Written Statements

Monday 17th October 2022 Written Statements

Monday 17 October 2022

Energy Markets Finance Scheme: Contingent Liability

Monday 17th October 2022 Written Statements

[The Chancellor of the Exchequer (Jeremy Hunt)]

It is normal practice when a Government Department proposes to undertake a contingent liability in excess of £300,000, and for which there is no statutory authority, for the Minister concerned:

To present a departmental minute to Parliament, giving particulars of the liability created and explaining the circumstances; and

To refrain from incurring the liability until 14 parliamentary sitting days after the issue of the minute, except in cases of special urgency.

I am writing to notify Parliament of a contingent liability that HM Treasury intends to create related to the energy markets finance scheme (EMFS) which is being delivered with the Bank of England and opens for applications today. This is a case of special urgency in which this liability will be incurred within 14 days of this minute being issued due to the extraordinary volatility of the energy market and need to deliver this scheme. The Treasury notified the Treasury Select Committee and Public Accounts Committee of this contingent liability when the then Chancellor confirmed this scheme as part of the growth plan on 23 September 2022. In parallel to laying a departmental minute, the Treasury has also written to these Committees to provide them with further details of the contingent liability.

As set out to Parliament in the plan for growth on 23 September 2022, the EMFS provides a 100% guarantee to commercial banks to provide additional lending to energy firms. This guarantee is provided by the Bank of England, which is in turn indemnified by HM Treasury. The scheme provides a backstop for energy firms facing large and unexpected margin calls due to price volatility in energy markets, ensuring they can continue to operate and manage risk in a cost-effective way and eventually reduce costs for businesses and consumers.

Margin calls can be large, with reports of them reaching multiple billions of pounds in some extreme cases. The facility will only support additional lending beyond what is commercially available to meet large margin calls. There is no cap on the facilities provided to firms due to the varying requirements of each firm, but a total size of the guarantee will be set for each firm as a part of the application process. Therefore, the total liability will depend on the take-up of the scheme and the specific circumstances of each applicant. However, any support provided will be on terms designed to protect the taxpayer.

The guarantees may only be provided to firms playing a material role in UK energy markets and they will need to evidence their exposure to margin calls. Firms will also have to comply with other eligibility criteria, including being UK based/having a UK presence, facing short-term liquidity requirements and being otherwise of sound financial health. When using the scheme, firms will also have to comply with a set of policy conditions, such as restrictions on the use of funds, executive pay, and capital distributions.

It is our intention that the EMFS is a scheme of last resort, to be used after existing commercial financing options are exhausted. This is reflected in the penal interest rate of the facilities, which will be significantly above market rate. As is standard practice for commercial lenders, an arrangement fee and commitment fee will be charged to firms, as well as an interest rate on drawn funds. Commercial banks delivering the scheme will not generate a commercial return which corresponds to remuneration for risk, given the Bank of England will wholly guarantee loans—but they will be allowed a commercial margin for admin costs incurred. The remainder of the proceeds of fees and interest on loans will flow back to the Exchequer.

The Government will only face losses from the scheme if the lending is not repaid. To reduce the risk of this happening, a rigorous application process has been set up. Firms will have to meet a minimum credit rating threshold of BB—and applications will be assessed initially by the Bank of England and then by an advisory committee (AC), which will make a recommendation for the Chancellor to decide whether to approve or reject an application. The scheme will therefore have a robust assessment of default risk and solvency, with due diligence provided by external and expert advisers.

The tenor of each facility agreement will last up to 12 months.

HM Treasury, supported by UK Government Investments, will be responsible for the management and monitoring of the scheme once launched. The Bank will report regularly on the progress of the scheme, as set out in its market notice. If the liability is called, provision for any payment will be sought through the normal supply procedure.

A departmental minute has been laid before the House of Commons.

[HCWS325]

T-level Overlap List

Monday 17th October 2022 Written Statements

[The Parliamentary Under-Secretary of State for Education (Andrea Jenkyns)]

Today I am notifying Parliament of the next stage of the Government’s reforms to post-16 qualifications at level 3 in England—the publication of the final list of qualifications that overlap with the T-levels in Education and Childcare, Digital, and Construction and the Built Environment.

In our response to the second stage consultation of the review of post-16 qualifications at level 3 and below, we set out our aims to streamline the qualifications landscape at level 3. The review aims to ensure that only qualifications that are necessary and lead to good outcomes are approved for public funding, delivering greater value for money for the taxpayer. It is important to ensure that all qualifications serve a clear and distinct purpose and lead to good progression and good outcomes for students. Supporting students to make a choice at 16 between an excellent academic or an excellent technical route will prepare students better for the next phase of their lives.

We have already removed funding approval from over 5,000 qualifications at level 3 and below that had no or low enrolments.

On 11 May Parliament was notified of the commencement of the next stage of our review—to remove funding approval for qualifications that overlap with T-levels. The rigour of T-levels, combined with the meaningful industry placement of at least 45 days, will equip more young people with the skills, knowledge and experience necessary to access skilled employment or further technical study. The results for the first three T-levels awarded in summer 2022 were fantastic, with a 92% pass rate—and feedback from this first group of students indicates that they have progressed to a variety of destinations, including higher education, apprenticeships or skilled employment. The removal of overlapping qualifications will give T-levels the space needed to flourish and maximise the number of learners on these important qualifications.

We published the provisional list of qualifications that overlap with waves 1 and 2 T-levels in May, and awarding organisations had eight weeks to appeal their qualifications’ inclusion on the list.

I can now confirm the final list of qualifications that will have funding approval removed at 16-19 because they overlap with the T-levels in Education and Childcare, Digital, and Construction and the Built Environment. These qualifications will have funding approval removed in August 2024.

As the outline content of the T-levels in the Health and Science route is currently being reviewed by the Institute for Apprenticeships and Technical Education, this list does not include qualifications that overlap with these T-levels. Once the review has concluded, expected later this calendar year, we will confirm the final list of qualifications that overlap with these T-levels. Qualifications overlapping with these T-levels will have funding approval removed in 2024, at the same time as those overlapping with the other waves 1 and 2 T-levels.

This review has been led by evidence. We commissioned independent assessors to conduct in-depth reviews of the qualifications. All qualifications placed on the final overlap list were rigorously assessed and considered against three tests:

That they are technical qualifications;

That they have demonstrable overlap of content and outcomes with waves 1 and 2 T-levels already on offer; and

That they are aimed at supporting entry to the same occupation(s) as those T-levels.

We will run another process to identify qualifications that overlap with T-levels in the remaining T-level routes in 2023, and qualifications that overlap with these T-levels will have funding approval removed in 2025.

The next phase of the qualifications review will approve the qualifications that will sit alongside A-levels and T-levels in the new landscape. We are clear that other qualifications, including BTECs and similar qualifications, will continue to play an important role and we will fund these qualifications where they are high quality and where there is a clear need for them. We expect to publish details shortly of the process by which academic and technical qualifications at level 3 will be approved, and I will update Parliament on this.

[HCWS324]