Section 125: National Savings: Surplus Funds
Summary
1.This section requires the Commissioners for the Reduction of the National Debt (“the Commissioners”) to pay to the Consolidated Fund surplus sums held by them by virtue of their investments under section 17 of the National Savings Bank Act 1971 (“the 1971 Act”).
2.The section also gives a power to the Treasury to repeal or amend any enactment, by order, where the amendment is required as a consequence of the closure of ordinary accounts or the transfer of the surplus to the Consolidated Fund.
Details of the Section
3.Subsection (1)(a) requires the Director of Savings and the Commissioners to prepare a statement showing the amount of the surplus held by the Commissioners.
4.Subsection (1)(b) requires the Commissioners to transfer the surplus to the Consolidated Fund.
5.Subsection (2) describes the surplus which must be transferred by the Commissioners to the Consolidated Fund (“the relevant surplus”) and specifies the sums which may be deducted from the relevant surplus before the transfer is made. Subsection (2)(a) allows sums expended by the Director of Savings in relation to the surplus to be deducted from the relevant surplus; subsection (2)(b) allows the Commissioners’ expenses in managing the surplus to be deducted from the relevant surplus; and subsection (2)(c) provides that any sums which may be transferred to the Consolidated Fund under section 20 of the 1971 Act shall not form part of the relevant surplus.
6.Subsection (3)(a) provides that sums expended by the Director of Savings in relation to the surplus must be paid into the Consolidated Fund.
7.Subsection (3)(b) allows the Commissioners to retain sums representing their expenses in relation to the surplus.
8.Subsection (4) requires the Director of Savings and the Commissioners to present the statement under subsection (1) to the Comptroller and Auditor General who must audit the statement and report to Parliament accordingly.
9.Subsection (5) allows the Treasury, by order, to repeal or amend the legislation on ordinary accounts where the repeal or amendment is considered necessary or expedient in consequence of the closure of ordinary accounts or in consequence of the transfer of surplus moneys to the Consolidated Fund.
10.Subsection (6) requires an order under subsection (5) to be made by statutory instrument.
11.Subsection (7) provides that an order under subsection (5) must be laid in draft before, and approved by a resolution of, the House of Commons before it is made.
12.Subsection (8)(a) provides that references to sums expended or expenses incurred in connection with ordinary accounts includes sums expended or expenses incurred in connection with any amounts held by the Commissioners by virtue of their investments under section 17 of the 1971 Act.
13.Subsection (8)(b) ensures that the expressions used in the section have the same meaning as in the 1971 Act.
14.Subsection (9) provides that the “1971 Act” means the National Savings Bank Act 1971 and an “enactment” (at subsection (5)) includes both an enactment in the 1971 Act and subordinate legislation.
Background Note
15.The National Savings Bank Ordinary Account was launched in 1861. In accordance with the provisions of sections 17 to 20 of the 1971 Act, the balance of ordinary accounts in the National Savings Bank was transferred to the Commissioners who, in turn, were required to invest the funds transferred to them in accordance with those provisions. Interest on the investments held by the Commissioners met the operational running costs of the ordinary account as well as the interest paid to depositors.
16.When the ordinary account was closed to transactions in 2004, moneys remained unclaimed in some accounts. In 2008, for security and operational reasons, any balances remaining were transferred to a new ‘NS&I Residual Account’. The associated funds in respect of these accounts were transferred to the National Loans Fund.
17.All that now remains in the management of the Commissioners in respect of ordinary accounts is a surplus of moneys which represent sums set aside in the past to offset possible depreciation in the value of investments held by them (in accordance with section 20 of the 1971 Act) or sums which represent an increase in the capital value of their investments. The increase in the capital value occurred because the market value of gilt-edged investments held by the Commissioners rose as yields reduced in the 1990s and early 2000s, thereby increasing the value of older gilts. The 1971 Act makes no provision for how such a surplus must be managed.
18.This section requires the Commissioners to pay to the Consolidated Fund surplus sums held by them by virtue of their investments under section 17 of the 1971 Act and makes provision for the manner in which such a surplus must be calculated, transferred and accounted for
19.The section also allows the Treasury to repeal or amend, by order, statutory provisions relating to ordinary accounts which are no longer necessary.
