• The government’s portfolio of financial transactions (FTs), which include loans to the private sector and business investments, was valued at £203 billion in 2024.
  • The Financial Transaction Control Framework sets out HM Treasury’s principles for the enhanced management of FTs – but requires full implementation to ensure these transactions support stable public finances.
  • To help maximise the Framework’s benefits, the NAO recommends that HM Treasury establishes clearer implementation plans, develops more consistent guidance and control arrangements, and closes gaps in risk assessment.

The government can invest in financial transactions (FTs) in ways that reduce risks of destabilising public finances and increasing national debt – provided that it fully implements the framework governing these investments through more consistent risk assessments and controls, improved guidance, and stronger monitoring and assurance, according to a new National Audit Office (NAO) report.1

FTs, which include making loans to the private sector or investing in businesses, are often used by government in support of policy aims. In 2024, the government’s FT portfolio was valued at £203 billion.

As with any investment, these transactions carry a degree of risk. Even small losses in percentage point terms on these investments can have a significant impact on public finances. This means that FTs need to be managed effectively and sustainably.

Published alongside the Autumn 2024 Budget, the government’s Financial Transaction Control Framework sets out the enhanced requirements for managing and reporting on FTs, with the aim of ensuring that they support sustainable public finances and do not contribute to rising national debt.

The government has designated five public financial institutions to set up and manage most FTs on its behalf.2 These organisations, together with HM Treasury and UK Government Investments (UKGI),3 have started to implement some of the key principles underpinning the Framework.

But the Framework remains a work in progress. HM Treasury has yet to identify the main risks of using FTs; some of the Framework’s key principles are still being implemented by the responsible bodies; and civil servants, including those working for public financial institutions and government departments, have indicated that they lack clear, practical guidance on how they should work together in practice.

When HM Treasury designated the five original public financial institutions, three did not fully meet the Framework’s criteria, and the designation process still lacks transparency and minimum standards.

Strengthening this process would make it easier to apply the Framework’s principles consistently and increase certainty for those organisations seeking designation in the future.

HM Treasury faces other challenges to ensure that the Framework is fully implemented. It has not set out a delivery plan or objectives to measure progress, while responsibility for checking whether designated organisations are complying with the Framework is unclear. UKGI has also identified data limitations regarding the government’s FT portfolio, including a reliance on historic data.

To help maximise the benefits of the Framework, the NAO recommends that HM Treasury should:

  • set out a delivery plan for the full implementation of the Framework
  • work with relevant risk-control experts to strengthen the Framework
  • establish a clear and proportionate system for monitoring compliance with the Framework
  • provide more consistent, centrally coordinated guidance to support effective implementation of the Framework
  • ensure that UKGI collects proportionate and accurate data on the government’s FT portfolio
  • formalise its process for designating public financial institutions

“Implementing the Financial Transaction Control Framework in full will allow the government to strengthen financial management, support the effective use of FTs to achieve policy objectives, and protect the value for money of taxpayer-funded investment.”

Gareth Davies, head of the NAO

Read the full report

Managing the government’s financial investments

Notes for editors

    1. The report is available on the NAO website via the following link: https://www.nao.org.uk/reports/managing-the-governments-financial-investments/
    2. The five designated public financial institutions are British Business Bank; the National Wealth Fund; UK Export Finance; British International Investment; and the Student Loans Company.
    3. UKGI is the government’s corporate finance centre of excellence and supports departments in making FTs and guarantees. To increase transparency around investments, the Framework requires UKGI to publish a consolidated view of the government’s FTs.

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