Terms of reference
IDAB is appointed under Section 10 of the Industrial Development Act 1982 to advise the Secretary of State on the exercise of his functions under Sections 7 and 8 of that Act. Those sections empower the Secretary of State to provide selective financial assistance, respectively for industry in Assisted Areas and for industry generally.
In the report of the recent Triennial Review one of the principal conclusions was that wider use should be made of the skills and experience of IDAB. IDAB has a maximum of twelve board members plus a chairman. It is available to provide advice as a board or as a sub group or individually depending on the circumstances. The Board has a track record of applying its expertise to statutory cases and also to a broad range of non statutory matters. When providing advice on a statutory basis IDAB acts as a board, with a quorum of a minimum of five members, including the chairman.
Its members have a broad range of commercial and financial experience gained in industry, banking, accounting and finance.
In providing advice IDAB has developed a systematic and well tested methodology for evaluating the value for money, ie the cost and returns, of government financial assistance to industry.
IDAB meets monthly or more often as required and can be consulted outside meetings as required.
IDAB can be consulted for definitive advice on the basis of detailed papers or more informally on the basis of incomplete information to obtain directional guidance.
Early consultation is essential as it allows more scope for advice to be reflected in final cases and facilitates matters of concern to IDAB being acted on and reflected in final decisions.
When Ministers have provided support which the Board has advised against, it is established practice to seek formal Accounting Officer Direction, which goes to the PAC and enters the public domain.
To date, the Board has been content to register its concerns with Ministers through this process.
IDAB has the authority under section 10(4) to require the Secretary of State to lay a statement before Parliament if he acts contrary to a recommendation it has made. The Board would use its section 10(4) authority in circumstances where the statutory powers of IDAB were being inappropriately challenged or where it was, in the Board’s view, in the public interest that it should do so and it believed that the seeking of a formal Direction alone was insufficient.
Types of case on which IDAB advice should be sought
The presumption is that in any business support matter where the Department is seeking or would benefit from independent commercial or financial advice IDAB should be consulted.
IDAB’s chief current role is advising on government financial assistance supporting employment preservation and creation.
The high priority accorded to job creation and the limited financial resources available to government for the foreseeable future make the most efficient use of public funds imperative.
IDAB focuses on evaluating the financial cost to government relative to the numbers, quality and longevity of jobs created.
IDAB provides this advice on individual projects and on programmes under which individual projects are evaluated.
IDAB has an oversight role in ensuring that wherever government financial support for job creation is being provided it is done so efficiently.
How IDAB advice will be sought
In respect of statutory matters it will be asked to:
- provide commercial and financial advice on all large regional support cases (ie those above £5 million);
- provide commercial and financial advice on all large cases of support given under section 8 (ie on a non-regional aid basis). Again, the level at which cases should be referred is set at £5 million;
- provide commercial and financial advice on proposals to make major modifications to existing forms of support;
- provide commercial and financial advice on all new schemes of support that rely on either Section 7 or 8.
In respect of non-statutory matters it will be asked to:
In view of the wish of the Department to make better use of IDAB, the skills and expertise it embodies and the independent review role it can provide, it will also provide commercial and financial advice on large projects that fall outside its statutory remit (eg Launch Investment cases) where the Department considers that the Board’s expertise would enable it to improve its decision-making.
Regional Growth Fund (RGF)
As the RGF includes cases that both fall within and outside IDAB’s statutory remit and as the RGF incorporates a unique assessment and appraisal process based on that developed by IDAB, the following arrangements will apply:
Round 1/2 cases
- process as previously agreed, ie cases seeking aid of £10 million or more or from applicants that had previously been before IDAB come to the Board once due diligence is complete and before a decision to award final offer letter is made;
- progress reports on outstanding cases for every Board meeting
Round 3 cases
- process as previously agreed, cases seeking aid of £10 million or more or from applicants that had previously been before IDAB come to the Board once due diligence is complete and before a decision to award final offer letter is made;
- one page report on each of the cases covered by the £10 million or more or previous applications criteria circulated for every Board meeting allowing Members to comment on emerging issues/suggest issues for consideration eg during due diligence;
- due diligence reports on each of the cases copied to Members at the draft stage
Round 4 and exceptional cases
- IDAB to be notified of all applications in response to the competitive round announced on 17 January 2013 at an early stage and prior to submission to the Ministerial Group (ie pre conditional offer stage) so that IDAB or one or more of its members can provide early advice on those where its experience and expertise is most relevant;
- the process for applications that are approved by the Ministerial Group will be that set out above for Round 3 cases;
- all exceptional RGF cases of £2 million or more or any others that it or the Department wishes it to review to be considered by IDAB or one or more of its members before the start of the due diligence process and again before the final offer letter stage.
All RGF cases
- the RGF team may refer other cases or programmes to IDAB at any stage of the process where they wish to seek the Board’s advice
In all cases, issues will be brought to the Board at a sufficiently early stage in their development to enable its views to have a real impact on the outcome.
These terms of reference were developed and agreed in February 2013, but are subject to regular review and amendment.