Responding to sharp criticism by members of the Public Accounts Committee over the lack of oversight of the Levy Control Framework (LCF), officials insisted measures had been taken to improve both the forecasts and the process of scrutinising them.
“There’s been a very clear attempt by the Department, working with the Treasury, to strengthen its approach the management of these forecasts, and that has helped us get back under control,” said permanent secretary to the Department for Business, Energy and Industrial Strategy (BEIS) Alex Chisholm.
“I think it should help this committee to feel more confidence that we’re on top of these forecasts for the future.”
Chisholm said he was confident that BEIS could continue to operate within the 20 per cent headroom in the LCF spending caps. He added that the projected £1.5 billion overspend revealed by the Office for Budget Responsibility (OBR) in July last year had already come down by £235 million due to the early closure of parts of the Renewables Obligation and cuts to Feed-in Tariff rates.
Former shadow energy secretary Caroline Flint asked why the Levy Control Board, which was set up to monitor to the framework, had not met for a period of 20 months between 2013 and 2015, during which the huge overspend had become apparent.
Treasury deputy director for energy, environment and agriculture Neil Kenward insisted that there was “ongoing dialogue” between the Treasury and the Department of Energy and Climate Change (Decc) at the time and that the projections were overseen by OBR. Kenward assured the committee that the board now met regularly once every three months.
Officials were also grilled over the late publication of several reports. MPs questioned why an internal review of the lessons learned from the forecasting failures produced by Decc in 2015, had only now been published.
MP Kevin Foster asked why it had taken the prospect of the BEIS committee to publish a separate report on the cost of LCF subsidies to consumers; why it was “less comprehensive” than a similar report from 2014; and why that report hadn’t been published annually as parliament had been told it would.
Chisholm said the ‘consumer-funded policy’ report had been published in response to a National Audit Office report on the LCF, and that BEIS had decided to release the internal review at the same time as “stakeholders might be interested”. He said the Department would be happy to looking into publishing the consumers costs report annually.
Kenward confirmed that the government was considering the future of the LCF, which the Treasury will set out in the 2017 spring budget. He said a formal consultation was not currently planned but the government had been discussing these issues with stakeholders “for some time”.
The issue had been raised earlier in the meeting of the impact of wholesale prices on the cost of Contracts for Difference. Kenward said ministers would need to consider “whether it is right for us to focus on the wholesale price as the right reference price or whether it should be a different price”, as part of the review.