, counsel and advice agencies	59,638	59,638	62,013	62,013
Contribution refunds to funded clients	1,284	1,284	755	755
Creditor for pension transfer deficit: amounts payable to LGPS	4,219	4,219	11,781	11,781
Amounts issued from the Consolidated Fund for supply but not spent at year end	179,503	179,503	214,504	214,504
CFERs due to be paid to the Consolidated Fund:
- received	2,182	19,986	86	17,153
- receivable	-	-	-	-
Intra-departmental payables	27,916	-	23,379	-
	1,623,571	1,645,624	1,781,931	1,814,815
Amounts falling due after more than one year
Local Authority loan balances	20,751	20,751	22,351	22,351
Deferred income	-	1,110	-	2,123
Creditor for pension transfer deficit: amounts payable to LGPS	-	-	4,068	4,068
Other payables	16,283	16,283	14,855	14,855
	37,034	38,144	41,274	43,397

19.2 Other financial liabilities - Analysis by type

		31 March 2022		31 March 2021
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£000	£000	£000
Amounts falling due within one year
Lease incentive creditors	87	87	1,766	1,766
Straight lining creditors	-	-	5,154	5,154
Finance lease creditors	138,972	141,013	11,697	11,697
Imputed finance lease element of on-balance sheet
PFI contracts	38,466	38,466	33,549	33,549
	177,525	179,566	52,166	52,166
Amounts falling due after more than one year
Lease incentive creditors	-	-	13,499	13,499
Straight lining creditors	-	-	126,744	126,744
Finance lease creditors	1,448,486	1,455,851	85,316	85,316
Imputed finance lease element of on-balance sheet
PFI contracts	279,173	279,173	271,491	271,491
	1,727,659	1,735,024	497,050	497,050

20. Provisions for liabilities and charges

		2021‑22		2020‑21
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£000	£000	£000
Balance at 1 April	1,554,681	1,559,109	1,541,829	1,545,153
Provided in the year	2,117,726	2,119,285	1,823,309	1,825,650
Provisions not required written back	(79,498)	(80,867)	(84,197)	(85,139)
Provisions utilised in the year	(1,984,899)	(1,985,172)	(1,724,553)	(1,724,849)
Borrowing costs (unwinding of discount)	3,685	3,685	(1,707)	(1,706)
Balance at 31 March	1,611,695	1,616,040	1,554,681	1,559,109
Analysis of expected timing of discounted cash flows
Not later than one year	916,691	920,237	942,996	945,921
Later than one year but not later than five years	329,706	330,474	288,299	289,788
Later than five years	365,298	365,329	323,386	323,400
Balance at 31 March	1,611,695	1,616,040	1,554,681	1,559,109

	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 2021	193,260	155,666	88,622	18,515	73,782	64,507	14,828	161,015	78,920	658,621	51,373	1,559,109
Provided in the year	21,390	16,818	4	38,251	66,997	77	529	127,775	17,642	1,768,621	61,181	2,119,285
Provisions not required written back	(29,000)	(1,814)	(4,132)	-	(16,761)	(14,517)	(3,660)	(1,666)	(8,225)	-	(1,092)	(80,867)
Provisions utilised in the year	(23,390)	(5,896)	(5,129)	(31,303)	(21,757)	(32,532)	(11,173)	(122,326)	(1,335)	(1,716,295)	(14,036)	(1,985,172)
Borrowing costs (unwinding of discount)	500	-	1,043	-	2,175	-	-	(33)	-	-	-	3,685
Balance at 31 March 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
Analysis of expected timing of discounted cash flows
Not later than one year	45,100	5,697	4,136	25,463	12,222	7,299	524	78,943	14,307	710,947	15,599	920,237
Later than one year but not later than five years	67,800	22,685	15,983	-	83,208	10,236	-	85,822	39,769	-	4,971	330,474
Later than five years	49,860	136,392	60,289	-	9,006	-	-	-	32,926	-	76,856	365,329
Balance at 31 March 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

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.

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 £162.8 million can be analysed as follows:

Salaried judicial office holders	78.5
Fee-paid judicial office holders	36
Transitional protection	24.8
Length of service protection	23.5
Total	162.8

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 2022. 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:

(i) 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 2.5% or £2.9 million.

(ii) (Long-term) salary increase: A long-term salary increase of CPI +1.25% 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 £2.9 million.

(iii) Post-employment rates: This sensitivity shows the impact of calculating the provision using the post-employment rate rather than the general provisions rates. This would increase the liability by 1.0% or £1.1 million.

(iv) 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 increase the liability by 3% or £3.4 million.

(v) 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
(i) Discount rate: +0.5% p.a.	- 2.5	- £2.9
(ii) (Long-term) salary increase: +0.5% p.a	+ 2.5	+ £2.9
(iii) Post-employment rates	+ 1.0	+ £1.1
(iv) Retirement age: all members retire 1 year later	+ 3.0	+ £3.4
(v) Inflation: +0.5% pa	Nil	Nil

A separate element of liability has also been recognised for fee-paid judiciary:

MoJ is required to compensate eligible retired fee-paid judges for the additional pension benefits due, including interest where applicable, until the Judicial Pension Scheme can be amended by legislation to allow full benefits to be paid from the scheme. These are known as payments in lieu of pension and are expected to be settled within the next year. MoJ has recognised a provision of £11.9 million for the outstanding payments. 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 rate of -1.3% (2020-21: -0.95%) in real terms.

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. The 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.

Legal claims includes a provision of £48.8 million for salaried judges who sit from time to time in judicial capacities remunerated, on a substantive basis, at a higher level than their respective salaries.

CICA pre‑tariff scheme

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

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 no analysis with regard to timing of cashflows is provided.

CICA tariff scheme

The tariff scheme provision is reflective of CICA’s liabilities under the 1996, 2001, 2008 and 2012 Schemes. CICA recognises liabilities that are based on an evaluation of total applications that are currently known and received which are held within CICA and have not yet been processed; these are referred to as claims reported but not completed (discounted value £164.8 million). Where an event has occurred on or before the reporting date, but an application has not yet been made, CICA recognises this as a 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.

Due to the fixed nature of the tariff scheme the liability has been discounted at the prevailing HM Treasury Discount Rates in order to recognise the time value of money. The rates used are nominal to reflect that the tariffs are not influenced by inflationary pressures, therefore a real rate for discounting is not used. This discount will be unwound over the remaining life of the provision and be shown as a finance charge in the CSoCNE.

In 2021-22, a review of the provision estimate methodology was conducted, resulting in the following refinements to the estimate:

Tariff schemes

Due to the introduction of a new public application service, and the requirement to have the provision model expanded to also include a forecast, a few changes have been made.

The percentage (%) nil assessed 2012 scheme

The new public application service does not operate in a way allowing the model to split % nil by tariff so this part of the process has been re-worked.

The methodology continues to consider the likelihood of cases being nil but this is now included in the tariff profiles, as a tariff which gains a nil award.

The percentage (%) nil assessed pre-2012 tariff schemes

Continues to compare end of year data extracts for cases resolved with a monetary award against end of year extracts for live cases. There has been one update:

Due to the low volumes any movement in the data has more of an impact so to reduce this the live case extracts now include cases that have been re-opened.

Age profiles

To avoid volatility due to low volume in the older brackets, rather than creating five separate age brackets CICA now aggregates the data into two, current age 0 to 12 months and current age 12 months plus. By grouping to 12 months plus, CICA is allowing for the complexity to be recognised while also not being limited to tight one-year brackets where movement between them can be due to other limitations rather than just complexity.

Decided cases

The model now reverts to the original treatment by CICA of assuming these cases will be paid 100% of their decided value. CICA’s analysis still stands that it is in fact not 100% but due to the minimal impact this has on the model’s outputs it is instead considered and monitored by sensitivity testing.

Following the review, CICA has assessed the impact on the tariff provision disclosed in the 2020-21 Annual Report and Accounts. The impact of the refinements has not led to a material difference in the disclosed value.

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. 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 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 which would have been utilised 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 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 is obscured because of the potential interaction between the assumptions.

Underlying the estimates of liabilities for unbilled work across all of the Legal Aid funding schemes is the modelling assumption that costs accrue at a constant rate throughout the lifetime of cases. In reality, it is accepted that costs are generally concentrated towards the beginning and the end of legal matters. The 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.

The significant WIP provision balances relate to civil representation – £224.6 million (2020-21: £204.3 million) – and ‘crime higher’ – £408.6 million (2020-21: £378.6 million).

Civil representation WIP provision

Civil Representation legal aid relates to funding for representation by barristers and solicitors in civil cases that go to court. The civil representation work in progress provision is calculated using past patterns of activity, and assuming that these are a reasonable indicator of likely activity on live cases. 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. The 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 prior to the estimate. 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.

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:

Civil and family court capacity: the capacity of the family and civil courts was reduced during the pandemic, meaning that cases could not be cleared at the same rate. An adjustment has been made to the model, reducing the assumed rate at which work accumulated on cases during this period in direct proportion to the reduction in court capacity. The reduced capacity has also been assumed to apply over a larger population of outstanding cases, as court backlogs increased.
Payment on account: during the pandemic, the LAA increased the amount of completed work that was remunerated through payment on account (POA) from 75% to 80% for non-Family Advocacy Scheme (FAS) claims, and to 100% for FAS claims. This has been taken into account within the WIP provision model in generating the bill value profiles.
Duration profiles: until August 2020, a subset of Civil Representation bills were sent to HMCTS for assessment prior to being submitted to the LAA for payment. As a result of the pandemic, the LAA decided to bring the assessment of these bills in-house, in order to speed up payments to providers. This meant that the delay in claiming prior to August 2020 and post could be significantly different. In order to address this incongruity, the basis of the duration profiles for solicitor profit costs was amended to operate on the basis of the period during which work was done, removing the billing delay period from the profiles in order that all cases were considered on a consistent basis.

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 provision		(Decrease) in provision
	Assumption	£m	Assumption	£m
Duration profile¹	Max duration + 1 year	13.5	Max duration + 1 year	(13.5)
Final billing duration²	+15 days	0.0	-15 days	(0.0)
Average final bill value (new since COVID-19)³	+15%	43.4	-15%	(43.4)
COVID-19 capacity profile⁴	Maximum capacity	19.1	Minimum capacity	(10.0)
Provider COVID-19 billing behaviour⁵	-25.0%	13.4	+25%	(13.4)

¹ 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.

² Final billing duration: it can take some time for providers to compile and submit their bills to us 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.

³ Average bill value: The model implicitly assumes that recent historical bill values are an indicator of future bill values for equivalent workstreams.

⁴ Court capacity profiles: The model assumes that the rate at which work accumulates on cases during periods of COVID-19 related reductions in the capacity of the relevant court jurisdictions declines in proportion with the reduction in court capacity, and further that this work is diluted across an increased volume of outstanding cases. This approach implicitly assumes that the delays in cases progressing through the courts due to COVID-19 related capacity constraints are not indicative of additional work being conducted on affected cases.

⁵ Provider COVID-19 billing behaviour: during the COVID-19 pandemic, significant changes were observed in the pattern of provider billing. Most notably, there was a marked increase in claims for payment on account and in claims for interim bills on cases with multiple proceedings. The impact of these changes has not yet fed through to the profiles used to estimate the provision, but the increased rate of payment clearly reduces the outstanding liability, therefore an assessment has been made of the anticipated level of increased payment due to variance from pre-pandemic billing patterns, and deducted from the provision.

Using these reasonable alternative assumptions, the fair value of the financial liabilities at 31 March 2022 could be higher by up to +25.2% (£89.4 million) or lower by up to -22.6% (-£80.3 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 WIP provision

Crime higher legal aid relates to funding for solicitors and advocates in relation to representation in Crown Courts, the Court of Appeal and the Supreme Court. The crime higher WIP estimate is calculated by considering cohorts of case starts and modelling their progress through the legal aid system. A separate calculation is then done to estimate the amount that has already been paid on these cases through interim payments.

The impact of the COVID-19 pandemic led to substantial changes across the justice system. Consideration of these changes has had to be taken when estimating liabilities within the Legal Aid funding schemes. For crime higher, the following amendments have been made:

Crown Court capacity: Crown Court capacity was substantially reduced during the pandemic, meaning that cases could not be cleared at the same rate. An adjustment has been made to the model, reducing the assumed rate at which work accumulated on cases during this period in direct proportion to the reduction in court capacity. The reduced capacity has also been assumed to apply over a larger population of outstanding cases, as court backlogs increased.
Interim payment profiles: as fewer cases were completing in the Crown Court, the estimated proportion of interim-billed cases that don’t close was being over-estimated by the model. An adjustment has been made to account for this, assuming that the overall proportion of such cases is in line with pre-pandemic levels.
Price adjustment: in addition to operating at a reduced capacity, the social distancing restrictions in place within the Crown Court during the pandemic has meant that the capacity to hear more complex cases involving multiple parties has been severely hampered. This has resulted in the mean cost of the cases that have been cleared through the court substantially reducing. This in turn means that the value of outstanding cases will be skewed towards the more expensive end of the spectrum, and an adjustment has been made to the model to account for this, increasing the value of the liability in accordance with the reduction in case values that has been seen.

Crime higher assumptions tested:	Increase in provision		(Decrease) in provision
	Assumption	£m	Assumption	£m
Price profiles	+10.0%	67.2	-10.0%	(67.2)
Completion rates	+2.5%	26.6	-2.5%	(25.2)
Case duration	+10.0%	(63.8)	-10.0%	61.4
Capacity baseline (new since COVID-19)	+25.0%	(1.4)	-25.0%	(15.1)

Relatively small changes in these inputs could lead to a significant difference in the work in progress realised. Assumptions are reviewed annually to ensure they remain appropriate.

Using these reasonable alternative assumptions, the fair value of the financial liabilities at 31 March 2022 could be higher by up to +7% (£28.5 million) or lower by up to -11.3% (-£46.0 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 refunds under the scheme 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 refunds for Supervision fees is based on the number of assessments and supervisions which took place between 1 April 2008 and 31 March 2015.

In accordance with the department’s accounting policies, the provision is reviewed annually and reflects the likely settlement values at the year-end. The online application service for Power of Attorney fees came to an end on 31 January 2021 and it is anticipated that application volumes will fall. An assessment of the closing liability at 31 March 2022 was based on the average payment and refund volume over this period and a provision of £0.9 million remains.

Supervision refunds will continue until 4 October 2025. This refund is split into two parts: proactive refunds to those payees already on record with a live supervision case and reactive refunds where the public is required to submit a claim. All proactive refunds are completed. The reactive refund uptake is very low and projecting current refund profile and costs has resulted in a £2 million reduction in provision.

Employment Tribunals and Employment Appeal Tribunal Fee Repayment Scheme: On 26 July 2017 the UK Supreme Court handed down a judgment that quashed the Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013/1893. The Lord Chancellor has committed to refunding those who paid the fees. We identified £32.2 million in fees paid and to date have refunded £18.6 million including interest. During 2021-22 £90,160 of fees were refunded including interest and accruals. As we are not able to reliably estimate the probability that the remaining fees will be claimed and refunded, we have not created a provision but have recognised a contingent liability of £13.9 million, including an estimate of the interest payable.

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 the department in January 2020.

A contingent liability of £9.3 million is recognised in these accounts in respect of COP, Insolvency, RCJ and other fees.

The CTLO liability remained in the 2020-21 accounts as a provision of £5.7 million, due to uncertainty of timing to discharge the liability to each recipient. In 2021-22 we 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 2022 were estimated at £5.3 million, and HMCTS continues to accept the liability for all claims until the end of the qualifying period. The balance of the liability, £10.5 million, is shown as a contingent liability as there is significant uncertainty that we would refund this amount.

Other provisions include a provision in HMCTS for an onerous lease of undeveloped land of £73.7 million. The increase of £49 million relates to a change in the discount rate used to calculate the onerous lease provision.

21. 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 2022		31 March 2021
	Core department & agencies	Departmental group	Core department & agencies group	Departmental group
	£000	£000	£000	£000
Property, plant and equipment	206,774	206,774	441,904	441,904
Intangible assets	17,116	17,116	34,754	34,754
Total capital commitments	223,890	223,890	476,658	476,658

22. Commitments under PFI and Service Concession Arrangements

22.1 Arrangements not recognised on the Consolidated Statement of Financial Position

As at 31 March 2022 there are no off-balance sheet PFI commitments.

22.2 Arrangements recognised on the Consolidated Statement of Financial Position

Project name	Entity	Contract start date	Duration (years)	Description
Hereford & Worcester Magistrates’ Courts	HM Courts & 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 & 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 & 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 & 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 & 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 & 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 & 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 & Somerset Magistrates’ Court	HM Courts & Tribunals Service	August 2004	27	Provision of serviced accommodation at Bristol Magistrates Court, North Somerset Magistrates Court and Avon & 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 Altcourse	HMPPS	December 1997	25	Design, build, finance and operate an 800-place category B prison at HMP Altcourse, Liverpool.
HMP Parc	HMPPS	December 1997	25	Design, build, finance and operate a 1,519-place category B prison near Bridgend, South Wales.
HMP Lowdham Grange	HMPPS	February 1998	25	Design, build, finance and operate a 760-place category B prison at HMP Lowdham Grange, Nottingham.
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.

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 £635.1 million (2020-21: £635.7 million). 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 2022		31 March 2021
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£000	£000	£000
Rentals due not later than one year	52,626	52,626	51,641	51,641
Rentals due later than one year but not later than five years	172,582	172,582	172,110	172,110
Rentals due later than five years	177,404	177,404	191,953	191,953
	402,612	402,612	415,704	415,704
Less: interest element	(84,973)	(84,973)	(110,664)	(110,664)
Present value of obligations	317,639	317,639	305,040	305,040

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 2022		31 March 2021
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£000	£000	£000
Rentals due not later than one year	38,466	38,466	33,549	33,549
Rentals due later than one year but not later than five years	132,441	132,441	119,883	119,883
Rentals due later than five years	146,732	146,732	151,608	151,608
Present value of obligations	317,639	317,639	305,040	305,040

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 2022		31 March 2021
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£000	£000	£000
Service charge due within one year	633,928	633,928	576,589	576,589
Service charge due later than one year but not later than five years	1,506,195	1,506,195	1,720,589	1,720,589
Service charge due later than five years	1,137,836	1,137,836	1,410,689	1,410,689
Total	3,277,959	3,277,959	3,707,867	3,707,867

23. Other financial commitments

The department 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 the department is committed are as follows:

		31 March 2022		31 March 2021
	Core department & agencies	Departmental group	Core department & agencies	Departmental group
	£000	£000	£000	£000
Not later than one year	382,403	385,453	736,379	739,601
Later than one year but not later than five years	600,643	601,021	785,901	788,709
Later than five years	90,097	90,097	77,210	77,210
Total other financial commitments	1,073,143	1,076,571	1,599,490	1,605,520

Included within the table for 2020-21, there was a commitment totalling £103 million relating to the Community Rehabilitation Companies that were terminated in June 2021.

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

The LAA’s financial risk management process seeks to enable the early identification, evaluation and effective management of risks. Systems have been established to review and reflect changes in the legal aid market and the LAA’s activities.

Interest rate risk

The LAA is not exposed to significant interest rate risk. At 31 March 2022, £93.7 million (2020-21:

£89.9 million) of statutory charge debt was due, the principal of which carried a fixed rate of interest.

Money received by the LAA on behalf of funded clients is held on deposit until the case is concluded. Interest is paid to funded clients by reference to the London Interbank Offered Rate (LIBOR), at the rate of 0.5% per annum less the rate payable on damages on deposit in the general account.

Money received by the LAA in relation to Crown Court Means Test contributions is held until the final judgment and costs of the case have been determined. Refunds of contributions are paid to applicants that have been found not guilty including interest calculated at 2% per annum from the date of contribution receipt by the LAA. The balance of contribution monies is held as cash.

Credit risk

Credit risk is the risk that counterparties to financial instruments do not perform according to the terms of the contract or instrument, causing a financial loss to the department by failing to discharge their contractual obligations.

Legal Aid Agency receivables

LAA has an inherent risk within trade receivables and other current assets, as LAA is not predisposed to straightforward cash collections. LAA recognises this risk and mitigates it in the case of statutory charge debts, where repayment 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 which totals £246.6 million (31 March 2021: £284.2 million). This includes receivables valued at fair value and those measured at amortised cost. The majority of the LAA’s trade and other receivables are the result of a statutory charge: £93.7 million (31 March 2021: £89.9 million) out of a total receivables balance after impairment of £181.3 million (31 March 2021: £167.9 million).

A high proportion of these are secured on property and settlement is deferred until the property is sold. Secured statutory charge debt is measured under IFRS 13 and reductions in carrying value are classed as fair value adjustments rather than impairments.

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 which 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 2022.

However, past payment profiles have been adjusted to account for the exceptional circumstances arising from COVID-19; our expectation is that these extraordinary payment patterns will not be repeated in the future.

There is no additional adjustment in the impairment of the LAA’s receivables at 31 March 2022 to reflect the potential future impact of the macroeconomic effect of COVID-19. Based on the experience from previous recessions we do not consider this will have a material impact on the fair value of receivables, and in particular secured debt, recognised in these accounts. The impact of a recession has historically resulted in a delay in the cash receipts on secured debt, due to the impact on the property market and delays to property sales which result in the repayment of the debt. The financial impact of COVID-19 on the property market has been ameliorated in the short term through government action e.g. stamp duty holidays, and it may be that cash receipts have been accelerated rather than delayed. Again, based on experience from previous recessions we do not consider this will have a material impact.

Disclosed below is the impact of a 10% reduction in cash receipts across both secured and unsecured debt, which is a more significant reduction than previously experienced.

The LAA’s impairment model uses 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 rate is 1.9% nominal and (1.1%) and (0.2%) in excess of RPI real until February 2030 and post February 2030 respectively (2020-21: 3.7% nominal and 0.7% real).

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% (this rate is set by HM Treasury)

		31 March 2022	31 March 2021
	Assumption	£m	£m
Income received	Evenly through the year	1.7	1.1
Expected cash inflows based on historic repayment profiles	+10%	14.6	14.7
Expected cash inflows based on historic repayment profiles	-10%	(14.7)	(14.8)
Discount rate	+1%	(8.4)	(7.4)
Discount rate	-1%	9.4	8.2

Using these reasonably possible alternative assumptions, the fair value of the LAA financial assets at 31 March 2022 could be higher by £25.6 million (31 March 2021: £24.0 million) or lower by £23.1 million (31 March 2021: £22.2 million). These assumptions will be 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 (‘FVP&L’)
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 FVP&L
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.

				2021‑22
	Assets at FVPTL	Assets at FVOCI	Assets at amortised cost	Total carrying value at 31 March 2022
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 financial assets	94,108	‑	612,200	706,308

				2021‑22
	Assets at FVPTL	Assets at FVOCI	Assets at amortised cost	Total carrying value at 31 March 2022
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 financial assets	94,108	‑	612,200	706,308
		Liabilities at FVPTL	Liabilities at amortised cost	Total carrying value at 31 March 2022
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 financial liabilities		‑	3,131,836	3,131,836

				2020‑21
	Assets at FVPTL	Assets at FVOCI	Assets at amortised cost	Total carrying value at 31 March 2021
Financial assets:	£’000	£’000	£’000	£’000
Cash at bank and in hand	-	-	266,618	266,618
Trade and other receivables	89,887	-	326,080	415,967
Other financial assets	641	-	-	641
Total financial assets	90,528	‑	592,698	683,226
		Liabilities at FVPTL	Liabilities at amortised cost	Total carrying value at 31 March 2021
Financial liabilities:		£000	£000	£000
Trade and other payables		‑	1,360,873	1,360,873
Other financial liabilities		‑	549,216	549,216
Total financial liabilities		‑	1,910,089	1,910,089

The department 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.

Trade and other receivables have been discounted over the period from the reporting date to the expected date of collection. This has a material impact on their present value.

To take account of this time value of money effect an estimation technique has been used, discounting all receivable balances over periods commensurate with historical cash flow patterns for each class of receivable at a rate of -1.30% real and 1.55% nominal (2020-21: 3.7% real, 0.7% nominal). The discount rate used is the HM Treasury discount rate. The estimation technique used assumes that the timing of future cash flows will follow historical trends.

Fair value hierarchy

The department 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.

			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)
Service costs
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 participant’s 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)	-	-	-	-	-	-
	(917,308)	681,041	(236,267)	(350,793)	463,255	112,462	(6,774,717)	5,143,874	(1,630,843)

			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)
Service costs
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 participant’s 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)	-	-	-	-	-	-
	(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
	2021‑22	2021‑22	2021‑22	2020‑21	2020‑21	2020‑21
	%	%	%	%	%	%
Inflation assumption	3.00	3.25	n/a	2.70	2.85	n/a
Rate of increase in salaries	4.25	n/a	3.95	3.50	n/a	3.60
Pension increase rate	3.00	3.25	3.20	2.70	2.85	2.85
Discount rate	2.70	2.70	2.70	2.10	2.00	2.00
Pension accounts revaluation rate	3.00	n/a	n/a	2.70	n/a	n/a

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	2,123,959	358,738	2,482,697	48.9
Gilts	50,397	-	50,397	7.4	328,514	-	328,514	70.9	-	-	-	-
Corporate bonds	32,690	-	32,690	4.8	-	-	-	-	440,639	-	440,639	8.7
Property	10,897	16,345	27,242	4.0	-	-	-	-	-	196,717	196,717	3.9
Cash and cash equivalents	-	19,750	19,750	2.9	25,170	-	25,170	5.4	158,797	-	158,797	3.1
Investment funds & unit trusts	-	-	-	-	-	-	-	-	928,209	870,706	1,798,915	35.4
Other	-	7,491	7,491	1.1	-	4,847	4,847	1.1	-	-	-	-
Total plan assets	555,729	125,312	681,041	100.0	458,408	4,847	463,255	100.0	3,651,604	1,426,161	5,077,765	100.0

The major categories of scheme assets for 2020‑21 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	427,340	61,311	488,651	79.7	123,683	-	123,683	27.0	2,016,983	273,837	2,290,820	50.0
Gilts	50,888	-	50,888	8.3	324,921	-	324,921	72.0	-	-	-	-
Corporate bonds	28,203	-	28,203	4.6	-	-	-	-	282,151	-	282,151	6.0
Property	9,810	13,488	23,298	3.8	-	-	-	-	-	171,909	171,909	4.0
Cash and cash equivalents	-	12,262	12,262	2.0	873	-	873	0.0	91,438	-	91,438	2.0
Other	-	-	-	-	-	-	-	-	1,092,471	672,027	1,764,498	38.0
Total plan assets	‑	9,811	9,811	1.6	‑	5,616	5,616	1.0	‑	‑	‑	‑
	516,241	96,872	613,113	100.0	449,477	5,616	455,093	100	3,483,043	1,117,773	4,600,816	100.0

Sensitivity analysis ‑ change in assumptions relative to 31 March 2022 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 2022	Actuarial value of liabilities on 31 March 2021
	£000	£000
0.1% decrease in discount rate	934,737	947,752
0.1% increase in the salary increase rate	919,143	931,840
1 year decrease in post retirement mortality age rating*	885,202	964,493
0.1% increase to pension increase rate	932,902	945,891

*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 2022 actuarial assumptions for LSC pension liabilities (based on total liabilities):

	Actuarial value of liabilities on 31 March 2022	Actuarial value of liabilities on 31 March 2021
	£000	£000
0.5% decrease in discount rate	384,329	403,420
1 year increase in life expectancy	364,825	380,854
0.5% p.a. increase in inflation	380,056	398,749

Sensitivity analysis ‑ change in assumptions relative to 31 March 2022 actuarial assumptions for Probation Pension liabilities (based on the change in liabilities):

	Approximate monetary amount	Approximate increase to employer liability	Approximate monetary amount	Approximate increase to employer liability
	2021‑22	2021‑22	2020‑21	2020‑21
	£000	%	£000	%
0.5% decrease in real discount rate	679,350	10.0	725,070	10.0
0.5% increase in the pension increase rate	72,860	-	79,640	1.0
0.5% increase in the salary increase rate	601,140	10.0	629,339	9.0

The principal demographic assumption is the mortality assumption (i.e. member life expectancy). For sensitivity purposes, we 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 2021-22, a one-year increase in member life expectancy would increase the liability by 4% or £270,945.

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 2021-22 was 19.4%. The last actuarial valuation was at 31 March 2019 and the contributions to be paid until 31 March 2023 resulting from that valuation are set out in the fund’s ‘Rates and adjustment certificate’ (employer contributions over this period will be 19.4% plus an additional lump sum payment that varies each year (£0.63 million in 2021-22).

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.

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 which 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, the 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 2022 was 19.2 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 not expect to contribute to the LSCPS for the year to 31 March 2022. 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 pension liability is recorded within the HMPPS accounts below. 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 2022, HMPPS paid employers’ contributions of £145.6 million to GMPF, relating to current probation staff, at 29.6% 2020-21: £98.5 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 2019 triennial valuation, the employer contribution rates for 2020-21 to 2022-23 will remain unchanged at 29.6%.

The pension position as at 31 March 2022, 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, including COVID‑19 impact

In March 2020, there were significant falls in some global markets as a result of the COVID-19 pandemic. This reduced the value of the LGPS assets recorded by GMPF and the share of assets applicable to HMPPS. Since then, the markets have improved and the assets held by GMPF have performed extremely well over the past year, as set out in the table. While the impact of COVID-19 continues to produce some uncertainty on the market valuation of properties, management acknowledges the uncertainty but considers that the valuation provided by GMPF is appropriate at the date of reporting.

The overall reduction in pension liabilities is partially offset by the increase in asset valuation, as shown in the table. The pension liabilities for 2021-22 reflect the appropriate assumptions; all assumptions remain under constant 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, an 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. A reduction in the discount rate results in an increase in pension liability for accounting purposes and vice versa. This 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 in light of COVID-19. 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 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 an increase this year in the projection for future pension increases and salary growth.

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 2021-22 the CMI 2021 model has been used, which uses more up to date longevity data when compared to the CMI 2020 model used for the 2021-22 assumptions. Based on very high-level analysis it is not expected that mortality arising from COVID-19 in the short term will have a significant impact on the valuation of the pension liability for HMPPS. In the longer term, COVID-19 has the potential to impact on future mortality, but it is too early to quantify at this stage. The mortality rate assumptions used for 2021-22 have not been adjusted specifically in relation to the potential 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 the 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 (GAD), 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 has calculated an estimated past service cost applicable to HMPPS and CAFCASS. The impact of the McCloud judgement was accounted for in the 2019-20 accounts under IAS19.

The government response to the consultation for unfunded pension schemes was published in February 2021. However, the government response for the LGPS has not yet been published and is not expected until later in the year. 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.

Based on the response for the unfunded pension schemes and written Ministerial Statement, no further adjustment to the cost in the pension liability has been made for 2021-22. Further information on the McCloud Judgment can be found at www.civilservicepensionscheme.org.uk/your-pension/remedy/.

26. Contingent assets and liabilities

Contingent liabilities disclosed under IAS 37

The department has contingent liabilities as defined within IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Unless otherwise stated, the amount of each contingent liability cannot be determined with sufficient reliability or to quantify it would jeopardise the outcome of the legal case.

Fee‑paid judicial office holders’ claims

Following a legal challenge, the department 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), does not apply equally to fee-paid judges. We will 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.

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.

Employment Tribunals

The department is currently defending several Employment Tribunal claims at various stages. Where it can be quantified, the estimated possible liability for MoJ is £0.2 million.

Other European Court of Human Rights claims

The department is currently engaged in several cases at the European Court of Human Rights, some of which may involve possible financial liabilities and others which are unquantifiable. Where it can be quantified, the estimated possible liability for the department is £0.5 million.

Headquarters legal claims

There is a number of outstanding legal claims against the department headquarters, some of which involve possible financial liabilities. These legal claims include judicial reviews challenging refusal to pay compensation for miscarriages of justice and legal aid funding. Cases where it is probable that the department will incur future costs have been included within provisions.

Data Protection Act

There are claims against the department for alleged failure to comply with the Data Protection Act. These cases are ongoing.

Incidents ‘incurred but not yet received’ (IBNYR)

IBNYR is an unquantifiable contingent liability in respect of a possible future obligation to individuals who have been victims of violent crime as of 31 March 2022. 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 the department 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.

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 from the claimant or representatives of acceptance of a determination made by a claims officer. The Scheme provides that the acceptance of the award must (normally) be sent within 56 days, but other provisions of the Scheme mean that CICA is not legally empowered to withdraw a First Decision or Appeal offer until 2 years and 56 days have passed or to withdraw a Review Decision offer until 2 years and 90 days have passed. Once this deadline has passed CICA is able to send out withdrawal letters.

There are cases where the deadline for acceptance has passed but CICA has not yet withdrawn the offer. Such offers require a formal decision to be made withdrawing the offer and for the applicant to be given the opportunity to exercise rights of review and appeal against that decision. In some of those cases, information may be received which may lead CICA to exercise its discretion under the Scheme in favour of the claimant, and not withdraw the offer even though the deadline has passed.

It is not possible to quantify the value of cases where CICA would so exercise discretion. However, the total value of cases ‘on-offer’ and passed the deadline is £1.8m: any liability would therefore be below that value.

HMCTS

Is involved in a number of legal cases in relation to ex gratia, compensation and other claims. The estimated cost of settlement for HMCTS is £1.4 million (2020-21: £0.9 million).

HMCTS fee refunds

Our current estimate of the total value of the refunds likely to be due is £44.6 million, of which £11 million has been provided for; the balance of £33.6 million is held as a contingent liability. Note 20 provides an analysis of both the provisions and contingent liability by refund scheme.

HMPPS

HMPPS faces claims amounting to £113.9 million (2020/21: £69.9 million) for injury to staff, prisoners and the public and for third party contract disputes where the likelihood of a liability arising is deemed possible but not likely or not reliably measurable.

LAA contingent assets

The LAA has two contingent assets in relation to costs orders from legal proceedings with a total value of £29 million (31 March 2021: two with a total value of £29 million).

Other contingent liabilities

A review of contracted-out service contracts was carried out in the current financial year and a small number of these were identified as including elements of resource. Contracted out service arrangements operating with resource elements may lead to a liability for employment taxes and VAT where this has been recovered in error. MoJ is carrying out a review to determine any impact.

Associated departments and other central government bodies

The MoJ is the parent of the LAA, HMCTS, HMPPS, CICA and OPG agencies and the sponsor of NDPBs as listed in Note 29. All of these bodies are regarded as 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 & Customs, Home Office, PCSPS and HM Treasury.

Management personnel

Lucy Frazer KC MP, Minister of State at MoJ from 13 September to 15 September 2021, is married to the Chief Executive of Alexander Mann Solutions Ltd (AMS). AMS are contracted under a crown commercial service framework arrangement to source contractors and temporary workers and was a supplier to MoJ prior to the Minister’s appointment. AMS also subcontract elements of their work to the department via two other providers of contingent labour, Brook Street and Hays. In 2021-22, MoJ paid £57.4 million to AMS (£45.3 million in 2020-21). The majority of this cost relates to payments to agency staff but an element covers the services provided by AMS to source these temporary workers. The Minister had no role in the decisions relating to this expenditure. On 30 September 2021 Andrew Baigent stepped down as a director for Integrated Debt Services Limited (trading as Indesser), which had been a joint venture between the Government and TDX Group Limited offering a single route for government bodies to use the private sector to recover debt. As at the 30 September 2021 HMCTS had paid £72,005 to Indesser in 2021-22, with a total payables balance of £13,205. Andrew had represented the Government as a non-executive director on the board of Indesser since 16 July 2018.

HMCTS use Indesser to provide information and analysis to assist with the recovery of debt. HMCTS paid £173,843 in total to Indesser for goods and services during 2021-22, with a total payable balance of £14,793 (all amounts shown include VAT). 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 2021-22, Legal Aid Agency made payments totalling £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 (2020-21 £0.6 million) with a total debtor balance due to us as at 31 March 2022 of £0.0 million (2020-21: £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.

28. Third party assets

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

Funds in Court

The department 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 2022	31 March 2021
	£000	£000
Cash at bank and on deposit	2,611,167	2,406,082
Securities	82,512	83,831
Total	2,693,679	2,489,913

Official Solicitor and Public Trustee (OSPT)	Criminal Injuries Awards (CICA)	Pending legal aid amounts (LAA)	Bail monies (HM Courts & Tribunals Service)	Prisoner monies (HMPPS)	Total
£000s	£000s	£000s	£000s	£000s	£000s
1,184	84,350	17,016	57,465	15,004	175,019
59,760	-	-	-	-	59,760
8,293	-	-	-	-	8,293
69,237	84,350	17,016	57,465	15,004	243,072
67,303	83,876	16,838	75,350	16,894	260,261

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 on an ‘as needs’ basis against an agreed framework
LAA receives awarded damages awaiting the final settlement of a case and contribution monies from clients towards legal costs. The LAA receives contributions towards costs awaiting the final judgment and calculation of the total costs of a case. The outcome of the case will determine whether the third party asset transfers to LAA or is returned to the third party
HMCTS holds a number of cash balances on behalf of third parties. These consist of bail monies and monies held on behalf of court users which are received and held while the case progresses. At 31 March 2022 these amounted to £57.5 million (2020-21: £75.0 million) and have not been recognised in the accounts in accordance with FReM requirements
HMPPS holds cash on behalf of offenders. At 31 March 2022 the balance held was £15.0 million (2020-21: £16.9 million).

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 2021, 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 and
Tribunal Procedure Committee

Supply financed agencies

Criminal Injuries Compensation Authority
HM Courts & 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 1]}

The Annual Report 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.

On 1 September 2022, Amy Rees (formerly HMPPS Director General for Probation, Youth and Wales) was appointed as HMPPS Director General Chief Executive Officer and as Accounting Officer for HMPPS. Former CEO Dr Jo Farrar will continue in her role as Second Permanent Secretary of the MoJ.

On 29 September 2022 the Lord Chancellor announced changes to criminal aid funding. A planned 15 percent fee increase for criminal barristers will now apply to the vast majority of cases currently in the Crown Court. This will also apply to fee increases for solicitors and is part of a wider package of proposals announced by the government to help tackle the court backlog. The LAA work in progress provision recognised in these accounts has been calculated on the basis that the fee increase would only apply to new cases.

In the period after the reporting date there has been significant volatility in both investment markets and exchange rates. As this is the result of events which occurred after the balance sheet date, this is a non-adjusting event under IAS 10. We do not consider that any meaningful mid-year estimate of the impact can be made, however the net impact of all movements throughout the year will be reflected in the pension scheme asset and liability figures at 31 March 2023. The proportion of the HMPPS and Cafcass funds investment and therefore exposure to government and corporate bonds was low and any negative movement was largely offset by other investments in its portfolio. No significant change in asset allocations was required and there has been no ongoing impact in terms of fund liquidity.

Investment strategy is managed on behalf of HMPPS by GMPF, and Cafcass by WYPF and is not in the direct control of the department, therefore no action has been taken by the department in relation to the recent market volatility.

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 ↩

			2021‑22		2020‑21
		Core department & agencies	Departmentalgroup	Core department & agencies	Departmentalgroup
	Note	£000	£000	£000	£000
Cash flows from operating activities
Net operating expenditure	CSoCNE	(9,727,783)	(9,758,965)	(9,312,285)	(9,330,109)
Adjustments for non-cash transactions		1,547,172	1,552,009	2,443,412	2,458,796
Finance costs/(income)		37,392	37,390	27,893	27,893
Movements in pensions		110,068	130,843	(1,979)	7,753
(Increase)/decrease in trade and other receivables	16	(114,750)	(114,657)	98,389	104,437
Less: Movements in receivables not passing through the CSoCNE and receivable impairments		(13,090)	(13,085)	(19,628)	(19,574)
(Increase)/decrease in inventories		(297)	(415)	3,824	3,597
(Decrease)/increase in trade and other payables	18	(162,600)	(174,444)	235,754	246,432
Less: Movements in payables relating to items not passing through the CSoCNE		34,127	33,365	(258,459)	(249,198)
Increase/(decrease) in other financial liabilities	18	1,335,737	1,347,704	18,578	18,578
Less: Movements in other financial liabilities relating to items not passing through the CSoCNE		-	-	(17,798)	(17,798)
Utilisation of provisions	19	(1,984,899)	(1,985,172)	(1,724,553)	(1,724,849)
Intra-departmental adjustment through SoCiTE (between MoJ core and agencies)		(7,689)	(7,912)	(30,275)	(6,287)
Other		2	-	-	-
Net cash outflow from operating activities		(8,946,610)	(8,953,339)	(8,537,127)	(8,480,329)
Cash flows from investing activities
Purchase of property, plant and equipment		(1,180,664)	(1,181,348)	(978,653)	(980,173)
Purchase of intangible assets		(139,049)	(139,968)	(141,600)	(143,508)
New PFI liabilities in year		41,538	41,538	55,707	55,707
Adjust for increase/(decrease in capital payables)		12,008	12,033	76,668	76,668
Proceeds on disposal of property, plant and equipment		1,094	1,140	(386)	(386)
Proceeds on disposal of intangible assets		625	626	383	364
Proceeds on disposal of assets held for sale		3,402	3,402	18,676	18,676
Asset transfers out of the group to GPA		-	-	900	-
Net cash outflow from investing activities		(1,261,046)	(1,262,577)	(968,305)	(972,652)
Cash flows from financing activities
From the Consolidated Fund (Supply)		10,089,757	10,089,757	9,237,140	9,237,140
From the Consolidated Fund (Supply) - Prior year		-	-	192,387	192,387
From the Consolidated Fund (Non-Supply)		163,084	163,084	163,898	163,898
Capital element of finance leases and on-balance sheet Private Finance Initiative (PFI) contracts		(21,307)	(23,868)	(37,909)	(37,909)
Repayment of local authority loans		(1,600)	(1,600)	193	193
Interest paid		(37,392)	(37,390)	(27,893)	(27,893)
Net cash inflow from financing activities		10,192,542	10,189,983	9,527,816	9,527,816
Net increase/(decrease) in cash and cash equivalents in the period before adjustment for receipts and payments to the Consolidated Fund		(15,114)	(25,933)	22,384	74,835
Receipts due to the Consolidated Fund outside the scope of the department’s activities		-	-	(267)	(17,334)
Payments of amounts due to the Consolidated Fund		(17,791)	(17,791)	(785)	(9,446)
Net increase/(decrease) in cash and cash equivalents in the period after adjustment for receipts and payments to the Consolidated Fund		(32,905)	(43,724)	21,332	48,055
Cash and cash equivalents at the beginning of the period	18	214,590	266,618	193,258	218,563
Cash and cash equivalents at the end of the period	18	181,685	222,894	214,590	266,618

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Consolidated Statement of Comprehensive Net Expenditure

Consolidated Statement of Financial Position

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 2022

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 The impact of new International Financial Reporting Standards (IFRS) on the 2021-22 accounts

1.7 Property, plant and equipment

Initial recognition and capitalisation threshold

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

Subsequent measurement – the departmental group as lessee

Finance and operating leases – the departmental group as lessor

Transitional arrangements

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

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 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

Net pension assets and liabilities

Provisions for liabilities and charges

Accounting for receivables impairment

LAA financial assets

Critical judgements in applying accounting policies

Valuation of court buildings and prisons earmarked for closure

LAA financial assets

Service Concession Arrangements

2. Statement of Operating Expenditure by Operating Segment

2. Statement of Operating Expenditure by Operating Segment (continued)