Background to the report

In pursuit of its policy goals, the government makes loans to the private sector, or takes equity stakes in businesses. The government calls these financial transactions (FTs). In 2024, the FT portfolio was valued at £203 billion.

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The government usually finances these investments by borrowing. In the Autumn 2024 Budget, the government introduced a new “fiscal framework” and changed its preferred measure of national debt.

This change means that any additional government borrowing made to fund an FT is offset by the value of the investment acquired, and debt does not immediately increase.

The government has announced an increase in the use of FTs and it plans to spend £23.8 billion on them between financial years 2025-26 and 2029-30, with investment directed to areas such as offshore wind and housing.

As with any investment, these transactions carry a degree of risk – for example, the loan may not be repaid in full, or the business may fail. Even small losses in percentage point terms on these large numbers can have a significant impact on public finances.

In 2024, alongside the Budget, HM Treasury (HMT) published the Financial Transaction Control Framework, which sets out requirements for approving FTs, managing their risks, and reporting on them.

It aims to ensure that the use of FTs supports sustainable public finances and does not lead to debt rising over time.

The Framework introduced the concept of “public financial institutions” that will have the necessary expertise, institutional structures and risk management capabilities to set up and manage most FTs, often on behalf of government departments.

To date, HMT has designated five such institutions, all of which existed before the Framework was introduced.

Scope of the report

This report considers the Framework’s design, implementation and oversight. It builds on our previous body of work where we have examined the overall public investment landscape and looked at how some public financial institutions were set up and run.

In those previous reports, we have reviewed major transactions, such as asset sales and loan arrangements, to see how decisions affect long-term value, and shared practical guidance on financial and risk management, and corporate finance to help improve decision-making around the government’s FTs.

Conclusions

The Framework is an important step in strengthening the government’s management of FTs and emphasising that investments should be good value for money.

HMT has recognised that the government changing its preferred measure of national debt, and the planned increase in FTs of £23.8 billion over the next five years, require a robust approach to managing these investments effectively and sustainably.

However, key elements of the Framework are not yet in place. Implementing the Framework in full will allow HMT to maximise its benefits so that the Framework acts to strengthen financial management, supports effective use of FTs to achieve policy objectives, and protects the value for money of taxpayer-funded investment.

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Publication details

Press release

View press release (24 Mar 2026)

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