Lessons for government: monitoring and responding to companies in distress

Public Accounts Committee Closed Inquiry
Opened: 13 Dec 2023 Closed: 28 May 2024 Parliament page
Direct intervention in the private sector has generally been seen as a last resort by the Government, with private sector companies allowed to fail as part of the efficient working of markets and the economy. The Government’s approach in this area is now changing, with the pandemic, war in Ukraine … Read more
17 Recommendations
10 Conclusions
1 Report
1 Oral session
2 Letters
1 Event
Activity timeline 6 events
28 May
2024
Report published
13 Mar
2024
Report published
6 Feb
2024
Correspondence
6 Feb
2024
Correspondence
17 Jan
2024
Oral evidence
17 Jan
2024
Formal meeting (oral evidence session) · The Grimond Room, Portcullis House
Oral evidence sessions 1 session
17 Jan 2024
View on parliament.uk
Lessons for government: monitoring and responding to companies in distress
Hannah Gray · UK Government Investments Jess Glover · HM Treasury Neil Johnson · Department for Business and Trade Sir Gareth Rhys Williams CB · Cabinet Office
Title HC No. Published Items Response
Twentieth Report - Monitoring and responding to companies in dis… HC 425 13 Mar 2024 27 Responded
Recommendations & Conclusions
27 results
2 Recommendation Accepted
Twentieth Report - Monitoring and …
Set out how HM Treasury and Cabinet Office will support departments to maintain risk knowledge.
We are concerned that departments are not maintaining institutional knowledge relating to ‘at risk’ companies and sectors. HM Treasury monitors the health and resilience of the corporate sector as a whole and the Department for Business and Trade oversees industry … Read more
Government Response
The government states it already supports departments through existing mechanisms, including commercial engagement on supplier risk, two-way intelligence sharing, Orange Book guidance, and Cabinet Office commercial teams providing regulation, guidance, and playbooks. Additionally, the DBT recently published a Critical Imports and Supply Chains Strategy to monitor and respond to supply chain shocks.
HM Treasury
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3 Recommendation Accepted
Twentieth Report - Monitoring and …
Set out how HM Treasury will ensure accounting officers address supplier commercial model risks.
We are not convinced that accounting officers give sufficient consideration to the commercial models of those they contract with, which means they do not understand the potential risks (including supplier failure). HM Treasury suggests accounting officers should produce a formal … Read more
Government Response
The government states it already ensures Accounting Officers address supplier commercial risks through existing guidance documents like the AO Assessments Guidance, Managing Public Money, the Sourcing Playbook (which includes guidance on supplier failure and contingency planning), and the Orange Book for risk management.
HM Treasury
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4 Recommendation Accepted
Twentieth Report - Monitoring and …
Set out HM Treasury support for accounting officers making decisions in company distress situations.
We are concerned that accounting officers may not always be equipped to protect taxpayers’ money when making decisions on intervention in these fast-paced, high-pressure situations. This Committee and previous committees have reported many times over the past two decades on … Read more
Government Response
The government explains it supports Accounting Officers through various existing guidance, playbooks, training, and specialist teams. It also commits to shortly re-issuing information, including the NAO’s good practice guide, to departments and AOs to further highlight guidance for dealing with distressed companies.
HM Treasury
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5 Conclusion Rejected
Twentieth Report - Monitoring and …
Set functional standards for monitoring and responding to companies in distress across government.
The Cabinet Office has not assessed or coherently identified the skills and expertise needed for monitoring and responding to companies in distress. We have previously raised concerns about the level of commercial, risk management and corporate finance expertise in government … Read more
Government Response
The government rejects setting new functional standards, stating existing guidance and risk management strategies suffice. Instead, the Cabinet Office Commercial Function will collaborate with the Risk Centre of Excellence, UKGI, and HM Treasury to explore a more targeted approach for developing necessary skills across government.
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6 Recommendation Acknowledged
Twentieth Report - Monitoring and …
Set out updated approach to evaluating company distress cases and sharing lessons learned.
It is vital that the government evaluates and shares the lessons from these cases on a timely and consistent basis, regardless of whether the case resulted in government intervention. We have previously found that much of government activity and spending … Read more
Government Response
The government acknowledges that evaluation of company distress cases has not been formalised and will work with the Cabinet Office and UKGI to consider future changes and how to strengthen departmental evaluation requirements and share lessons. It also points to parliamentary and NAO scrutiny as providing evaluation.
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1 Conclusion Accepted
Twentieth Report - Monitoring and …
Committee examined evidence from key departments on government's corporate distress monitoring.
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury (the Treasury), the Department for Business and Trade, the Cabinet Office, and UK Government Investments (UKGI).1
Government Response
The government accepts the committee's observation and outlines its Lead Government Department (LGD) approach for emergency planning and risk assessment, noting significant improvements in supplier monitoring since 2018 through the Sourcing Playbook. It details how the Cabinet Office monitors strategic suppliers and how responsibility for supply chain resilience and intelligence lies with LGDs.
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7 Conclusion Accepted
Twentieth Report - Monitoring and …
Departments have varied approaches to understanding supply chains and informal distress monitoring.
Departments are at different stages and have different approaches to understanding their sectors’ supply chain dependencies and exposure.13 The Treasury told us that individual departments lead on their sectors and it is for each of them to monitor the health … Read more
Government Response
The government states the recommendation is already implemented, highlighting its Lead Government Department approach, improved supplier monitoring since 2018, the Sourcing Playbook, Cabinet Office monitoring, and published strategies for critical sector supply chain resilience.
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8 Recommendation Accepted
Twentieth Report - Monitoring and …
Lack of integrated departmental oversight creates blind spots for distressed companies.
Companies and markets can cut across several departments’ policy responsibilities or provide services to multiple departments. This meant that in the cases of Carillion, CF Fertilisers and UKCloud, no single department had a complete picture of the government’s exposure to … Read more
Government Response
The government states the recommendation concerning the lack of a complete cross-departmental picture of exposure to distressed companies is already implemented. It refers to the existing Lead Government Department approach, improved supplier monitoring since Carillion, and Cabinet Office monitoring of strategic suppliers.
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9 Recommendation Accepted
Twentieth Report - Monitoring and …
Mapping multi-tiered public service supply chains presents significant complexity and cost challenges.
The National Audit Office (NAO) reported that the Cabinet Office’s markets, sourcing and suppliers team were in the early stages of exploring how departments map their supply chains, and whether a similar approach could be taken for public service supply … Read more
Government Response
The government states the recommendation to improve supply chain mapping is already implemented. It describes existing measures such as the Lead Government Department approach, improved supplier monitoring via the ‘Sourcing Playbook’, and Cabinet Office monitoring of strategic suppliers.
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10 Recommendation Accepted
Twentieth Report - Monitoring and …
Treasury relies on departments for specific sectoral monitoring despite central oversight.
The Treasury told us that some of its staff work on monitoring the health of the UK corporate sector overall, by looking at a series of indicators.25 It told us that actively monitoring the corporate sector is an important and … Read more
Government Response
The government states the recommendation on monitoring the UK corporate sector and relying on departments is already implemented. It highlights existing approaches like Lead Government Departments, improved supplier monitoring, Cabinet Office oversight of strategic suppliers, and published strategies for critical supply chain resilience.
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11 Recommendation Accepted
Twentieth Report - Monitoring and …
High civil service turnover undermines corporate knowledge and institutional memory on distress.
The government’s corporate knowledge about the health of key sectors and companies may be vulnerable because of the high turnover of civil servants in this field, who may have 17 Correspondence from HM Treasury to Committee, 30 January 2024 18 … Read more
Government Response
The government agrees with the recommendation, stating it is implemented through ongoing actions such as making supplier risk a standing item for engagement, fostering two-way intelligence sharing to retain corporate memory, and requiring departments to escalate risk indicators via their governance frameworks and the Orange Book. It also highlights the Cabinet Office's commercial team support and DBT's Critical Imports and Supply Chains Strategy.
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12 Conclusion Accepted
Twentieth Report - Monitoring and …
Departments have improved sectoral understanding post-pandemic, though construction remains fragile.
We asked the witnesses what lessons they had learned about companies’ resilience across the economy from supporting them during the pandemic. The Treasury told us that it had learned the “importance of departments having a good sectoral understanding, understanding the … Read more
Government Response
The government states the recommendation is already implemented, citing its existing Lead Government Department approach, improved supplier monitoring since 2018, the Sourcing Playbook, Cabinet Office monitoring of strategic suppliers, and published strategies for supply chain resilience.
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13 Recommendation Accepted
Twentieth Report - Monitoring and …
Departments underutilise and produce inconsistent Accounting Officer Assessments for public funds.
This Committee has continually advocated for the use of Accounting Officer (AO) Assessments to support high quality decision-making and enhance transparency. The Treasury’s guidance suggests that it is good practice for an AO Assessment to be produced for each significant … Read more
Government Response
The government states the recommendation regarding Accounting Officer Assessments is already implemented. It details existing guidance for AOs on considering commercial risks, value for money, and feasibility, as well as the support provided by finance directors and commercial teams.
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14 Conclusion Accepted
Twentieth Report - Monitoring and …
Government remains vulnerable to provider failure in outsourced public services, despite measures.
For several decades, successive governments have contracted out public services to private providers. Where providers or suppliers fail, the government is often the fall-back owner of risks. This was demonstrated when Carillion failed and the government had to step in … Read more
Government Response
The government states the recommendation is already implemented, detailing its Lead Government Department approach for emergencies, significantly improved supplier monitoring since Carillion, the Sourcing Playbook, and the Cabinet Office's monitoring of strategic suppliers and critical sector resilience strategies.
HM Treasury
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15 Conclusion
Twentieth Report - Monitoring and …
Ensuring taxpayer gains from contracts remains challenging, requiring improved market testing.
We asked the government specifically about how it ensures the taxpayer gains when a company does well partly as a result of having a government contract. The Cabinet Office told us that it publishes key performance indicators (KPIs) for its … Read more
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16 Conclusion Accepted
Twentieth Report - Monitoring and …
Government previously lacked a structured framework for providing financial support to distressed companies.
In 2020, the government set out publicly some broad principles which it uses to underpin decisions on providing last-resort bespoke financial support to financially distressed companies. The government has publicly stated that there is an “extremely high bar for putting … Read more
Government Response
The government agrees with the recommendation and aims for a July 2024 implementation. It outlines existing guidance, expert teams (HM Treasury's Special Situations team, UKGI), and departmental responsibilities for managing interventions, committing to shortly re-issue relevant information and the NAO's good practice guide to departments.
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17 Recommendation Accepted
Twentieth Report - Monitoring and …
Require departments to rigorously adhere to public money principles for all company interventions.
As with any activity involving public money, a department must adhere to the principles of regularity, feasibility, propriety and value for money set out in the Treasury’s Managing Public Money. A department will likely be required to carry out a … Read more
Government Response
The government states the recommendation to adhere to principles of regularity, feasibility, propriety, and value for money for interventions is already implemented. It outlines existing guidance in Accounting Officer Assessments, Managing Public Money, and the Sourcing Playbook, along with support from finance directors and commercial teams.
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18 Conclusion Accepted
Twentieth Report - Monitoring and …
Maintaining propriety during rapid, imperfect decision-making in company distress situations is challenging.
Propriety is concerned with meeting high standards of public conduct and parliamentary expectations, and cannot be dispensed with even when making difficult judgements on competing issues in an emergency.46 Responding in these situations often requires rapid decision-making by officials and … Read more
Government Response
The government agrees with the recommendation, with a target implementation date of July 2024. It outlines existing guidance and expert support available to departments for rapid, proper decision-making in crisis situations, and commits to shortly re-issuing information and the NAO's good practice guide.
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19 Conclusion Accepted
Twentieth Report - Monitoring and …
Government employs stringent due diligence and asset security to mitigate moral hazard risks.
We asked the witnesses how they manage the risks of moral hazard (where support for one company creates an incentive for other companies to take risks with the expectation they will also be supported) and free riders (where the company’s … Read more
Government Response
The government agrees with the recommendation and aims to implement it by July 2024. It details existing guidance, support teams, and practices for managing interventions and protecting taxpayer interests, and commits to shortly re-issuing relevant information and the NAO's good practice guide to departments.
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20 Recommendation Acknowledged
Twentieth Report - Monitoring and …
Government interventions often lead to prolonged involvement and unforeseen costs without clear exit strategies.
The NAO report has shown how intervening in companies can lead to unforeseen costs and government involvement over a period much longer than expected. Ensuring value for money requires careful consideration not just of short-term objectives but also of longer-term … Read more
Government Response
The government agrees with the recommendation on planning for long-term scenarios and exit strategies for interventions, with a target date of July 2024. It highlights existing guidance and support from various departments and commits to shortly re-issuing the NAO's good practice guide to departments.
HM Treasury
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21 Recommendation Accepted
Twentieth Report - Monitoring and …
Ensure departments possess or access essential specialist skills for company distress interventions throughout their lifecycle.
Departments must have, or be able to access, the skills, expertise and capacity needed through the whole lifecycle of any intervention in a company, including to prepare for and respond to company distress scenarios.56 We have repeatedly highlighted longstanding issues … Read more
Government Response
The government agrees to the recommendation and aims to implement it by April 2025. The Cabinet Office Commercial Function will collaborate with other bodies to develop a more targeted approach for building skills in monitoring and responding to companies in distress.
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22 Recommendation Deferred
Twentieth Report - Monitoring and …
Specialist skills for company distress are concentrated centrally, resulting in patchy government capabilities.
The Treasury told us that having the right skills and capabilities in place is “a really critical lesson” highlighted by the NAO’s report. It acknowledged that these skills are currently “patchy across government”.61 The relevant specialist skills for responding to … Read more
Government Response
The government agrees with the recommendation to address patchy skills across government, setting an April 2025 target. It outlines existing guidance and training but commits to the Cabinet Office Commercial Function working with relevant bodies to look at developing a more targeted approach for skills development.
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23 Recommendation Deferred
Twentieth Report - Monitoring and …
Departments and regulators face ongoing challenges in securing high-demand commercial and financial skills.
Nonetheless, the Treasury reiterated that it is up to departments and regulators to ensure they have the capability and capacity to discharge their duties, including understanding what financial expertise they need.66 The Department for Business and Trade explained how the … Read more
Government Response
The government agrees with the recommendation regarding skills and capabilities across government, setting an April 2025 target. It refers to existing guidance and risk management frameworks, and commits to the Cabinet Office Commercial Function working with other bodies to look at developing a more targeted approach for skills development.
HM Treasury
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24 Recommendation Deferred
Twentieth Report - Monitoring and …
Government company interventions are not consistently or robustly evaluated, hindering learning and accountability.
Evaluation is a systematic assessment of the design, implementation, and outcomes of an intervention.69 It is important for learning what works and why, and to demonstrate accountability for the use of public money.70 Our work on the use of evaluation … Read more
Government Response
The government agrees with the recommendation on the importance of evaluation and sets a target date of July 2024. It acknowledges that evaluation of company cases has not been formalized and will work with Cabinet Office and UKGI to consider future changes and how to strengthen departmental evaluation requirements.
HM Treasury
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25 Recommendation Deferred
Twentieth Report - Monitoring and …
Treasury acknowledges government's current lack of systematic evaluation for company interventions and non-interventions.
We asked the witnesses about how robustly government collates and shares evaluation findings and lessons on this topic. The Treasury suggested that this was something they “can probably be a bit more systematic on”. It provided the example of the … Read more
Government Response
The government agrees with the recommendation to systematically evaluate interventions and non-interventions, setting a target date of July 2024. It commits to working with Cabinet Office and UKGI to consider future changes, potentially including placing conditions on departments to report back to the centre.
HM Treasury
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26 Conclusion Deferred
Twentieth Report - Monitoring and …
Challenges persist in recovering costs from third parties after airline insolvencies.
We asked the witnesses whether there had been any learning from the experiences of airline collapses about industry insurance schemes and also how government manages the risks around recuperating money from private insurers. UKGI suggested that there was some work … Read more
Government Response
The government agrees with the recommendation and aims for a July 2024 implementation, acknowledging that evaluation of company cases has not been formalized. It states HM Treasury will work with Cabinet Office and UKGI to consider future changes to internal evaluation, rather than specifically addressing lessons from airline collapses or managing risks with private insurers.
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27 Recommendation Deferred
Twentieth Report - Monitoring and …
Value in exploring international frameworks for company intervention and non-intervention approaches.
We also asked the witnesses whether they looked to different international regimes to learn any lessons about how to deal with companies and sectors that might be in trouble. The Treasury and the Cabinet Office said that each country is … Read more
Government Response
The government agrees with the recommendation and aims for a July 2024 implementation, but focuses its response on improving and formalizing the internal evaluation of company distress cases. HM Treasury will work with the Cabinet Office and UKGI to consider future changes, including strengthening requirements for departmental evaluation, but does not explicitly commit to reviewing international frameworks.
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Government Response AI assessment · 26 of 17 classified
Accepted 17
Acknowledged 2
Deferred 6
Rejected 1
Total 17 recs + 10 conclusions
Correspondence 2 letters
6 Feb 2024 Correspondence from Gareth Rhys Williams CB, Government Chief Commercial Officer and Non-Executive Director, Crown Commercial Service, re Committee’s inquiry into lessons for government: monitoring and responding to companies in distress, dated 26 January 2024
Parliament page
6 Feb 2024 Correspondence from Jessica Glover, Director General, Growth and Productivity, HM Treasury, re Lessons for government in monitoring and responding to companies in distress hearing, dated 30 January 2024
Parliament page