Act as shareholder for, and lead establishment of, UK government arm’s length bodies
UKGI paper on the use of ALBs in government: a view from practitioners
A key part of UKGI’s mission is to support departments across Whitehall to be most effective in their role as shareholders of arm’s length bodies. In this paper, published in 2020, we have drawn on our expertise across both the public and private sectors to identify how, where and why arm’s length bodies are used by government, and to define seven critical success factors for setting up and managing them. The paper is intended to help inform debate across Whitehall and beyond on the effective use of arm’s length bodies for specialised delivery, as well as to share practical know-how and expertise in this area.
Case Studies
British Business Bank
The British Business Bank is a government-owned economic development bank that makes finance markets for smaller businesses work more effectively, allowing those businesses to prosper, grow and build UK economic activity. The Bank manages the UK government’s access to finance programmes for smaller businesses within a single commercially-minded institution.
It is not a bank in a conventional sense. It does not finance businesses directly, but instead provides funds and guarantees to private sector partners, enabling them to finance a greater number of smaller businesses (either through debt or equity). It uses economic evidence to design programmes that address market failures affecting smaller businesses across the economy and to improve smaller businesses’ awareness of the finance options available to them.
UKGI was instrumental in the establishment of the British Business Bank. The role included advising ministers on the rationale and options for creating a single business development bank dedicated to making finance markets work better for Small and Medium Enterprises (SMEs). The new Bank combined existing teams and new teams recruited to provide expertise in innovative areas such as wholesale solutions. UKGI also led on state aid approval for the Bank and its programmes and on the appointment of initial Board members for the Bank.
While the Secretary of State for the Department for Business, Energy and Industrial Strategy (BEIS) is the sole shareholder of the British Business Bank, UKGI has a specific team made up of colleagues with both private sector and civil service backgrounds which leads on the British Business Bank’s governance and the shareholder relationship on behalf of BEIS.
UK Government Investments also lead on advising ministers on the establishment and monitoring of the British Business Bank’s targets and performance against its strategic objectives, in collaboration with the Department for Business, Energy and Industrial Strategy.
The Royal Mint
UK Government Investments acts as shareholder on behalf of HMT Ministers in relation to Government’s 100% shareholdings in The Royal Mint. The Royal Mint’s primary purpose is to manufacture and distribute coins for the UK, as well as to supply blanks and official medals. Since 2010, They have operated on a fully commercial basis providing goods and services to HMT via the UK Coin contract.
We discharge our role primarily through membership of the Board and certain of its committees. Over the past year, we have worked with HMT and The Royal Mint to better align the governance structure with the government’s objectives for the Mint as well as further developing the medium-term strategy to remain a profitable business despite the long-term decline in cash usage.
With regards to COVID-19, the UKGI team has been supporting The Royal Mint in its options to keep the business open and providing steers on Government support packages that are available. We are pleased to note that The Royal Mint has been using its engineering expertise to create and manufacture medical visors to help protect frontline care workers in the NHS.
Defence Equipment & Support
In 2020, UK Government Investments took on the shareholder role of Defence Equipment & Support (DE&S) on behalf of the Ministry of Defence. The organisation is responsible for the safe procurement and support of a vast range of equipment for the UK’s armed forces and undertakes decommissioning and disposal when equipment reaches the end of its service life. The business works across more than 150 locations worldwide and operates with a budget of £178 billion for the next ten years.
So far, we have taken up a non-executive seat on the DE&S Board to represent the shareholder interests of the Secretary of State. Over the next year we will work with DE&S and the Ministry of Defence to establish core governance and corporate foundations for the organisation and strengthen and monitor DE&S’s corporate performance against its agreed aims. This will include revising and updating the framework agreement between the organisation and department, reviewing new KPIs and embedding recommendations from the recent Board effectiveness review and governance review, supporting the organisation as it delivers on its commitments to its customers.