On Monday 24 October, the House will debate Supplementary Estimates for HM Treasury and the Department for Business, Energy and Industrial Strategy (BEIS).
Estimates and Parliamentary approval of public spending
Supplementary Estimates contain updated spending plans for Government departments, which must be approved by Parliament before they can take effect. They are normally considered around February/March, shortly before the end of the financial year. These Estimates are being laid before the House early and are therefore described as "out-of-turn".
The most significant changes in these Estimates, compared to the Main Estimates that passed the House in July, are:
- £60 billion more for BEIS to pay for the Government's energy bills support package (£31 billion for the Energy Price Guarantee and £29 billion for the Energy Bill Relief Scheme)
- £11.2 billion more for HM Treasury to fund payments to the Asset Purchase Facility, the vehicle used by the Bank of England to carry out its quantitative easing programme.
If approved by the Commons, the Estimates will be put into law through a Supply and Appropriation (Adjustments) Bill, voted through immediately after the debate.
Energy bills support
The extra funding for BEIS will pay for the Government's energy bills support in 2022/23. This was introduced because of the sharp increase in wholesale energy prices in 2022, caused largely by Russia's invasion of Ukraine, which then led to domestic energy prices also increasing. For more details, see the Library's briefings on Domestic energy prices and the Energy Prices Bill 2022/23.
The Asset Purchase Facility
Following the 2008/2009 financial crisis, the Bank of England began a programme of quantitative easing. Broadly speaking, the Bank bought financial assets to boost demand in the economy.
The Bank carries out its quantitative easing programme through a special purpose vehicle called the Bank of England Asset Purchase Facility (APF). Through the APF, the Bank has purchased financial assets (mainly government bonds) from private investors such as pension funds and insurance companies.
The Treasury indemnifies the APF and Bank against any direct losses. The Treasury also receives any running profits, which occur when Bank Rate is lower than the average income from the assets held in the APF. Thus far, the Treasury has been receiving profits from the APF, as Bank Rate has been sufficiently low. However, the Bank of England has been raising Bank Rate since December 2021 and the APF has begun unwinding quantitative easing. The APF is therefore now in a position where the Treasury will need to make payments to it, under the Treasury’s indemnity.