Corporate report

HMPPS Annual report and accounts 2024-25: Financial statements (HTML)

Published 30 October 2025

Applies to England and Wales

Statement of Comprehensive Net Expenditure (SoCNE)

For the period ended 31 March 2025

			2024–25		2023–24
	Notes	£’000	£’000	£’000	£’000
Income from contracts with customers	3a	(256,298)		(241,584)
Other operating income	3b	(45,752)		(41,716)
Total operating income			(302,050)		(283,300)
Staff costs	4a	3,479,323		3,294,506
Purchase of goods and services	4b	2,800,810		2,574,358
Depreciation, amortisation and impairment charges	4c	728,545		570,901
Other non-cash expenditure	4d	492,688		493,629
Total operating expenditure			7,501,366		6,933,394
Net operating expenditure			7,199,316		6,650,094
Finance expense	4e	33,654		4,215
Net expenditure for the year			7,232,970		6,654,309

Other Comprehensive Expenditure

For the period ended 31 March 2025

		2024–25	2023–24
Items which will not be reclassified to net operating expenditure:	Notes	£’000	£’000
Net (gain)/loss on revaluation of property, plant and equipment	5	(54,684)	(28,580)
Net (gain)/loss on revaluation of intangible assets	6	(262)	(350)
Net (gain)/loss on revaluation of right of use assets	7	3,084	211
Net (gain)/loss on revaluation of assets held for sale	8	579	164
Remeasurement of net pension liabilities (gain)/loss	18	(12,797)	788,534
Total comprehensive expenditure		7,168,890	7,414,288

The notes form part of these accounts.

Statement of Financial Position (SoFP)

At 31 March 2025

			31 Mar 2025		31 March 2024
	Notes	£’000	£’000	£’000	£’000
Non-current assets
Property, plant and equipment	5	11,699,975		11,144,079
Intangible assets	6	81,977		70,648
Right of use assets	7	120,444		163,951
Investments		251		239
Total non-current assets			11,902,647		11,378,917
Current assets
Assets held for sale	8	9,898		2,490
Inventories	9	70,463		63,622
Trade and other receivables	10	133,045		163,729
Cash and cash equivalents	11	59,201		61,308
Total current assets			272,607		291,149
Total assets			12,175,254		11,670,066
Current liabilities
Trade and other payables	12a	(900,840)		(841,160)
Financial liabilities	14b	(20,911)		(23,536)
Lease liabilities	7ii	(22,563)		(20,230)
Provisions	13	(26,122)		(33,458)
Total current liabilities			(970,436)		(918,384)
Non-current assets less net current liabilities			11,204,818		10,751,682
Non-current liabilities
Trade and other payables	12b	(238)		(281)
Financial liabilities	14b	(127,755)		(148,666)
Lease liabilities	7ii	(112,112)		(139,305)
Provisions	13	(184,727)		(187,814)
Pension deficit	18b	(472,245)		(529,505)
Total non-current liabilities			(897,077)		(1,005,571)
Assets less liabilities			10,307,741		9,746,111
Taxpayers’ equity
General Fund			6,910,612		6,323,951
Revaluation Reserve			3,397,129		3,422,160
Total taxpayers’ equity			10,307,741		9,746,111

The notes form part of these accounts.

James McEwen

Chief Executive Officer

21 October 2025

Statement of Cash Flows (SoCF)

For the period ended 31 March 2025

			2024–25		2023–24
	Notes	£’000	£’000	£’000	£’000
Cash flows from operating activities
Net expenditure		(7,232,970)		(6,654,309)
Adjustments for non-cash transactions		1,254,166		1,048,407
Adjustment for intradepartmental settlements and asset transfers with MoJ		293,320		264,956
Adjustment for finance costs	4e	9,826		16,787
Adjustment for pension contributions paid less service costs	18	(68,531)		(49,435)
(Increase)/decrease in trade and other receivables:	10	30,684		2,200
Less: Impairments in trade and other receivables	4c	(1,009)		(1,568)
(Increase)/decrease in inventories	9	(6,841)		1,552
Increase/(decrease) in trade and other payables	12a	59,680		(23,881)
Increase/(decrease) in capital payables		(33,888)		37,616
Less: Payments of amounts due to the Consolidated Fund to MoJ		–		75
Utilisation of provisions	13	(35,697)		(25,506)
Net cash outflow from operating activities			(5,731,260)		(5,383,106)
Cash flows from investing activities
Purchase of property, plant and equipment	5	(1,204,328)		(1,161,449)
Purchase of intangibles	6	(11,361)		(20,483)
Proceeds on disposal of property, plant and equipment		187		143
Proceeds on disposal of assets held for sale		7,154		10,054
Proceeds on disposal of investments		–		–
Net cash outflow from investing activities			(1,208,348)		(1,171,735)
Cash flows from financing activities
Net funding received from MoJ		6,997,500		6,620,000
Payments of amounts due to the Consolidated Fund to MoJ		–		(75)
Repayments of local authority loans	12b	(43)		(43)
Capital element of payments in respect of finance leases and on-balance sheet (SoFP) PFI contracts		(23,535)		(23,084)
Repayment of IFRS 16 lease liabilities	7	(26,595)		(24,255)
Interest paid		(9,826)		(16,787)
Net financing			6,937,501		6,555,756
Net increase/(decrease) in cash and cash equivalents in the period			(2,107)		915
Cash and cash equivalents at the beginning of the period	11	61,308		60,393
Cash and cash equivalents at the end of the period	11	59,201		61,308
Increase/(decrease) in cash and cash equivalents			(2,107)		915

The notes form part of these accounts.

Statement of Changes in Taxpayers’ Equity (SoCTE)

For the period ended 31 March 2025

		General Fund	Revaluation Reserve	Total Reserves
	Notes	£’000	£’000	£’000
Balance at 1 April 2023		6,263,983	3,528,804	9,792,787
Changes in taxpayers’ equity for 2023–24
Net expenditure for the year to 31 March 2024		(6,654,309)	–	(6,654,309)
Net gain/(loss) on revaluation of:
Property, plant and equipment		–	28,580	28,580
Intangible assets		–	350	350
Right of use assets			(211)	(211)
Assets held for sale		–	(164)	(164)
Release of reserves to the General Fund		135,199	(135,199)	–
Remeasurement of net pension liabilities	18	(788,534)	–	(788,534)
Funding from the MoJ		6,615,363	–	6,615,363
Settlement of transactions with MoJ		291,522	–	291,522
Notional items:
Auditor’s remuneration	4d	405	–	405
Notional element of MoJ overhead recharges		460,322	–	460,322
Balance at 31 March 2024		6,323,951	3,422,160	9,746,111
Changes in taxpayers’ equity for 2024–25
Net expenditure for the year to 31 March 2025		(7,232,970)	–	(7,232,970)
Net gain/(loss) on revaluation of:
Property, plant and equipment			54,684	54,684
Intangible assets			262	262
Right of use assets			(3,084)	(3,084)
Assets held for sale			(579)	(579)
Release of reserves to the General Fund		76,314	(76,314)	–
Remeasurement of net pension liabilities	18	12,797	–	12,797
Funding from the MoJ		6,997,500	–	6,997,500
Settlement of transactions with MoJ		260,564	–	260,564
Notional items:
Auditor’s remuneration	4d	450	–	450
Notional element of MoJ overhead recharges		472,006	–	472,006
Balance at 31 March 2025		6,910,612	3,397,129	10,307,741

The notes form part of these accounts.

Notes to the accounts

1. Statement of accounting policies

1.1 Basis of preparation

The accounts have been prepared in accordance with the Government Financial Reporting Manual (FReM) 2024–25 issued by HM Treasury. The accounting policies contained in the FReM follow International Financial Reporting Standards (IFRS) as adapted or interpreted for the public sector context.

Where the FReM permits a choice of accounting policy, the policy which has been judged to be the most appropriate to the particular circumstances of His Majesty’s Prison and Probation Service (HMPPS, or ‘the agency’) for the purpose of giving a true and fair view has been selected. The particular accounting policies adopted by HMPPS are described below. They have been applied consistently in dealing with items that are considered material to the accounts.

The functional and presentational currency of HMPPS is the British pound sterling (£).

1.2 Accounting convention

These accounts have been prepared on an accruals basis under the historical cost convention, modified to account for the revaluation of non‑current assets, assets held for sale, inventories and financial assets, where material.

1.3 Changes in accounting policy and disclosures

a) Changes in accounting policies and new and amended standards adopted

The 2025 to 2026 FreM withdraws the option to remeasure intangible assets using the revaluation model from 1 April 2025. With permission from HM Treasury all MoJ entities are adopting this adaptation of IAS 38 Intangible Assets early. This change is applied prospectively with carrying values at the transition date of 1 April 2024 now considered historical cost. Intangible assets have not been revalued in 2024 to 2025.

b) New standards, amendments and interpretations issued, but not effective, for the financial year beginning 1 April 2024, and not adopted early

IFRS 17 Insurance Contracts replaces IFRS 4 Insurance Contracts and is to be included in the FReM for mandatory implementation from 2025 to 2026. It establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of this Standard. It will require all insurance contract liabilities within scope to be calculated as the present value of future insurance cash flows with a provision for risk and held as liabilities on the SoFP. To assess the impact of the standard, we have reviewed contracts, provisions, contingent assets and liabilities for terms that meet the definition of an insurance contract under IFRS 17. Following further clarification guidance to support public sector adoption of the standard, we have assessed there will be no significant impact of the new standard on the HMPPS accounts.

IFRS 18 Presentation and Disclosure in Financial Statements will change the way HMPPS presents the SoCNE. The full impact of this new standard on HMPPS will not be determined until it has been adopted for use in the public sector by the FReM. It is expected to be implemented in the public sector from 1 April 2028.

HMPPS does not consider that any other new or revised standard or interpretation will have a material impact.

c) Changes in presentation and reclassifications

There have been no changes to presentation or reclassifications in 2024 to 2025. Changes required to reflect the revised structure of HMPPS have been made to the statement of operating costs by operating segment (Note 2) and the 2023 to 2024 statement has been restated for comparability.

1.4 Going concern

HMPPS is an executive agency of the MoJ. The future financing of HMPPS’ activities is expected to be met by the MoJ from supply funding, which is voted annually under the relevant Appropriation Act.

1.5 Operating income

Operating income is generated directly from the operating activities of HMPPS and is recognised as revenue in the SoCNE in accordance with IFRS 15. Revenue is recognised when a performance obligation included within an agreement with a customer is satisfied, at the transaction price allocated to that performance obligation.

A large proportion of operating income relates to grant funding from the European Social Fund (ESF), and the recharge of expenditure to other government departments, particularly healthcare funding.

Grant funding from the ESF is recognised in accordance with IAS 20 Accounting for Government Grants and Disclosure of Government Assistance on a systematic basis over the period in which the related eligible expenditure is incurred. ESF grants are presented using the gross method in accordance with IAS 20, with income disclosed under other operating income in Note 3. The funding is subject to conditions including delivery of agreed outputs, timely submission of claims, and compliance with funding rules. Non-compliance may result in clawback or the withholding of future funds.

Healthcare funding is recognised on an accruals basis. Establishments log healthcare activity (medical escorts and bedwatches), which is used as the basis for raising invoices with standard 30‑day payment terms.

The recharge of expenditure for provision of immigration detention is also recognised on an accruals basis. The cost of provision is recharged under a service level agreement, whereby the costs are recharged based on management accounts information and an agreed rate for each prison bed used in the year.

Another significant element of operating income comes from retail sales in prison shops, where the income is recognised on the exchange of goods.

Operating income is stated net of VAT. Further information can be found in Note 3.

Supply funding drawn down from the department is treated as financing and credited directly to the General Fund on a cash basis, in accordance with the FReM.

1.6 Purchases of goods and services

Purchases of goods and services are recognised on an accruals basis. Accrued expenditure is recognised when HMPPS has an unconditional obligation to pay customers, and is based on agreed amounts, contractually or by another form of mutual agreement.

1.7 Staff costs

Staff costs are recognised as expenses on an accruals basis when HMPPS has an unconditional contractual obligation to pay them.

1.8 Notional costs

Notional costs comprise statutory auditors’ remuneration, which represents the National Audit Office’s cost for the audit of HMPPS’ accounts, and notional costs for HMPPS’ usage of corporate services provided by MoJ. Such notional costs are credited directly to the General Fund. The majority of the notional recharge costs relate to IT services, HR services, estates costs, and shared services processing charges that are centrally managed by the department on behalf of HMPPS.

1.9 Property, plant and equipment, and intangible assets

Initial recognition and capitalisation threshold

Property, plant and equipment, and intangible assets, including subsequent expenditure on existing assets, are initially recognised at cost, representing the costs directly attributable to acquiring or constructing the asset and bringing it to the location and condition necessary for it to be capable of operating in the manner intended by management. The threshold for capitalising individual assets is £10,000 (including irrecoverable VAT).

Significant purchases of assets which are separately beneath the capitalisation threshold, in connection with a single project, are treated as a grouped asset, with a capitalisation threshold of £1 million (including irrecoverable VAT).

Where an item costs less than the prescribed limit but forms an integral part of a package whose total value is greater than the capitalisation level, then the item is capitalised.

Where a large asset, for example a building, includes a number of components with significantly different asset lives, e.g. plant and equipment, then these components are treated as separate assets and depreciated over their own useful lives.

Subsequent expenditure

Subsequent expenditure to enhance an item of property, plant and equipment is recognised as an increase in the carrying amount of the asset when it is probable that additional future economic benefits or service potential deriving from the cost incurred to replace a component of such item will flow to the enterprise and the cost of the item can be determined reliably. Where a component of an asset is replaced, the cost of the replacement is capitalised if it meets the criteria for recognition above. The carrying amount of the part replaced is de-recognised.

Other expenditure that does not generate additional future economic benefits or service potential, such as repairs and maintenance, is charged to the SoCNE during the financial year in which it is incurred.

Intangible assets are recognised if it is probable that future service potential will flow to HMPPS and the cost can be measured reliably. Intangible assets comprise software developed by third parties, including MoJ, and software licences.

Assets under construction

Assets under construction are valued at historic cost within property, plant and equipment and intangible assets. The assets are not subject to depreciation or amortisation until completion, when the carrying value is transferred to the respective asset category. Expenditure is capitalised where it is directly attributable to bringing an asset into working condition, such as external consultant costs, relevant employee costs and an appropriate portion of relevant overheads.

Subsequent valuation

Subsequent to initial recognition, property, plant and equipment are carried at current value.

Land and buildings (including dwellings) are recorded at current value, as interpreted by the FReM, on the basis of professional valuations, which are conducted for each property at least once every five years. Full professional valuations are undertaken by the Valuation Office Agency, an independent body, using Royal Institution of Chartered Surveyors (RICS) Valuation – Professional Standards, known as the Red Book. In between full valuations, carrying values are adjusted through desktop valuations to ensure they are not materially different from those that would be determined at the end of the reporting period. For buildings, the index applied is the Building Cost Information Service (BCIS) construction data Tender Price Index (TPI) that reflects price changes in the construction sector and is a good indicator of price pressure in building contracts in the UK. Furthermore, location factors are applied reflecting movements in the local property markets and a reduction in remaining life is reflected. In 2024 to 2025, 31% of the valuations were physical.

Freehold prison buildings and secure training centres are classified as specialised buildings which cannot be sold on the open market. Specialised properties are valued and carried at depreciated replacement cost (DRC) to a modern equivalent basis in accordance with the Red Book, adjusted for functional obsolescence.

Land associated with buildings valued to depreciated replacement cost (DRC) have been assessed to current value, interpreted as existing use value (EUV), having regard to the cost of purchasing a notional replacement site in the same locality, equally suitable for the existing use and of the same size, with normally the same physical and locational characteristics as the actual site, other than characteristics of the actual site that are irrelevant, or of no value, to the existing use. Where the use is too specialised to categorise in market terms, regard has been had to the range of uses prevailing in the locality of the actual site.

Assets which were recently held for their service potential but are now surplus are valued at current value in existing use where there are restrictions on HMPPS or the asset, which would prevent access to the market at the reporting date. Otherwise, surplus assets are valued at fair value in accordance with IFRS 13 Fair Value Measurement.

In determining whether a non-operational asset is surplus, HMPPS assesses whether there is a clear plan to bring the asset back into use as an operational asset. Where there is a clear plan, the asset is not considered as surplus and is maintained at current value in existing use. Otherwise, the asset is assessed as being surplus and valued at fair value under IFRS 13 Fair Value Measurement.

Farms and surplus freehold land, prison officers’ quarters and some other non‑specialised buildings are carried at open market valuations.

Non-property assets are recorded at cost on purchase and restated at each reporting date using the Producer Price Index published by the Office for National Statistics (ONS). In March 2025, the ONS announced a pause in publication of this data following identification of historical errors, therefore no PPI data is available for 2025 and no indexation has been applied to non-land and building assets in 2024 to 2025. It is possible that the historical errors in the ONS data could translate into errors in the carrying values of the assets brought forward at 1 April 2024, however, a sensitivity analysis has been conducted to demonstrate that it is very unlikely that these could have resulted in a material error. 2023 to 2024 figures have been maintained as published as we do not have details of the level of error involved and are therefore unable to calculate a restated figure.

Subsequent to initial recognition, intangible assets are recognised at fair value in accordance with IAS 38 Intangible Assets as adapted by the FreM.

As no active market exists for the intangible assets held by HMPPS, fair value is assessed as replacement cost less accumulated amortisation and impairment losses.

Intangible assets in service were re-measured at the end of each reporting period using the Producer Price Index issued by the ONS up until 31 March 2024. From 1 April 2024 all MoJ entities have been granted permission to early adopt the 2025 to 2026 FreM adaptation withdrawing the revaluation model for intangible assets. The carrying values at the transition date of 1 April 2024 are considered historical cost and will be amortised over the remaining lives of the assets.

Fair value hierarchy and inputs

The valuation technique applied to all fair value figures of surplus, non-operating properties, is the market approach in accordance with IFRS 13 Fair Value Measurement. It uses prices and other relevant information generated by market transactions involving identical or comparable (that is, similar) assets.

The inputs to this technique constitute level 2 inputs in each instance. Level 2 inputs are inputs that are observable for the asset, either directly or indirectly. The inputs used take the form of analysed and weighted market evidence such as sales, rentals and yields in respect of comparable properties in the same or similar locations at or around the valuation date.

For other property assets in continuing use, fair value is interpreted as market value or ‘value in use’. In the Red Book this is defined as “market value on the assumption that property is sold as part of the continuing enterprise in occupation”. The value in use of a non-cash-generating asset is the present value of the asset’s remaining service potential, which can be assumed to be at least equal to the cost of replacing that service potential.

Depreciated historical cost is used as a proxy for fair value for those assets with short useful lives or low values, as allowed by the FReM.

Estimation uncertainty

The valuation of HMPPS’ estate is inherently subjective due to, among other factors, build cost, functional obsolescence, changes in the TPI, prevailing market yields and comparable market transactions. As a result, the valuations HMPPS places on its estate are subject to a degree of uncertainty.

Depreciated replacement cost (DRC)

The starting point for any DRC is to establish the cost of the gross replacement cost, which is considered to fit the modern equivalent asset.

The costs used for the DRC valuations are costs relating to actual construction projects and as such are reliable and documented. Costs include VAT with the exception of PFI contracts which are delivered via a tax‑efficient route.

Adjustments are made to the costs in line with the RICs Red Book to exclude certain costs, such as contingencies, abnormal expenditure due to ground conditions, and demolitions. These costs are readily identifiable in the cost data provided.

Fees shown in the costs provided relate to the main contractor’s and design fees with some fees included in individual work packages. As part of the valuation approach, additional professional fees, such as quantity surveyors, are added to the valuation. There is considered to be potential for a small reduction of up to 1% to 2% in the fee additions applied.

The other key starting point is the assignation of lives to the assets, where BCIS research and published data obtained through feedback from the construction industry have been used, to provide averaged assessments of typical component lives.

The Valuation Office Agency approach to depreciation takes a componentised approach to assign ages and remaining lives and reflect any changes incurred such as on capital expenditure (capex), the level of maintenance, and applying physical obsolescence. The physical age of an asset is established through factual evidence and site inspection, and adjustments are made to ages to reflect renewal of components, with corresponding adjustments to component remaining lives.

The final stage of the valuation is the application of functional obsolescence. There is a degree of subjectivity around the application of functional obsolescence and a movement of 5% either way is considered reasonable.

Assumptions tested	Change	New valuation £m	Variance £m	Variance %
Actual total DRC buildings value 2025		8,228
Alternate scenarios:
Capex changes[footnote 1]	50%	8,250	23	0.3
Changes in TPI[footnote 2]	-2points	8,188	(40)	(0.5)
Changes in TPI[footnote 3]	2points	8,268	40	0.5
Physical depreciation[footnote 4]	-10%	8,274	46	0.6
Changes in functional obsolescence[footnote 5]	5%	8,224	(4)	(0.05)
Changes in functional obsolescence[footnote 6]	-5%	8,232	4	0.05
Changes in professional fees[footnote 7]	-1%	8,196	(32)	(0.4)

Land

Land associated with buildings valued to DRC has been assessed to current value, interpreted as EUV, having regard to the cost of purchasing a notional replacement site in the same locality. This land has been valued using the direct comparable approach. Available comparables might show a wide range depending on planning, use, size, density and location, and therefore require adjustment for these factors. These factors increase the level of valuer judgement involved.

The Valuation Office Agency has agreed with the MoJ for each site as to whether the actual site remains appropriate for the valuation. In some circumstances, alternative sites would be appropriate and in these instances the land has been valued assuming the benefit of planning permission for development for a use, or a range of uses, prevailing in the vicinity of the selected site.

Having regards to 2019 RICS Guidance Note ‘Comparable Evidence in Real Estate Valuation’, due to a lack of direct land comparable for valuers to draw upon this year, greater regard was given to market reports/forecasts.

In terms of land evidence, the table below shows a sensitivity analysis on a land valuation (HMP Elmley), extrapolated across the population.

Assumption tested	Assumption	Elmley £000	Extrapolated total £000
£/hectare	5%	119	55,590
£/hectare	-5%	(119)	(55,590)

A reasonable alternative assumption is to adjust the price per hectare (£/ha). The current value of the asset could be up to +5% higher £119,000 or by –5% lower (–£119,000), which extrapolates to +/– £55.6 million across the total population. Given the level of valuer judgement involved in land valuations, which are subjective, and the current market conditions with a lack of transactions, we are unable to quantify the potential level of uncertainty.

Existing use value – buildings

For the HMPPS estate the use of the EUV basis of valuation is used to support those properties where there is market-based evidence to support the use of EUV. This basis of valuation is typically used to value the land element of prisons, non‑specialist assets, married quarters, farms, land as well as non-specialist approved premises and probation assets. As a market‑based assessment of value, EUV relies on the availability of comparable market evidence that is capable of analysis and appropriate application by the valuer, using the required assumptions embodied within EUV, to reliably inform the asset valuation being undertaken.

The table below shows sensitivity analysis on one of the EUV valuations provided (Worthing Probation Office), extrapolated across the EUV population.

			Valuation
Assumption tested	Assumption	Worthing £000	Extrapolated total £000	Variance from base £000
Market yield (base)	10.00%	493	65,500
Market yield	10.25%	480	67,100	1,600
Market yield	9.75%	505	63,900	(1,600)

The UK investment market has experienced a significant rebasing over the past year, and in particular this has resulted in drops to the yields for regional offices. Assumptions are reviewed annually to ensure they remain appropriate.

Revaluation

Gains arising on revaluation are credited to the Revaluation Reserve and shown in Other Comprehensive Expenditure, unless they reverse a revaluation decrease on the same asset. Reversals are credited to the SoCNE to the extent of the previous amount expensed, and any excess is credited to the Revaluation Reserve.

When an asset’s carrying value decreases as a result of a permanent diminution in the value of the asset due to a clear consumption of economic benefit or service potential, the decrease is charged directly to operating expenditure in the SoCNE, with any remaining Revaluation Reserve balance released to the General Fund.

A revaluation decrease (other than as a result of a permanent diminution) is reversed against any existing amount held in the Revaluation Reserve in respect of that same asset, with any residual decrease taken to net operating costs in the SoCNE.

Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the SoCNE and depreciation based on the asset’s original cost is transferred from the Revaluation Reserve to the General Fund.

Depreciation and amortisation

Depreciation and amortisation are charged on a straight‑line basis at rates calculated to write off the value of assets less any estimated residual value evenly over their estimated useful lives. Useful lives are reviewed annually. Where a change to the life of an asset or asset category is determined, depreciation is charged on a straight‑line basis over the assessed remaining life. Depreciation commences in the month of acquisition for all non‑current assets.

If an asset comprises two or more significant components, with substantially different useful lives, then each component is treated separately for depreciation purposes and depreciated over its individual useful life. Estimated useful asset lives are within the following ranges:

Freehold land	Not depreciated
Freehold buildings including dwellings	Shorter of remaining life or up to 60 years (up to 55 years for dwellings) depending on building
Leasehold buildings including dwellings	Shorter of remaining life, remaining lease period or up to 50 years (up to 55 years for dwellings)
Information technology, plant and equipment, furniture, fixtures and fittings	3 to 15 years depending on individual asset type
Vehicles	5 to 15 years depending on individual asset type
Intangible assets – software	3 to 10 years
Intangible assets – licences	Length of the licence

1.10 Leases

Government bodies typically lease properties used for administrative purposes for reasons of efficiency and flexibility. HMPPS also benefits from the lease of land under leases with peppercorn consideration, which could not have been obtained through outright purchase. For other types of asset, HMPPS determines whether to lease or purchase based on value for money considerations, such as whether the underlying asset is required for its entire life or for a more limited period.

Scope and exclusions – HMPPS as lessee

In accordance with IFRS 16 Leases, contracts, or parts of contracts, that convey the right to control the use of an asset for a period of time are accounted for as leases.

As adapted by the FReM, IFRS 16 has been applied to leases with nil or nominal (that is, significantly below market value) consideration and arrangements for accommodation between government departments.

When making the above assessments, HMPPS excludes two types of leases. Firstly, those relating to low value items, which it considers as those where the underlying asset would have a cost of less than £10,000 when new, provided those items are not highly dependent on or integrated with other items. Secondly, contracts whose term (comprising the non‑cancellable period together with any extension options HMPPS is reasonably certain to exercise and any termination options HMPPS is reasonably certain not to exercise) is less than 12 months.

Initial recognition – HMPPS as lessee

At the commencement of a lease (or on the date of transition to IFRS 16, if later), HMPPS recognises a right of use asset and a lease liability.

The lease liability is measured at the value of the remaining lease payments, discounted either by the interest rate implicit in the lease or, where this is not readily determinable, HMPPS’ incremental rate of borrowing. This rate is advised annually by HM Treasury (4.72% for leases recognised in 2024, 4.81% for those in 2025). Where the lease includes extension or termination options, the lease payments will be for the non‑cancellable period together with any extension options HMPPS is reasonably certain to exercise and any termination options HMPPS is reasonably certain not to exercise.

In the event that a lease contract has expired, but HMPPS remains in occupation pending negotiations for a renewed term, the lease term has been measured as the estimated time until the new contract will be agreed.

The measurement of lease payments excludes any VAT payable, and irrecoverable VAT is expensed at the point it falls due in line with IFRIC 21 Levies.

The right of use asset is measured at the value of the lease liability, adjusted for: any lease payments made before the commencement date, any lease incentives received, any incremental costs of obtaining the lease, and any costs of removing the asset and restoring the site at the end of the lease. However, where the lease requires nil or nominal consideration (usually referred to as a ‘peppercorn’ lease), the asset will instead be measured at its EUV, using market prices or rentals for equivalent land and properties, with the difference between the carrying amount of the right of use asset and lease liability treated as notional income (or on transition, a credit to the General Fund).

Enhancements to leased assets such as alterations to a leased building are not classified within right of use assets but remain classified as property, plant and equipment in accordance with the FReM.

Subsequent measurement – HMPPS as lessee

After initial recognition, the right of use asset will be measured using the fair value model. HMPPS considers that the cost model (measurement by reference to the lease liability) is a reasonable proxy for fair value in the case of non‑property leases, and for property leases of less than five years or with regular rent reviews. For other leases, the asset will be carried at a revalued amount.

The value of the asset will be adjusted for subsequent depreciation and impairment, and for reassessments and modifications of the lease liability as described below. Where the amount of a reduction to the asset exceeds the carrying value of the asset, the excess amount is recognised in expenditure.

The lease liability will be adjusted for the accrual of interest, repayments, reassessments and modifications. Reassessments are reappraisals of the probability of the options given by the existing lease contract, for example where we no longer expect to exercise an option, while modifications are changes to the lease contract. Reassessments and modifications are accounted for by discounting the revised cash flows: using a revised discount rate where HMPPS becomes or ceases to be reasonably certain to exercise or not exercise an extension or termination option, or the lease is modified to amend the non‑cancellable period, change the term of the lease, change the consideration or the scope, or at the existing discount rate where there is a movement in an index or rate that will alter the cash flows, or the amount payable under a residual value guarantee changes.

Expenditure for each financial year includes interest on the lease liability and a straight‑line deprecation charge on the right of use asset over the life of the lease, together with any impairment of the right of use asset and any change in variable lease payments that was not included in the measurement of the lease payments during the period in which the triggering event occurred. Rental payments in respect of leases of low value items, or with a term under 12 months, are also expensed.

Estimates and judgements

Where a lease is embedded in a contract for services, the amount to be recognised as the right of use asset and lease liability should be the stand‑alone price of the lease component only. Where this is not readily observable, a determination will be made by reference to other observable data, such as the fair value of similar assets or price of contracts for similar non‑lease components.

As described above, HMPPS has determined the lease term by assessing the level of certainty as to whether termination or extension options will be exercised. In making these judgements, reliance has been placed on the professional judgement of estates staff, supported by information on corporate asset management plans, other business strategies, investment already made in the underlying asset, ongoing business needs and market conditions.

HMPPS has determined that the cost model is a reasonable proxy for fair value in most cases, because the rents payable are aligned to open market rates. In the case of longer leases where there are not regular rent reviews, there is a greater chance of divergence between cost and fair value, hence a professional revaluation is appropriate.

HMPPS leases various non‑property assets such as vehicles and IT equipment. Since 2023 to 2024 the leasing of a fleet of vehicles has also been recognised as a right of use asset. No other non‑property leases have been recognised in these accounts.

1.11 Non‑current assets held for sale

Non‑current assets are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction, and a sale is considered highly probable. Property assets held for sale are stated at the lower of carrying amount immediately prior to classification as held for sale and their fair value less the costs of selling the asset. Any subsequent impairment or reversal of impairment is recognised in the SoCNE. Non‑current assets classified as held for sale are not depreciated.

Gains and losses on disposal of non‑current assets are determined by comparing the proceeds with the carrying amount and are recognised in the SoCNE. When revalued assets are sold, the amounts included in the Revaluation Reserve are transferred to the General Fund.

1.12 Impairment

At each reporting date, in accordance with IAS 36 Impairment of Assets as adapted by the FReM, HMPPS assesses all assets for indications of impairment. If any such indications exist, the assets in question are tested for impairment by comparing the carrying value of those assets with their recoverable amounts. If the recoverable amount of an asset is less than its carrying value, the carrying value of the asset is reduced to its recoverable amount. The recoverable amount of an asset is the higher of its ‘fair value less costs to sell’ and ‘value in use’ as defined under ‘Subsequent valuation’ in Note 1.9. Current values in existing use are determined as follows:

• land and non-specialised – existing use or market value where there is an open market for such properties

• specialised buildings – DRC on a modern equivalent asset basis

Impairment losses are recognised in the SoCNE, except where the asset had been revalued previously and a Revaluation Reserve is held for the asset. In this case the value of the reserve is released first, and then excess impairment is charged to the SoCNE.

Impairment losses resulting from a permanent diminution in the value of the asset, due to a clear consumption of economic benefit or service potential, are recognised directly in the SoCNE, and any Revaluation Reserve held for the asset is transferred to the General Fund.

The reversal of an impairment loss is recognised in the SoCNE to the extent that the original charge, adjusted for subsequent depreciation, was previously recognised, with any remaining amount recognised in the Revaluation Reserve.

1.13 Deferred income

Deferred income is recognised at the point in time where income has been received but a performance obligation has not been met.

1.14 Payables

These are financial liabilities other than those classified as held at fair value through profit or loss (net operating expenditure). Payables are recognised at the point in time where the expense of the same transaction is recognised.

They are valued initially at fair value, with the transaction value regarded as the fair value at the date of initial recognition. Where the time value of money is considered to be material, the estimated cash values are discounted using the effective interest rate. They are derecognised when all obligations are settled.

1.15 Service concession arrangement including PFI arrangements

Service concession arrangements, including those under PFI contracts, involve private sector operators being contractually required to provide services to the public using certain infrastructure assets. HMPPS classifies these as service concession arrangements when they satisfy the conditions set out in IFRIC 12 Service Concession Arrangements, as adapted for the public sector context by the FReM. Future payment streams are assessed to identify separately the infrastructure, interest and service components.

Where the service concession arrangement involves the creation or provision of an asset by the operator, HMPPS recognises the infrastructure asset at fair value (or the present value of future minimum infrastructure payments, if lower) as a non‑current asset in the SoFP, with a corresponding liability for future payments under the agreement, following the principles contained within IFRS 16. As per the FReM, this approach means the liability is remeasured whenever there is a change in future lease payments resulting from a change in an index or rate used to determine those payments.

The service element is charged to the SoCNE in the period the services are rendered by the operator. The interest element is charged to the SoCNE over the contract to produce a constant periodic rate of interest on the remaining balance of the liability. Older prison PFI arrangements and other service concession arrangements use HM Treasury discount rates. HMP Thameside PFI and, where possible, any future PFI contracts will use the interest rate implicit in the contract.

‘Manage and Maintain’ contracts are used for some privately operated prisons where the building is owned by HMPPS, but access is provided to the operator in order to deliver the contracted services. As the assets relating to these contracts were owned by HMPPS prior to the start of the contract there is no related liability or interest charge.

1.16 Inventories

Inventories comprise raw materials, work‑in‑progress, finished goods and consumable stores. Inventories are valued at the lower of current replacement cost and net realisable value. Current replacement cost is not considered materially different from historical cost.

1.17 Employee benefits

Short‑term benefits such as salaries and wages or post‑employment benefits resulting from employment and long‑term benefits such as long service awards, including termination benefits (for example early departure costs) and pension benefits are recognised at the cost of providing the benefit in the period in which it is earned by the employee, rather than when it is paid or becomes payable.

The department recognises the expected cost of the annual leave entitlement of its employees that is accrued at the end of the financial year in accordance with IAS 19 Employee Benefits.

Defined benefit pension schemes

Principal Civil Service Pension Scheme

The provisions of the PCSPS cover most past and present employees in HMPPS HQ and prisons. While this is an unfunded defined benefit scheme, in accordance with the FReM adaptation of IAS 19, HMPPS accounts for it as a defined contribution scheme. HMPPS recognises contributions payable as an expense in the year in which they are incurred, and the legal or constructive obligation is limited to the amount that it agrees to contribute to the fund.

Local Government Pension Scheme

HMPPS probation staff and past employees of the probation trusts, including those who transferred to Community Rehabilitation Companies (CRC) and/or Commissioned Rehabilitative Services (CRS) are covered by the provisions of the LGPS via a pension fund administered by the Greater Manchester Pension Fund (GMPF). This is a funded defined benefit scheme.

The Secretary of State for Justice has provided a guarantee to GMPF in respect of the CRS’ participation in the GMPF for pension liabilities that transferred to the CRS.

The pension fund is subject to an independent triennial actuarial valuation to determine each employer’s contribution rate. The last formal actuarial valuation was at 31 March 2022 and was carried out during 2022. The results of the valuation as at 31 March 2022, and the annual roll forward for each subsequent year including 2024 to 2025, are shown in the actuarial report as at 31 March 2025 and are reflected in the 2024 to 2025 accounts.

A professional calculation of the net pension position at the reporting date is obtained from Hymans Robertson LLP, the independent actuary for GMPF. The assumptions underpinning the actuarial calculations are subject to review as part of HMPPS’ annual reporting and audit process.

The IAS 19 net pension position is the present value of the defined benefit obligation less the fair value of plan assets at the reporting date. The present value of the obligation is determined by discounting estimated future cash outflows using rates as advised by the scheme actuary.

In between formal actuarial valuations, the obligation is approximated by adjusting the most recent full valuation using latest available membership data. Where this net position is a surplus, IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction is applied and limits that surplus by means of an asset ceiling to reflect that the full economic benefit is not realisable by the agency. Further detail on the application of IFRIC 14 is included in Note 18 Pensions.

Remeasurements, comprising actuarial gains and losses, the effect of the asset ceiling, and the return on plan assets (excluding interest) are recognised within Other Comprehensive Expenditure in full in the period in which they arise. Service costs are recognised in the SoCNE and are spread systematically over the working lives of the employees. The net interest charge in the SoCNE reflects the unwinding of the discount applied to the net liabilities of the scheme.

IAS 19 requires that the discount rate is determined by reference to market yields at the end of the reporting period, on high‑quality AA corporate bonds of a currency and duration consistent with the currency and duration of the benefit obligations. The discount rate at 31 March 2024 is slightly higher compared to the previous year, reflecting a higher yield on high‑quality corporate bonds and reducing the pension obligation.

National Employment Savings Trust (NEST) Defined Contribution Pension Scheme

Under the government’s policy of ‘Workplace Pensions’, all workers who meet the minimum requirements for auto‑enrolment must be enrolled into a pension scheme by their employer.

NEST Defined Contribution Scheme is offered to individuals working in HMPPS who are not civil servants and are therefore not eligible to join the Civil Service Pension Scheme (public sector prisons/HQ prison staff) or the LGPS (Probation Service staff). This covers those working on a sessional/fee paid basis who are on a contract of services and not a contract of employment.

Civil Service Injury Benefits Scheme

The Civil Service Injury Benefits Scheme is accounted for under IAS 37. Please see Note 1.18.

1.18 Provisions and contingent liabilities

Provisions represent liabilities of uncertain timing or amount. Provisions are recognised when HMPPS has a present legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation, and for which a reliable estimate can be made of the amount.

If the likelihood of payment is less than probable, but greater than remote, or the obligation cannot be measured reliably, a contingent liability is disclosed in the accounts.

Provisions and contingent liabilities are valued at the best estimate of the expenditure required to settle the obligation. They are discounted to present value using rates set by HM Treasury (4.03%, 4.07% and 4.81% for short–term, medium‑term and long–term cash flows respectively), where the effect is material.

Litigation

For litigation provisions, the likelihood of the outcome and the estimated amount due are calculated by legal professionals, using their professional judgment and expert knowledge of the case providing a range of values with the most likely estimate of the amount payable being provided for. Where legal cases relate to contract disputes, commercial professionals are also involved in the calculation of the likelihood and value. Further information on the inherent uncertainties in the litigation provision is included at Note 13.

Civil Service Injury Benefits Scheme

HMPPS is required to pay benefits to staff who are members of the PCSPS, who are injured in connection with their employment, under the Civil Service Injury Benefits Scheme. Benefits are paid only in respect of loss of earning capacity, and a provision is made for expected future costs. The Government Actuary’s Department provides HMPPS with annuity rates each year covering whole of life (for total liability value), one year, and two to five years (for cash flow values). These assumptions take the time value of money into account.

Injury benefit provisions are discounted using the HM Treasury post‑employment benefits real discount rate of 2.40% (2023 to 2024: 2.45%).

In calculating the provision, assumptions are made around life expectancy and the discount rate, as prescribed by HM Treasury, used in the calculation. Further detail is included at Note 1.20 and Note 13.

Dilapidation

The dilapidations provision reflects an estimate of the future expenditure required to return office space and other leased facilities to their original condition at the end of the lease term.

The provision is calculated using the assumed repairing level for each location, which is stipulated in the lease terms. A cost of repair per square metre is determined by our contracted surveyors, Cushman and Wakefield, and applied to the area for each lease at the specified level. The repair rates for each level are reviewed bi‑annually and updated as required.

The provision is calculated on the assumption that HMPPS will occupy the space until the end of each lease agreement with no intention to exercise any break options, unless there is a clear plan to terminate the lease early.

Further detail on assumptions is included at Note 13.

1.19 Value Added Tax

Most of HMPPS’ activities are outside the scope of VAT. In general, output tax does not apply and input tax on purchases is not recoverable. Irrecoverable VAT is charged to the relevant expenditure category or included in the capitalised purchase costs of non‑current assets. Where output tax is charged or input tax is recoverable, the amounts are stated net of VAT.

1.20 Critical accounting estimates and judgements

HMPPS makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Estimates and judgements are evaluated continually and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

Revaluation and impairment of non‑current assets

Subsequent to initial recognition, land and buildings (including dwellings) are recorded at current EUV based on professional valuations performed at 31 March each year by the Valuation Office Agency, an independent body, in accordance with the Royal Institute of Chartered Surveyors Appraisal and Valuation Manual.

Buildings that are specialised, such as the prisons, are valued at DRC to a modern equivalent basis. This modern equivalent is assumed to be in the same location with the same internal area as the existing property. The ‘beacon’ sets the cost to build a new modern equivalent asset and was updated in 2022 to 2023 based on the cost data from Berwyn, Five Wells and Fosse Way. The revised beacon cost has been applied to all of the prison estate. However, a factor has been applied to the older prisons to reduce the DRC and remove increases relating to the high specification of a new build. Substantially all other buildings are measured at current value determined from market‑based evidence. Each property is valued annually, with 31% of valuations physically inspected in 2024 to 2025. The remaining 69% of properties are valued via desktop calculations using the BCIS TPI, location factors and a one‑year reduction in remaining life.

Land associated with buildings valued to DRC have been assessed to current value, interpreted as EUV, having regard to the cost of purchasing a notional replacement site in the same locality, equally suitable for the existing use and of the same size, with normally the same physical and locational characteristics as the actual site, other than characteristics of the actual site that are irrelevant, or of no value, to the existing use. Where the use is too specialised to categorise in market terms, regard has been given to the range of uses prevailing in the locality of the actual site.

All assets other than land, buildings, intangible assets and assets under construction are ordinarily revalued at each reporting date using the Producer Price Index prepared by the ONS. In March 2025 the ONS announced a pause in publication of this data following identification of historical errors. Therefore, no PPI data is available for 2025 and no indexation has been applied to non‑land and building assets in 2024 to 2025.

LGPS assets and liabilities

The present value of the net pension position depends on several actuarially derived assumptions about inflation, salary and pension trends, discount factors and mortality rates. The estimated assets and liabilities are subject to fluctuation and uncertainty due to changes in these assumptions over time and differences between assumptions and actual events. Sensitivity analysis in relation to the key assumptions used in the calculation of the gross pension liability is provided in Note 18 along with details of the assumptions underlying the application of IFRIC 14.

The pension position for 2024 to 2025 has been calculated using suitable assumptions that have been selected and validated for use by the scheme actuary.

All assumptions remain under constant review. As the economic climate changes and more information becomes available, assumptions are reconsidered. More detail is reflected in Note 18.

Provisions for liabilities and charges

The recognition and measurement of provisions rely on the application of professional judgement, historical experience and other factors expected to influence future events. Provision balances which contain regular, homogeneous transactions are often derived from complex financial models. Estimates and assumptions applied in these models are continually reviewed. Where the likelihood of a liability crystallising is deemed probable and can be measured with reasonable certainty, a provision is recognised. Further information is set out in Note 1.18 and Note 13.

Critical judgements in applying HMPPS accounting policies

Service concession arrangements

The classification of arrangements as service concession arrangements requires HMPPS to determine, based on an evaluation of the terms and conditions of the arrangements, whether it controls the infrastructure. Where HMPPS is judged to control the infrastructure, the contract assets are reflected in the SoFP.

2. Statement of operating costs by operating segment

The statement of operating costs by operating segment presents net operating cost information based on the structure reported to the HAB. The segments reflect the main directorate structure within HMPPS, allowing the Board to have a clear view on the costs of frontline operations. Net cost information for directorates where budgets are held by MoJ is not reported to the HAB. This includes MoJ corporate services and estates functions and the National Distribution Centre.

The HMPPS directorate structure is as follows.

Public Sector Prisons

The Public Sector Prisons Directorate is responsible for line management and leadership of public sector prisons in England and Wales. The directorate drives the transformation of public sector prisons by implementing effective and efficient performance measures. It also ensures that offenders are treated with decency.

Probation Service

The Probation Service Directorate is responsible for line management and leadership of probation services in England and Wales. The Probation Service is a statutory criminal justice service that supervises all offenders released into the community, working closely with local delivery partnerships including prisons, CRS and other providers. The directorate also provides pre‑sentence reports to the courts, advising on appropriate sentencing measures for all individuals convicted of an offence.

Contracted Operational Delivery

The Contracted Operational Delivery Directorate manages national HMPPS contracts including privately operated prisons, reducing reoffending contracts and prisoner escort and custody services contracts. It manages strategic relationships and operational contracts. These support frontline delivery in prisons, probation, and the wider criminal justice system. Through these contracts HMPPS seeks to ensure effective system‑wide performance, promoting and supporting the integration of services at local level.

National Services

Under the new HMPPS area model, which was launched in October 2023, the newly created Area Executive Director roles oversee the management of seven National Services. These are Community Accommodation Services, Psychology Services, Prison Operational Policy, Foreign National Offenders, Public Protection Group, Women’s Services and Health and Safety, Litigation, Estates and Safety.

Youth Custody Service

The YCS was established in September 2017 as a distinct part of HMPPS. It has responsibility for placing and safeguarding children who have been remanded or sentenced to custody and for the provision of sufficient and suitable places for those children. The YCS operates all public sector sites across the Children and Young People Secure Estate, for children and young people between the ages of 10 and 17 across England and Wales. This includes three YOIs, one secure training centre, and the contract supporting delivery of secure children’s homes. The YCS is also involved in the oversight of a secure school run by Oasis Restore Trust.

HMPPS Change

HMPPS Change manages complex programmes to deliver them in the most effective way, ensuring the right resources are allocated to the right programmes. It includes Change Delivery Group, electronic monitoring, OneHMPPS and Change – Supply. Change Delivery Group provides central oversight of the major change programmes and projects across HMPPS, providing assurance, reporting of programme delivery, and intervening to tackle emerging, complex issues utilising the Gateway Management System.

Electronic monitoring is a valuable tool which strengthens offender management in the community and drives the broader criminal justice priorities of reducing reoffending and protecting the public. The electronic monitoring team supports the collection of data on the operation of electronic monitoring services, device‑wearer compliance and tag performance to support decision making which is vital to the delivery of court‑ordered community orders, court bail, post‑release licence conditions, and the supervision of foreign national offenders.

OneHMPPS ensures a HQ structure that provides a greater focus on operations and a more joined up model between prisons and probation. This programme has overseen a restructure of HQ functions, supported the development of the area model and the move to national services. Change – Supply includes the Prison Capacity Sub-Portfolio consisting of new prisons, prison estate expansion, private prisons contract expiry and transfer, the Accelerated Houseblock Delivery Programme, small secure houseblocks and the Rapid Deployment Cells Programme, as well as the long-term estates strategy and pipeline.

Rehabilitation

The Rehabilitation Directorate brings together agency oversight of the rehabilitative pathways, focusing on giving the right interventions to the right people at the right time. The work centres around delivery of the HMPPS Rehabilitation Strategy, which forms the basis for how we design and deliver our services. These services cover statutory interventions on drugs and alcohol (testing and community treatment) and education services, as well as a range of core rehabilitation services. These include CRS and accredited programmes, covering areas including employment, skills and education services (such as the Prisoner Education Service), accommodation and priority projects (such as CAS), and health and wellbeing (such as the Joint Offender Personality Disorder Pathway).

Directorate of Security

The Directorate of Security works closely with both MoJ and the operational field to provide the most effective and innovative support for security in prisons and probation.

Strategy, Performance and Corporate Delivery

Strategy, Performance and Corporate Delivery provides core performance, assurance and risk management to allow the HMPPS Accounting Officer to discharge their duties. The directorate sets out the HMPPS organisational strategy with partners and the wider government. It also delivers business planning for the agency, ensuring proper governance and change management to achieve our goals. Additionally, it directly supports operational delivery by enabling people to access and apply evidence and insight.

This helps continuously improve performance, monitor risk, enhance information security, and assure service delivery. The directorate also leads on diversity and inclusion, and works collaboratively to create more inclusive and open learning cultures.

Transforming Delivery

The Transforming Delivery Directorate leads on digital technology and services, operating models and developing the workforce.

Probation Operations

The Probation Operations Directorate provides national assistance to frontline delivery, including responding to emerging issues and improving outcomes. The directorate is made up of the following teams: National Security Division, Courts and Custody Group, Central Operations Support, Community Delivery Group and Professional Register.

Prison Operations

The Prison Operations Directorate provides services to support prison operations and continuous improvement of frontline service delivery across HMPPS.

Table 2a presents resource expenditure, which is reported to the Board by segment. Table 2b reconciles this total to the SoCNE, which also includes annually managed expenditure (AME) and SoCNE expenditure which counts towards capital for budgeting purposes. The HAB does not receive a SoFP analysed by operating segment and therefore such an analysis is not presented here.

Comparative information for 2023 to 2024 has been restated to reflect the current segment structure following the reorganisation on 1 April 2024.

2a Total net resource expenditure as reported to the Board in 2024 to 2025

			2024–25
	Gross expenditure	Income	Net
	£’000	£’000	£’000
Public Sector Prisons	2,670,982	(84,518)	2,586,464
Probation Service	1,164,060	(11,319)	1,152,741
Contracted Operational Delivery	1,048,726	(93,279)	955,447
National Services	261,036	(6,431)	254,605
Youth Custody Services	220,008	(37,631)	182,377
HMPPS Change	180,449	(15,362)	165,087
Rehabilitation Pathways and Partnerships	143,671	(48,775)	94,896
Directorate of Security	91,275	(1,871)	89,404
Strategy, Performance and Corporate Delivery	58,597	–	58,597
Transforming Delivery	48,069	–	48,069
Probation Operations	29,335	(498)	28,837
Prison Operations	20,735	–	20,735
Total	5,936,943	(299,684)	5,637,259

2b Reconciliation between operating segments and SoCNE in 2024 to 2025

			2024–25
	Gross expenditure	Income	Net
	£’000	£’000	£’000
Total net expenditure by operating segment as reported to the Board	5,936,943	(299,684)	5,637,259
PFI prisons and service concession arrangements accounting treatment	1,625	–	1,625
HMPPS costs where the budget is held within MoJ	900,600	(1,725)	898,875
MoJ costs where the budget is held within HMPPS	(11,029)	–	(11,029)
MoJ overhead recharges	492,637	–	492,637
Accounting treatment of impairments, provisions and pensions (AME)	156,248	–	156,248
Other	57,996	(641)	57,355
Total net expenditure per SoCNE	7,535,020	(302,050)	7,232,970

2a Total net resource expenditure as reported to the Board in 2023 to 2024 (restated)

			2023–24 (restated)
	Gross expenditure	Income	Net
	£’000	£’000	£’000
Public Sector Prisons	2,461,202	(78,555)	2,382,647
Probation Service	1,087,315	(10,094)	1,077,221
Contracted Operational Delivery	1,008,842	(90,053)	918,789
National Services	213,371	(8,962)	204,409
Youth Custody Service	222,034	(34,047)	187,987
HMPPS Change	179,893	(12,051)	167,842
Rehabilitation Pathways and Partnerships	143,981	(44,752)	99,229
Directorate of Security	86,531	(1,330)	85,201
Strategy, Performance and Corporate Delivery	81,750	(2)	81,748
Transforming Delivery	21,450	–	21,450
Probation Operations	29,883	(404)	29,479
Prison Operations	22,794	–	22,794
Total	5,559,046	(280,250)	5,278,796

2b Reconciliation between operating segments and SoCNE in 2023 to 2024

			2023–24
	Gross expenditure	Income	Net
	£’000	£’000	£’000
Total net expenditure by operating segment as reported to the Board	5,559,046	(280,250)	5,278,796
PFI prisons and service concession arrangements accounting treatment	15,498	–	15,498
HMPPS costs where the budget is held within MoJ	825,848	(2,545)	823,303
MoJ costs where the budget is held within HMPPS	(3,484)	–	(3,484)
MoJ overhead recharges	492,512	–	492,512
Accounting treatment of impairments, provisions and pensions (AME)	28,602	–	28,602
Other	19,587	(505)	19,082
Total net expenditure per SoCNE	6,937,609	(283,300)	6,654,309

3. Income

	2024–25	2023–24
	£’000	£’000
(a) Income from contracts with customers
External sales of prison industries	7,297	7,382
Retail prison shop income	82,623	81,464
In-cell TV income	1,855	1,831
Healthcare funding	75,886	66,400
Provision of immigration detention	3,521	6,609
Youth remand income	37,027	33,284
Education funding	11,359	11,153
Electronic monitoring services	15,357	12,043
Estates recharges	22	425
Other income	21,351	20,993
Total income from contracts with customers	256,298	241,584
b) Other operating income
European Social Fund and other European funding	44,918	40,818
Rental income	614	898
Capital grant in kind	220
Total other operating income	45,752	41,716
Total operating income	302,050	283,300

Income from contracts with customers includes sales to prisoners through the prison shop, healthcare funding and youth remand income.

Income in respect of services rendered is recovered in line with the related service level agreement on a full cost basis.

4. Expenditure

4a Staff numbers and related costs

Staff numbers and further details of related costs, including exit packages, are reported in the remuneration and staff report in the Accountability report.

	2024–25	2023–24
	£’000	£’000
Permanent staff – wages and salaries	2,537,983	2,394,375
Permanent staff – social security costs	274,955	257,193
Permanent staff – pension costs	602,211	538,178
Agency staff costs	38,249	54,802
Departures and severance payments	27,347	45,042
Inward secondments	4,756	11,715
Sub–total	3,485,501	3,301,305
Recoveries in respect of outward secondments	(6,178)	(6,799)
Total net costs	3,479,323	3,294,506

4b Purchase of goods and services

	2024–25	2023–24
	£’000	£’000
PFI prison service charges and privately operated prison charges	587,507	563,867
Service concession arrangement charges for prisoner escorting and custody services	169,572	156,543
Electronic monitoring	106,841	87,882
Contracted probation services	99,219	96,388
Accommodation, maintenance and utilities	781,256	688,468
Offender-related costs	538,843	505,659
Offender learning	175,066	157,784
Secure children’s homes	32,318	30,759
Secure training centres	25,348	23,202
IT services and telecommunications	62,262	34,148
Training and other staff-related costs	29,634	31,259
Travel, subsistence and hospitality	48,658	53,811
Professional services	48,488	48,828
Communications, office supplies and services	20,002	18,525
Compensation costs	30,818	34,336
Other costs	44,978	42,899
Total purchase of goods and services	2,800,810	2,574,358

Offender-related costs include offender food, clothing, cleaning equipment, prisoner earnings and prison shop cost of sales.

4c Depreciation, amortisation and impairment charges

		2024–25	2023–24
	Notes	£’000	£’000
Depreciation – Property, plant and equipment	5	457,027	435,684
Depreciation – Right of use assets	7	25,500	26,011
Amortisation – Intangible assets	6	14,504	13,288
Impairment charge – Property, plant and equipment	5	216,227	94,392
Impairment charge/(reversal) – Right of use assets	7	14,278	(42)
Impairment charge/(reversal) – Intangible assets	6	–	–
Impairment charge/(reversal) – Assets held for sale	8	-	–
Impairment charge/(reversal) – Trade and other receivables	10	1,009	1,568
Total depreciation, amortisation and impairment charges		728,545	570,901

In January 2025, a newly constructed prison HMP Millsike was brought into use. In accordance with accounting policies the asset was subsequently valued using the DRC method reflecting its specialised nature and this resulted in an impairment charge of £147.4 million which is included in the above. Downwards revaluations on go live are a common consequence of the use of the DRC methodology, which disregards many of the actual costs indirectly involved in creating the asset, by assuming a perfect site and ‘instant build’, which is not representative of the realities of the construction environment. Management will continue to assess the asset for indicators of impairment annually.

4d Notional expenditure

	2024–25	2023–24
	£’000	£’000
MoJ overhead recharges	492,637	492,512
Net (profit)/loss on disposal of assets	(399)	712
Capital grant in kind	–	–
External auditor’s remuneration	450	405
Total other non‑cash expenditure	492,688	493,629

MoJ overhead recharges

The MoJ overhead recharges represent the costs of services shared with MoJ including estates, digital technology, finance, HR, communications, analytical services, shared services and commercial and contract management. Recharges are apportioned based on appropriate cost drivers, such as headcount, floor space usage, or direct expenditure, to ensure a fair and transparent allocation aligned with operational resource consumption.

External auditor’s remuneration

The costs of the audit performed by the National Audit Office on behalf of the Comptroller and Auditor General are recognised as a non‑cash charge. During the year, HMPPS did not purchase any non‑audit services. The cost for the audit of the HMPPS Annual Report and Accounts for 2024 to 2025 was £450,000 (2023 to 2024: £405,000).

4e Finance expense

		2024–25	2023–24
	Notes	£’000	£’000
Interest on LGPS pensions	18	24,068	(10,612)
Unwinding of discount on provisions	13	(240)	(1,960)
Total non‑cash finance expense		23,828	(12,572)
Finance charge on PFI	14c	8,232	13,784
Finance charge on right of use assets	7	1,538	2,946
Other finance charge		56	57
Total cash finance expense		9,826	16,787
Total finance expense		33,654	4,215

5. Property, plant and equipment

	Land	Buildings	Dwellings	Information technology	Plant and equipment	Furniture, fixtures and fittings	Payments on account and assets under construction	Total
2024–25	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Cost or valuation
At 1 April 2024	1,083,092	7,990,647	27,003	270,584	513,778	21,077	1,767,842	11,674,023
Additions	700	2,538	–	41,931	21,182	18	1,171,847	1,238,216
Disposals	(1,409)	(258)	(885)	(1,289)	(16,406)	–	–	(20,247)
Transfers	(3,950)	(24,134)	–	–	(96)	–	(13,777)	(41,957)
Reclassifications	322	1,000,602	(12,780)	16,733	11,108	532	(1,035,096)	(18,579)
Impairments	(1,379)	(190,242)	–	(1,335)	(3,010)	–	(22,727)	(218,693)
Revaluations	35,565	(352,005)	303	333	32	–	–	(315,772)
At 31 March 2025	1,112,941	8,427,148	13,641	326,957	526,588	21,627	1,868,089	12,296,991
Depreciation
At 1 April 2024	–	–	(7)	(165,948)	(347,765)	(16,224)	–	(529,944)
Charged in year	–	(370,158)	(511)	(43,582)	(41,660)	(1,116)	–	(457,027)
Disposals	–	–	–	909	15,982	–	–	16,891
Transfers	–	66	–	–	–	–	–	66
Reclassifications	–	73	2	–	1	–	–	76
Impairments	–	–	–	209	2,257	–	–	2,466
Revaluations	–	370,008	504	(50)	(6)	–	–	370,456
At 31 March 2025	–	(11)	(12)	(208,462)	(371,191)	(17,340)	–	(597,016)
Carrying value
At 31 March 2025	1,112,941	8,427,137	13,629	118,495	155,397	4,287	1,868,089	11,699,975
At 31 March 2024	1,083,092	7,990,647	26,996	104,636	166,013	4,853	1,767,842	11,144,079
Asset financing:
Owned	958,671	6,236,809	13,629	118,495	124,784	4,287	1,868,089	9,324,764
On-balance sheet (SoFP) PFI and other service concession arrangement contracts	154,270	2,190,328	–	–	30,613	–	–	2,375,211
At 31 March 2025	1,112,941	8,427,137	13,629	118,495	155,397	4,287	1,868,089	11,699,975

Non‑operational assets

Included in the carrying values above are six non‑operational sites with a combined value of £4.4 million (31 March 2024: 63 non‑operational sites with a combined value of £18.1 million). These sites are vacant, but do not yet meet the criteria for classification as assets held for sale.

Valuation, estimation uncertainty and critical accounting estimates and assumptions

Further detail on valuation and estimation uncertainty can be found at Note 1.9 and on critical accounting estimates and assumptions at Note 1.20.

Reclassification as assets held for sale

Properties with a total carrying value of £13.4 million were reclassified to assets held for sale in 2024 to 2025 (2024 to 2025: £0.1 million).

Property, plant and equipment (continued)

	Land	Buildings	Dwellings	Information technology	Plant and equipment	Furniture, fixtures and fittings	Payments on account and assets under construction	Total
2023–24	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Cost or valuation
Balance at 1 April 2023	1,080,203	7,571,396	27,141	352,352	488,725	20,064	1,559,270	11,099,151
Additions	–	10,027	–	24,928	13,945	(475)	1,075,408	1,123,833
Disposals	–	(415)	–	(123,619)	(10,417)	(269)	–	(134,720)
Transfers	489	303	–	–	–	–	5,915	6,707
Reclassifications	384	838,014	(175)	13,172	10,069	999	(866,623)	(4,160)
Impairments	1,222	(89,447)	(38)	–	–	–	(6,128)	(94,391)
Revaluations	794	(339,231)	75	3,751	11,456	758	–	(322,397)
At 31 March 2024	1,083,092	7,990,647	27,003	270,584	513,778	21,077	1,767,842	11,674,023
Depreciation
At 1 April 2023	–	(851)	(1)	(252,872)	(309,775)	(14,872)	–	(578,371)
Charged in year	–	(360,378)	(490)	(34,275)	(39,503)	(1,038)	–	(435,684)
Disposals	–	2	–	123,619	9,489	269	–	133,379
Transfers	–	–	–	–	–	–	–	–
Reclassifications	–	(245)	–	–	(2)	2	–	(245)
Impairments	–	–	–	–	–	–	–	–
Revaluations	–	361,472	484	(2,420)	(7,974)	(585)	–	350,977
At 31 March 2024	–	–	(7)	(165,948)	(347,765)	(16,224)	–	(529,944)
Carrying value
At 31 March 2024	1,083,092	7,990,647	26,996	104,636	166,013	4,853	1,767,842	11,144,079
At 31 March 2023	1,080,203	7,570,545	27,140	99,480	178,950	5,192	1,559,270	10,520,780
Asset financing:
Owned	940,042	6,281,756	26,996	104,636	119,742	4,853	1,767,842	9,245,867
On-balance sheet (SoFP) PFI and other service concession arrangement contracts	143,050	1,708,891	–	–	46,271	–	–	1,898,212
At 31 March 2024	1,083,092	7,990,647	26,996	104,636	166,013	4,853	1,767,842	11,144,079

6. Intangible assets

	Software	Licences	Payments on account and assets under construction	Total
2024–25	£’000	£’000	£’000	£’000
Cost or valuation
At 1 April 2024	235,486	21,504	21,704	278,694
Additions	6,259	–	5,102	11,361
Disposals	(6,829)	–	–	(6,829)
Reclassifications	29,841	272	(25,038)	5,075
Revaluations	276	–	–	276
Transfers	–	–	9,135	9,135
Impairments	–	–	–	–
At 31 March 2025	265,033	21,776	10,903	297,712
Amortisation
At 1 April 2024	(188,281)	(19,765)	–	(208,046)
Charged in year	(13,643)	(861)	–	(14,504)
Disposals	6,829	–	–	6,829
Reclassifications	–	–	–	–
Revaluations	(14)	–	–	(14)
Transfers	–	–	–	–
At 31 March 2025	(195,109)	(20,626)	–	(215,735)
Carrying value
At 31 March 2025	69,924	1,150	10,903	81,977
At 31 March 2024	47,205	1,739	21,704	70,648
Asset financing
Owned	69,924	1,150	10,903	81,977
At 31 March 2025	69,924	1,150	10,903	81,977

At 31 March 2025 and 31 March 2024, there were no individually material intangible assets.

Intangible assets (continued)

	Software	Licences	Payments on account and assets under construction	Total
2023–24	£’000	£’000	£’000	£’000
Cost or valuation
At 1 April 2023	364,002	21,274	10,741	396,017
Additions	8,723	(3)	11,763	20,483
Disposals	(163,594)	(1,129)	–	(164,723)
Reclassifications	23,886	1,118	(20,679)	4,325
Revaluations	2,469	244	–	2,713
Transfers	–	–	19,879	19,879
Impairments	–	–	–	–
At 31 March 2024	235,486	21,504	21,704	278,694
Amortisation
At 1 April 2023	(334,307)	(19,879)	–	(354,186)
Charged in year	(12,497)	(791)	–	(13,288)
Disposals	160,662	1,129	–	161,791
Reclassifications	–	–	–	–
Revaluations	(2,139)	(224)	–	(2,363)
Transfers	–	–	–	–
At 31 March 2024	(188,281)	(19,765)	–	(208,046)
Carrying value
At 31 March 2024	47,205	1,739	21,704	70,648
At 1 April 2023	29,695	1,395	10,741	41,831
Asset financing
Owned	47,205	1,739	21,704	70,648
At 31 March 2024	47,205	1,739	21,704	70,648

7. Leases

Right of use lease asset			2024–25			2023–24
	Land and buildings	Other	Total	Land and buildings	Other	Total
	£’000		£’000	£’000		£’000
Cost or valuation
At 1 April	226,176	3,943	230,119	209,699	–	209,699
Additions and remeasurements	(6,803)	6,158	(645)	18,957	3,943	22,900
Disposals	(5,797)	–	(5,797)	(624)	–	(624)
Reclassifications	–	–	–	–	–	–
Revaluations	(5,898)	–	(5,898)	(1,558)	–	(1,558)
Impairments	(14,278)	–	(14,278)	42	–	42
Transfers	–	–	–	(340)	–	(340)
At 31 March	193,400	10,101	203,501	226,176	3,943	230,119
Depreciation
At 1 April	(65,922)	(246)	(66,168)	(42,373)	–	(42,373)
Charged in year	(23,602)	(1,898)	(25,500)	(25,765)	(246)	(26,011)
Disposals	5,797	–	5,797	624	–	624
Reclassifications	–	–	–	245	–	245
Revaluations	2,814	–	2,814	1,347	–	1,347
Transfers	–	–	–	–	–	–
At 31 March	(80,913)	(2,144)	(83,057)	(65,922)	(246)	(66,168)
Net right of use assets	112,487	7,957	120,444	160,254	3,697	163,951

Lease liabilities

A maturity analysis of contractual undiscounted cash flows relating to lease liabilities is presented below. The cash flows and balances are presented net of irrecoverable VAT.

			31 March 2025			31 March 2024
Buildings	Gross £’000	Interest £’000	Net £’000	Gross £’000	Interest £’000	Net £’000
Amounts falling due:
Not later than one year	22,844	(2,062)	20,782	21,779	(2,477)	19,302
Later than one year but not later than five years	68,000	(5,204)	62,796	66,779	(7,952)	58,827
Later than five years	46,327	(2,648)	43,679	91,687	(13,998)	77,689
	137,171	(9,914)	127,257	180,245	(24,427)	155,818
Less: unaccrued interest	(9,914)			(24,427)
Balance at 31 March	127,257			155,818
Current			20,782			19,302
Non‑current			106,475			136,516
			127,257			155,818

			31 March 2025			31 March 2024
Other	Gross £’000	Interest £’000	Net £’000	Gross £’000	Interest £’000	Net £’000
Amounts falling due:
Not later than one year	2,091	(310)	1,781	1,079	(151)	928
Later than one year but not later than five years	5,923	(286)	5,637	2,968	(179)	2,789
Later than five years	–	–	–	–	–	–
	8,014	(596)	7,418	4,047	(330)	3,717
Less: unaccrued interest	(596)			(330)
Balance at 31 March	7,418			3,717
Current			1,781			928
Non‑current			5,637			2,789
			7,418			3,717

Amounts recognised in the Statement of Comprehensive Net Expenditure

	31 March 2025	31 March 2024
	£’000	£’000
Depreciation charge	25,500	26,011
Interest expense	1,538	2,946
Short‑term leases	19	19
Low value asset leases (excluding short-term leases)	9	9
Licenses not capitalised	689	689
Total	27,755	29,674

Amounts recognised in the Statement of Cash Flows

	31 March 2025	31 March 2024
	£’000	£’000
Interest expense	1,538	2,946
Repayment of principal on leases	25,057	21,309
Total	26,595	24,255

8. Assets held for sale

	31 March 2025	31 March 2024
	£’000	£’000
Cost or valuation
At 1 April	2,490	9,115
Reclassifications	13,428	175
Disposals	(5,441)	(6,636)
Impairments	–	–
Revaluations	(579)	(164)
At 31 March	9,898	2,490

HMPPS has committed to a plan to sell various surplus properties, which are to be sold for commercial use and domestic dwellings. The properties are available for sale in their present condition and the sales are highly probable to occur within one year from the date of classification as an asset held for sale.

9. Inventories

	31 March 2025	31 March 2024
	£’000	£’000
Industries and farms
Raw materials	32,453	26,190
Work‑in‑progress	2,287	2,544
Finished goods	2,248	2,166
	36,988	30,900
Consumables	33,475	32,722
Total inventories	70,463	63,622

10. Trade and other receivables

	31 March 2025	31 March 2024
	£’000	£’000
Trade receivables	28,414	23,903
Other receivables	21,145	40,045
VAT receivables	40,914	51,644
Intra‑departmental receivables	11,332	11,702
Prepayments	6,722	11,938
Accrued income	24,518	24,497
Total trade and other receivables	133,045	163,729

11. Cash and cash equivalents

	31 March 2025	31 March 2024
	£’000	£’000
Balance at 1 April	61,308	60,393
Net change in cash and cash equivalents	(2,107)	915
Balance at 31 March	59,201	61,308
The following balances at 31 March were held at:
Government Banking Service	57,487	60,015
Commercial banks and cash in hand	1,714	1,293
Cash at bank and in hand	59,201	61,308

At 31 March 2025, all bank accounts were held with the Government Banking Service.

Third party monies

At 31 March 2025, HMPPS held cash of £13.7 million (£13.6 million at 31 March 2024) on behalf of offenders. As this cash belongs to third parties, the balance is not included in the SoFP in these accounts.

12. Trade and other payables

12a. Amounts falling due within one year

	31 March 2025	31 March 2024
	£’000	£’000
Trade payables	60,439	75,958
Taxation and social security	61,156	57,441
Other payables	73,281	54,778
Intra‑departmental payables	128,031	123,037
Accruals	523,379	503,394
Deferred income	54,554	26,552
Total	900,840	841,160

12b. Amounts falling due after more than one year

	31 March 2025	31 March 2024
	£’000	£’000
Local authority loan balances	238	281
Total	238	281

13. Provisions for liabilities and charges

				31 March 2025	31 March 2024
	Leasehold property dilapidations	Injury benefit scheme	Litigation and other provisions	Total	Total
	£’000	£’000	£’000	£’000	£’000
Balance at 1 April	55,345	104,885	61,042	221,272	220,394
Provided in year	1,250	10,624	30,506	42,380	47,496
Provisions not required written back	(1,450)	(2,705)	(12,711)	(16,866)	(19,152)
Provisions utilised in year	(532)	(6,872)	(28,293)	(35,697)	(25,506)
Unwinding of discount	–	–	(240)	(240)	(1,960)
Balance at 31 March	54,613	105,932	50,304	210,849	221,272

Analysis of expected timing of discounted cash flows

				31 March 2025	31 March 2024
	Leasehold property dilapidations	Injury benefit scheme	Litigation and other provisions	Total	Total
	£’000	£’000	£’000	£’000	£’000
Not later than one year	13,193	6,579	6,350	26,122	33,458
Later than one year but not later than five years	9,154	23,734	39,520	72,408	75,493
Later than five years	32,266	75,619	4,434	112,319	112,321
Balance at 31 March	54,613	105,932	50,304	210,849	221,272

Leasehold property dilapidations

Dilapidation costs are an estimate of the expenditure required to return vacated leased properties to their original condition. The movement in year is as a result of:

• updated information relating to property vacations

• new properties leased during the year

• leases terminated during the year

• changes in square metre rate (SQM) rate assumptions

The key assumption used in calculating the dilapidation provision is the rate per square metre for each of the three assumed lease types which are set by building surveyors. These are reviewed and updated bi annually, using their expert knowledge to reflect changes in the rate.

For sensitivity purposes, we have calculated the percentage change in value of the dilapidation provision based on various changes in the SQM rate.

% change in SQM rate	Change in dilapidation value (£000)	Change in dilapidation %
+ 5%	1,800	3.30%
– 5%	(1,800)	(3.30%)

Civil Service Injury Benefits Scheme provisions

From 1 April 1998, HMPPS is required to pay benefits under the Civil Service Injury Benefits Scheme. The scheme pays benefits to any PCSPS member who suffers disease or injury, which is wholly or partially attributable to the nature of the duty, or who suffers an attack or similar act which is directly attributable to employment within the service. Benefits are paid only in respect of loss of earning capacity and are designed to enhance a beneficiary’s income up to a guaranteed minimum of 85% of pensionable earnings.

One of the key assumptions used in calculating the provision is the discount rate used to place a present value on projected future cashflows. The discount rates are prescribed by HM Treasury and are therefore outside the formal control of HMPPS.

The Injury Benefits Scheme provision is sensitive to the change in discount rate which takes the time value of money into account in the annuity rates used in the calculation. The discount rate is one factor used in the calculation of an annuity rate, along with others such as life expectancy. There was a decrease in discount rate prescribed by HM Treasury in 2024 to 2025, from 2.45% to 2.40%, which in turn increased the annuity rate used in the calculation. This has increased the provision by £0.9 million.

Mortality assumptions are derived by the Government Actuary Department in line with the population within the Injury Benefits Scheme membership. For sensitivity purposes, we estimate that a one‑year decrease in life expectancy results in the annuity rate being slightly lower, with the reduction of up to 0.5. For 2024 to 2025, a one‑year decrease in member life expectancy would decrease the liability by £2.8 million or 3%.

Litigation and other provisions

Litigation provisions of £50.3 million (31 March 2024: £61.0 million) comprise legal claims against HMPPS and reflect all known claims where legal advice indicates that it is more likely than not that the claim will be successful, and the amount of the claim can be reliably estimated.^{[footnote 8]}

Legal claims which are likely to succeed with a lesser degree of certainty or cannot be estimated reliably are disclosed as contingent liabilities in Note 17.

Provisions for six cases which have resulted in annuities arising from litigation are discounted using the HM Treasury rates as payments are due over a number of years – more than 20 years in some cases. The change in the discount rate prescribed by HM Treasury does not have a material effect on the litigation provision balance given the low number of annuity cases.

Other general litigation provisions are not discounted, on the basis that the potential discounting on claims that could continue for longer than 12 months is uncertain and is not material.

The nature of these claims results in inherent uncertainty in the estimation assumptions used to provide for such cases. The significant estimations and judgements required for the calculation of this provision are the likely finding in each litigation case, the timeframe in which it is likely to be resolved, and the value of any compensation which will be due to the claimant. In order to manage the risk inherent in these judgements, cases are reviewed frequently and on an individual basis to ensure that legal experts can attribute specific scenarios to those evidenced in each case. They use their expertise to provide timeframes on settling each claim, but this is a best estimate and progress on each claim may differ as new evidence becomes available and values change to reflect this.

As a result, we do not consider there to be any meaningful sensitivity analysis that would provide further insight on the above claims as there are no common underlying assumptions across the claims.

14. Commitments under PFI contracts and other service concession arrangements

14a. On‑balance sheet (SoFP) PFI contracts and other service concession arrangements at 31 March 2025

Project name	Contract start date	Duration (years)	Description
PFI contracts
HMP Forest Bank	January 2000	25	Design, build, finance and operate an 800‑place category B prison HMP Forest Bank, on site of the former Agecroft power station. PFI contract extended by 12 months
HMP Rye Hill	January 2001	25	Design, build, finance and operate a 600‑place category B prison HMP Rye Hill at Onley, near Rugby. New houseblock has been built, increasing capacity by additional 400 places by May 2025
HMP Dovegate	July 2001	25	Design, build, finance and operate a 1,060‑place category B prison and therapeutic community facility at HMP Dovegate, Marchington
HMP Bronzefield	June 2004	25	Design, build, finance and operate a 500‑place category B prison at Ashford in Middlesex
HMP Peterborough	March 2005	25	Design, build, finance and operate an 840‑place category B prison at Peterborough in Cambridgeshire
HMP Thameside	March 2012	25	Design, build, finance and operate a 900‑place category B prison at Woolwich in London
Oakhill Secure Training Centre	May 2004	25	Design, construct and manage a secure training centre, located in Oakhill, Milton Keynes
Prison Escort Custody Service	August 2020	10	The supply and running of prison vans and escorts
Other service concession arrangements
HMP Doncaster	October 2011	15	Manage and maintain a 1,145‑place category B prison at Doncaster in South Yorkshire
HMP Oakwood	April 2012	15	Manage and maintain a 2,100‑place category C prison at Featherstone in the West Midlands
HMP Northumberland	December 2013	15	Manage and maintain a 1,348‑place category C prison at Morpeth in Northumberland
HMP Five Wells	January 2022	10	Manage and maintain a 1,680‑place category C prison at Wellingborough in Northampton
HMP and YOI Parc	December 2022	10	Manage and maintain a 1,652‑place category B prison and 60‑place YOI at Bridgend in South Wales
HMP Fosse Way	May 2023	10	Manage and maintain a 1,715‑place category C prison at HMP Fosse Way in Leicester
HMP Altcourse	June 2023	10	Manage and maintain a 1,164‑place category B prison located in Liverpool
HMP Ashfield	November 2024	10	Manage and maintain a 400‑place category B prison at Pucklechurch in South Gloucestershire

14b. Commitments under PFI and other service concession contracts

Details of the imputed finance lease charges under service concession arrangements recognised on the SoFP are given in the table below for each of the following periods:

	31 March 2025	31 March 2024
	£’000	£’000
Rentals due not later than one year	28,098	31,758
Rentals due later than one year but not later than five years	82,309	105,055
Rentals due later than five years	78,569	83,921
	188,976	220,734
Less interest element	(40,310)	(48,532)
Present value of obligations	148,666	172,202

The present value of liabilities under service concession arrangements recognised on the SoFP are given in the table below for each of the following periods:

	31 March 2025	31 March 2024
	£’000	£’000
Rentals due not later than one year	20,911	23,536
Rentals due later than one year and not later than five years	77,527	81,363
Rentals due later than five years	50,228	67,303
Present value of obligations	148,666	172,202

Details of the minimum service charge under service concession arrangements recognised on the SoFP are given in the table below for each of the following periods:

	31 March 2025	31 March 2024
	£’000	£’000
Not later than one year	801,412	728,773
Later than one year but not later than five years	2,080,788	2,142,537
Later than five years	353,348	608,293
Total service element	3,235,548	3,479,603

Future commitments are estimates based on assumptions, using the best information available. The service concession arrangement for HMP Millsike commenced in April 2025 and so while it is not included in the table at 14a, the future service charges are included in the table above.

14c. Charge to the Consolidated Statement of Comprehensive Net Expenditure

The total amount charged in the SoCNE in respect of on‑balance sheet (SoFP) PFI and other service concession arrangements transactions was £771.9 million for the year to 31 March 2025 (2023 to 2024: £752.7 million). Of this total, the service element was £763.7 million (2023 to 2024: £738.9 million) and the interest charges were £8.2 million (2023 to 2024: £13.8 million).

15. Other financial commitments

HMPPS has entered into non‑cancellable contracts for which we have a financial commitment which are not included elsewhere within these accounts.

	31 March 2025	31 March 2024
	£’000	£’000
Not later than one year	34,943	78,244
Later than one year but not later than five years	14,199	15,668
Later than five years	–	–
Total other financial commitments	49,142	93,912

16. Capital commitments

Capital expenditure contracted for at the end of the reporting period but not included in these financial statements is as follows:

	31 March 2025	31 March 2024
	£’000	£’000
Property, plant and equipment	1,671,287	284,642
Total capital commitments	1,671,287	284,642

The main cause of the significant year‑on‑year movement in capital commitments is the different stages of construction of prison builds at each year end. HMP Millsike was within a year of completion at 31 March 2024, while work at HMP Gartree was in the relatively early stages at 31 March 2025.

17. Contingent liabilities

HMPPS faces claims amounting to £69.1 million (31 March 2024: £49.1 million) for injury to staff, prisoners and the public and for third party contract disputes where the likelihood of a liability arising is deemed possible but not likely or not reliably measurable. Other claims where it is more likely than not that a liability will arise have been provided for in the accounts, see Note 13. In addition, there are a number of litigation claims that are in the process of being assessed. As a result, they are currently deemed unquantifiable.

A cross‑MoJ review of travel and subsistence policies has identified instances of incorrect tax and National Insurance treatment on certain expenses. A detailed review is ongoing to determine the likelihood and value of any resulting liability to HMRC, however the review has not yet progressed sufficiently to quantify the liability.

Remote contingent liabilities reported to Parliament are disclosed in the accountability report.

18. Pensions

Staff costs in Note 4(a) include the cost of pension contributions made by HMPPS.

15 individuals retired early on ill health grounds (2023 to 2024: 20). The total additional accrued pension liabilities in the year amounted to £0.1 million (2023 to 2024: £0.2 million).

Principal Civil Service Pension Scheme

The PCSPS and the Civil Servant and Other Pension Scheme – known as ‘alpha’ – are unfunded, multi‑employer defined benefit schemes. HMPPS is unable to identify its share of the underlying assets and liabilities. Civil Service pension schemes are accounted for as defined contribution plans as a result. The scheme actuary valued the PCSPS at 31 March 2020. Details can be found at www.civilservicepensionscheme.org.uk

For the year to 31 March 2025, employer’s contributions of £472.7 million were payable to the PCSPS (2023 to 2024: £416.5 million) at a rate of 28.97% (2023 to 2024: 26.6% to 30.3%) of pensionable pay.

The scheme actuary reviews employer contributions usually every four years following a full scheme valuation. The contribution rates are set to meet the cost of the benefits accruing during 2024 to 2025 to be paid when the member retires and not the benefits paid during this period to existing pensioners. As a result of the 2020 valuation, the employer contribution rate from 1 April 2024 to 31 March 2027 will be 28.97% of pensionable pay.

Partnership pension accounts

Employees can opt to open a partnership pension account, which is a stakeholder pension with an employer contribution. Employers’ contributions of £1.4 million (2023 to 2024: £1.3 million) were paid to one or more of the panels of three appointed stakeholder pension providers. Employer contributions are age‑related and range from 8% to 14.75% (2023 to 2024: 8% to 14.75%) of pensionable pay.

Employers also match employee contributions up to 3% of pensionable pay. In addition, employer contributions of £0.05 million, 0.5% of pensionable pay, (2023 to 2024: £0.05 million, 0.5%) were payable to the PCSPS to cover the cost of the future provision of lump sum benefits on death in service or ill health retirement of these employees. There were contributions due of £0.1 million, and no contributions prepaid to the partnership pension providers at 31 March 2025.

National Employment Savings Trust (NEST) Defined Contribution Pension Scheme

Under the government’s policy of ‘Workplace Pensions’, all workers who meet the minimum requirements for auto‑enrolment must be enrolled into a pension scheme by their employer.

NEST Defined Contribution Scheme is offered to individuals working in HMPPS who are not civil servants and are therefore not eligible to join the Civil Service Pension Scheme (Public Sector Prisons/HQ prison staff) or the LGPS (Probation Service staff). This covers those working on a sessional/fee paid basis who are on a contract of services and not a contract of employment.

The NEST scheme is run by the NEST Corporation, a non‑departmental public body. It is accountable to Parliament through the Department for Work and Pensions and is independent of government in its day‑to‑day decisions.

Pension contributions are based on a pensionable pay range, of between £6,240 and £50,270 (2023 to 2024: £6,240 and £50,270). A minimum pension contribution is not mandatory for pensionable pay below £6,240 (2023 to 2024: £6,240). Minimum contributions for 2024 to 2025 were 8% in total: 3% by employers and 4% by employees, with 1% through tax relief from government (2023 to 2024: 3% by employers and 4% by employees, with 1% through tax relief from government). For the year to 31 March 2025, employer contributions of £0.03 million were paid (2023 to 2024: £0.03 million).

Local Government Pension Scheme

HMPPS offers retirement benefits within the LGPS to probation staff working within the Probation Service.

Past employees of the Probation Trusts, and LGPS probation staff who transferred to CRS providers, to the former CRCs and to the Probation Service, are covered by the provisions of LGPS via one pension fund, GMPF, administered by their local authority council, Tameside Metropolitan Borough Council. The assets and liabilities from the former Probation Trust’s own pension funds were transferred to GMPF. The total pension obligation will continue to be the responsibility of HMPPS and will be reported in the HMPPS annual report and accounts.

The LGPS is a statutory scheme primarily governed by the LGPS Regulations 2013 and the LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014. These are subject to amendment over time. The LGPS is a funded, multi‑employer defined benefit scheme. HMPPS recognises an LGPS pension scheme liability in these accounts, in accordance with IAS 19.

A liability arises as employees earn their future entitlement to payments when they retire. The pension fund is subject to an independent triennial actuarial valuation to determine each employer’s contribution rate. The contribution rates reflect benefits as they are accrued and reflect the past experience of the schemes.

The LGPS provides benefits on a ‘final salary’ basis, up to 31 March 2014, at a normal retirement age of 65. For pensionable service up to 31 March 2008, benefits accrued at the rate of 1/80th of pensionable salary for each year of service. In addition, a lump sum equivalent to 3/80ths of final pay for every year of total membership is payable on retirement. Benefits accrued at the rate of 1/60th of pensionable salary for service from 1 April 2008 to 31 March 2014 with no automatic lump sum.

From 1 April 2014, the scheme provides benefits on a career average revalued earnings (CARE) basis. Benefits accrue at the rate of 1/49th of pensionable salary for each year of service. The scheme permits employees to take a lump sum payment on retirement in exchange for a reduction in their future annual pension. Members pay contributions of between 5.5% and 12.5% of pensionable earnings. Member contributions changed from 1 April 2014 and benefits accrued from this date are on a CARE basis, with protections in place for those members in the scheme before the changes took effect.

Following the 2022 triennial valuation, the probation employer contribution rate for the period 1 April 2023 to 31 March 2026 is 26.5%. For the year to 31 March 2025, HMPPS paid employers’ contributions of £192.9 million to GMPF, relating to current probation staff, at 26.5% (2023 to 2024: £181.1 million at 26.5%).

The pension position as at 31 March 2025, as detailed below, is based on the actuarial report from Hymans Robertson LLP, the independent actuary for GMPF, in compliance with IAS 19. There were no plan curtailments or settlements during the year.

Full details of GMPF’s Investment Strategy Statement, Funding Strategy Statement, including its annual report and financial statements, and responsibilities of the GMPF Management Panel can be found on the GMPF website: www.gmpf.org.uk

Tameside Metropolitan Borough Council is the administering authority of GMPF.

A number of assumptions are made as part of the actuarial valuation process, and the major assumptions are set out in this table. The assumptions underlying the calculation of the net pension position as at 31 March 2025 are used for accounting purposes as required under IAS 19.

Risks associated with the fund in relation to accounting

The net pension position, as at 31 March 2025, is shown in the disclosure below. This reflects the appropriate assumptions, and all assumptions remain under constant review. As the economic climate changes and more information becomes available assumptions will be updated to reflect this.

HMPPS is only liable for the pension obligations due to GMPF relating to Probation Service employees (and ultimately the CRS employees under the Secretary of State for Justice Pension Guarantee, referred to in Note 1.17). HMPPS is not liable for pension obligations of other employers that participate in the LGPS with GMPF.

Should HMPPS move to another pension fund or pension scheme, an exit payment to cover the pension liability due would be determined by GMPF and their actuary. However, there are no plans to move to another pension fund or pension scheme.

Discount rate

The discount rate is the most significant financial assumption for assessing pension obligations. An increase in the discount rate results in a decrease in the value of the pension liability for accounting purposes and vice versa. The discount rate used in these financial statements, as required by IAS 19, is based on the market yields of high–quality corporate bonds valued as at the reporting date of 31 March. Hymans’ corporate bond yield curve is based on the constituents of the iBoxx AA corporate bond index. The discount rate assumptions set by the actuary are considered appropriate. The increase in the discount rate compared to last year has resulted in a further reduction in the pension obligations, the impact of which is discussed further below in ‘Accounting for a net pension surplus and asset ceiling restriction’.

Inflation

The inflation assumption is the second most significant financial assumption for assessing pension obligations and typically drives the assumption for salary growth and pension increases (to the extent they are inflation linked).

A higher inflation assumption will lead to an increase in pension liabilities. The government announced the measure of Retail Price Index will change from 2030 to be in line with the Consumer Price Index, including housing costs. This has been allowed for when deriving the inflation assumption. Whilst there was no change to the inflation assumption this year, the actual increase in pension rate from April 2025 of 1.7%, which is lower than forecast, has resulted in an experience gain.

Mortality

The baseline mortality assumptions are based on analysis carried out by longevity experts Club Vita. Future life expectancy predictions use their continuous mortality investigation model. For 2024 to 2025, the CMI 2023 model has been used, which uses more up to date longevity data. This has resulted in a reduction in obligations.

Risk mitigation strategies

The GMPF Management Panel carries out a similar role to the trustees of a pension scheme. They are key decision makers for:

• investment strategy

• monitoring investment activity and performance

• overseeing administrative activities

• guidance to officers in exercising delegated powers

• reviewing governance arrangements

Each local council within Greater Manchester is represented on the Management Panel, along with MoJ. There have been no concerns raised by MoJ to date on GMPF’s investment or funding strategy or asset performance.

Virgin Media v NTL Pension Trustees Judgment

Following last year’s Court of Appeal judgment in Virgin Media Limited v NTL Pension Trustees Limited, on 5 June 2025 the government announced it would introduce legislation to give affected pension schemes the ability to retrospectively obtain written actuarial confirmation that historic benefit changes met the necessary standards.^{[footnote 9]}

The LGPS will therefore work with its advisers to understand whether a review of historic Section 37 confirmations is required and if necessary, undertake such a review.

McCloud Judgment

The December 2018 McCloud Judgment found that transitional arrangements put in place during the reform of firefighters and judges pension schemes was discriminatory on grounds of age. The government has confirmed this ruling also applies to the LGPS. For the 2022 valuation, McCloud liabilities were included as set out in the Department for Levelling Up, Housing and Communities 2022 valuation letter. A further government response was made on 6 April 2023 in relation to McCloud and the amendments to the statutory underpin.^{[footnote 10]} The actuary has advised that no further adjustment to the cost in the pension obligation is required for 2024 to 2025. Further information on the McCloud Judgment can be found at www.civilservicepensionscheme.org.uk/your-pension/2015-remedy/

Accounting for a net pension surplus and asset ceiling restriction

The net pension position at 31 March 2025 was a net surplus of £1,710 million, before any adjustment for the asset ceiling restriction (31 March 2024: £831 million) as set out in the actuary report provided by Hymans, under IAS 19.

IAS 19 requires that the discount rate is determined by reference to market yields at the end of the reporting period, on high‑quality AA corporate bonds of a currency and duration consistent with the currency and duration of the benefit obligations. The discount rate at 31 March 2025 is higher compared to the previous year, reflecting a higher yield on high‑quality corporate bonds and significantly reducing the pension obligation.

Under the requirements of IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, the agency is required to consider whether it is appropriate to limit the amount of net pension surplus in the financial statements which was determined under IAS 19 if the full economic benefit cannot be obtained. IAS 19 provides a definition of an asset ceiling for these purposes as the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan, with the lower of the surplus and the asset ceiling being recognised. IFRIC 14 provides further guidance on calculating figures for an asset ceiling with reference to minimum funding requirements.

A refund would only be available to the agency on exiting the scheme, however participation in the current pension scheme is dictated by statute meaning an exit would rely on the occurrence of an uncertain future event not wholly within the agency’s control, that is, an act of Parliament. Therefore, the agency does not have an unconditional right to a refund of the surplus.

The appropriate method is therefore to consider the economic benefit available as a contribution reduction. The agency has concluded that primary contributions to the scheme (2024 to 2025: 18.1%, 2023 to 2024: 18.1%) and those related to ill health retirements (2024 to 2025: 4.3%, 2023 to 2024: 4.3%) establish a minimum funding requirement for future contributions under IFRIC 14. The economic benefit available as a reduction in future contributions is calculated as the sum of:

(a) any amount that reduces future minimum funding requirement contributions for future service because the entity made a prepayment

(b) the estimated future service cost less the estimated minimum funding requirement contributions that would be required for future service in those periods if there were no prepayment as described in a)

In determining this, the agency made a number of judgments.

• We consider it appropriate to treat the current service charge and the primary contributions as continuing in perpetuity as there is no intention to cease operations of the Probation Service, or to change the pension scheme available to employees of the service.

• The additional contributions to meet ill health retirement costs are discretionary with the rate set as part of the triennial valuation. While we would anticipate continuing to fund early retirement on the grounds of ill health via this mechanism, the financial commitment only exists for the three‑year period covered by the valuation. In calculating minimum funding requirements under IFRIC 14 we therefore judge the appropriate period over which to include the ill health retirement contributions to be the one year remaining until the next valuation.

• We do not consider that the economic benefit available as a reduction in future contributions can be meaningfully used if negative. This figure will therefore be taken as the maximum of the calculated figure and nil in the calculation of the asset ceiling.

The agency is required to make contributions of 4.1% in relation to past service. This was set by the actuary based on a funding time horizon of 20 years at the last triennial valuation. IFRIC 14 requires that to the extent that the contributions payable will not be available after they are paid into the plan, the entity shall recognise a liability when the obligation arises. We have judged that the appropriate period over which to consider the secondary contributions is 18 years – this is taking the actuarial assessment of the time it will take for the scheme to be fully funded at the last valuation and reducing by the two years that have elapsed since then. Once the scheme is fully funded the secondary contributions will no longer be required and will therefore end.

Annuity rates for these three time periods were provided by the scheme’s actuary using the same assumptions as the IAS 19 calculation as described below.

We consider it appropriate to restrict the net asset relative to funding obligations by use of the asset ceiling. This means that the asset ceiling is applied to the net surplus excluding the unfunded liabilities figure of £24.8 million. These unfunded liabilities are then added back to the closing liability position.

Having applied IFRIC 14 in line with the above facts and judgements, based on the present value of expected reductions in future contributions to the plan, the IAS 19 funded surplus of £1,734 million was reduced to a liability of £447 million. The closing position including unfunded liabilities is therefore £472 million. The table below summarises the effect of the valuation under IFRIC 14.

	31 March 2025	31 March 2024
	£’000	£’000
IAS 19 total closing assets	5,898,595	5,618,264
IAS 19 total closing liabilities	(4,188,973)	(4,787,131)
Net IAS 19 closing surplus/(deficit)	1,709,622	831,133
As IAS 19 shows a surplus, valuation basis adopts IFRIC 14:
Estimated benefit available as reduction in future contributions	–	–
Minimum funding requirement relating to past service	(447,409)	(499,892)
IAS 19 unfunded liabilities	(24,836)	(29,613)
IFRIC 14 closing surplus/(deficit)	(472,245)	(529,505)
Effect of the asset ceiling	(2,181,867)	(1,360,638)

The major assumptions used by the LGPS actuary were:

	31 March 2025	31 March 2024
	%	%
Rate of increase in salaries	3.55	3.55
Rate of increase for pensions in payment and deferred pensions	2.75	2.75
Discount rate	5.80	4.85

Mortality

Life expectancy is based on the Fund’s VitaCurves with improvements in line with the CMI 2023 model, with a 15% weighting of 2023 (and 2022) data, a 0% weighting on 2021 and 2020 data, standard smoothing (Sk7), initial adjustment of 0.25% and a long‑term rate of improvement of 1.5% per year. for both males and females. (2023 to 2024: Life expectancy was based on the Fund’s VitaCurves with improvements in line with the CMI 2022 model, with a 25% weighting of 2022 and 0% weighting on 2021 and 2020 data, standard smoothing (Sk7), initial adjustment of 0.25% and a long‑term rate of 1.5% per year for both males and females.) Based on these assumptions, the average future life expectancies at age 65 are summarised below:

	Male	Female
Current pensioners	21.0 years	23.8 years
Future pensioners*	21.6 years	25.3 years

*Figures assume members aged 45 as at the last formal valuation date

Movements in the LGPS defined benefit obligation during the year:

				31 March 2025				31 March 2024
	Fair value of plan assets	Present value of obligation	Impact of asset ceiling adjustment	Net pension position	Fair value of plan assets	Present value of obligation	Impact of asset ceiling adjustment	Net pension position
		£’000	£’000	£’000		£’000	£’000	£’000
Plan assets	5,618,264	–	–	5,618,264	5,198,010	–	–	5,198,010
Funded liabilities	–	(4,757,518)	–	(4,757,518)	–	(4,710,429)	–	(4,710,429)
Unfunded liabilities	–	(29,613)	–	(29,613)	–	(31,270)	–	(31,270)
Effect of the asset ceiling	–	–	(1,360,638)	(1,360,638)	–	–	(257,329)	(257,329)
Opening balance at 1 April	5,618,264	(4,787,131)	(1,360,638)	(529,505)	5,198,010	(4,741,699)	(257,329)	198,982
Current service costs	–	(123,523)	–	(123,523)	–	(132,946)	–	(132,946)
Past service costs (including curtailments)	–	(4,147)	–	(4,147)	–	(2,039)	–	(2,039)
Total current and past service costs	–	(127,670)	–	(127,670)	–	(134,985)	–	(134,985)
Net interest (cost)/income	273,527	(231,604)	(65,991)	(24,068)	247,632	(224,797)	(12,223)	10,612
Remeasurements
Gain/(loss) from change in financial assumptions	–	758,309	–	758,309	–	281,261	–	281,261
Gain/(loss) from change in demographic assumptions	–	8,395	–	8,395	–	31,557	–	31,557
Experience gains/(losses)	–	45,976	–	45,976	–	(151,933)	–	(151,933)
Returns on plan assets, excluding amounts included in net interest	(44,645)	–	–	(44,645)	141,667	–	–	141,667
Gain/(loss) from change in the effect of asset ceiling under IFRIC 14	–	–	(755,238)	(755,238)	–	–	(1,091,086)	(1,091,086)
Total remeasurements	(44,645)	812,680	(755,238)	12,797	141,667	160,885	(1,091,086)	(788,534)
Cashflows
Participants’ contributions	45,994	(45,994)	–	–	43,173	(43,173)	–	–
Employer contributions	192,852	–	–	192,852	181,099	–	–	181,099
Contributions in respect of unfunded benefits	3,349	–	–	3,349	3,321	–	–	3,321
Benefit payments	(187,397)	187,397	–	–	(193,317)	193,317	–	–
Unfunded benefit paid	(3,349)	3,349	–	–	(3,321)	3,321	–	–
Closing balance at 31 March	5,898,595	(4,188,973)	(2,181,867)	(472,245)	5,618,264	(4,787,131)	(1,360,638)	(529,505)
Plan assets	5,898,595	–	–	5,898,595	5,618,264	–	–	5,618,264
Funded liabilities	–	(4,164,137)	–	(4,164,137)	–	(4,757,518)	–	(4,757,518)
Unfunded liabilities	–	(24,836)	–	(24,836)	–	(29,613)	–	(29,613)
Effect of the asset ceiling	–	–	(2,181,867)	(2,181,867)	–	–	(1,360,638)	(1,360,638)
Closing balance at 31 March	5,898,595	(4,188,973)	(2,181,867)	(472,245)	5,618,264	(4,787,131)	(1,360,638)	(529,505)

The plan assets in the LGPS were:

	Quoted price (in active markets)	Quoted price (not in active markets)	Value at 31 March 2025	Value as a percentage of total scheme assets at 31 March 2025	Value at 31 March 2024	Value as a percentage of total scheme assets at 31 March 2024
	£’000	£’000	£’000	%	£’000	%
Equity securities	2,236,454	–	2,236,454	38%	2,175,921	39%
Debt securities	691,947	–	691,947	12%	518,861	9%
Private equity	–	371,364	371,364	6%	382,588	7%
Property	–	307,784	307,784	5%	247,549	4%
Investment funds and unit trusts	850,980	1,260,351	2,111,331	36%	2,169,480	39%
Cash and cash equivalents	179,715	–	179,715	3%	123,865	2%
Total plan assets	3,959,096	1,939,499	5,898,595	100%	5,618,264	100%

Assets with a quoted price in active markets

Assets with a quoted price in an active market are valued at their market value or observable bid price quotations.

Private equity and investment funds and unit trusts without a quoted price in active markets

Due to the lack of a readily comparable market, the pensions scheme instructs investment managers to value unquoted equity, infrastructure and special opportunities portfolios in accordance with IFRS. The valuation basis may be any of quoted market prices, broker or dealer quotations, transaction price, third party transaction price, applying earnings multiples of comparable public companies to projected future cash flows, third party independent appraisals or pricing models. Many factors feed into the valuation including changes in interest rates and credit spreads, the operating cash flows and financial performance of the investments relative to budgets, trends within sectors and/or regions, underlying business models, expected exit timing and strategy and any specific rights or terms associated with the investment, such as conversion features and liquidation preferences. There is inherent estimation uncertainty in these valuations due to the nature of these calculations. The risk is reduced through the use of experts and ongoing review of the suitability of the estimates and assumptions made in the calculations.

Property

Investment properties are valued on the basis of open market value and market rent in accordance with the RICS Appraisal and Valuation Manual by chartered surveyors engaged by the pension scheme. Valuations were performed as at 31 December 2024 and subsequently adjusted for transactions undertaken between 1 January and 31 March 2025. While there is inherent estimation uncertainty, this is reduced by using independent experts with the relevant experience and qualifications to perform the valuations.

Sensitivity analysis

The actuary’s assessment of the impact on LGPS pension liabilities of increases and reductions in key actuarial assumptions is below:

		31 March 2025		31 March 2024
	Approximate monetary amount	Approximate increase to employer liability	Approximate monetary amount	Approximate increase to employer liability
	£000	%	£000	%
0.1% decrease in real discount rate	73,985	2	89,570	2
0.1% increase in the salary increase rate	3,144	0	3,735	0
0.1% increase in the pension increase rate	72,897	2	87,483	2

The principal demographic assumption is the mortality assumption (member life expectancy). For sensitivity purposes, we estimate that a one–year increase in life expectancy would approximately increase the employer’s defined benefit obligation by around 3% to 5%. In practice the actual cost of a one‑year increase in life expectancy will depend on the structure of the revised assumption (improvements to survival rates predominantly apply at younger or older ages). For 2024 to 2025, a one‑year increase in member life expectancy would increase the liability by 4% or £168 million.

19. Financial instruments

Categories of financial instrument

Details of receivables, cash balances and payables can be found in Notes 10, 11 and 12.

Receivables comprise trade receivables, other receivables and accrued income that have fixed or determinable payments that are not quoted in an active market.

Receivables are assessed at each SoFP date and impaired where recoverability is in doubt.

HMPPS holds share investments of £0.25 million (31 March 2024: £0.24 million) in milk companies due to the milk producing prison farms run by HMPPS at HMP Usk. They are held as financial assets at fair value through profit and loss. Fair value is equal to market value at the reporting date, and the movement in the value of assets is recognised immediately in the SoCNE, as income or as an expense.

HMPPS has financial liabilities comprising PFI liabilities, finance lease liabilities, trade payables, other payables and accruals.

Financial liabilities are measured initially at fair value. Where the effect is material, estimated cash flows of financial liabilities are discounted.

Credit risk

HMPPS is exposed to minimal credit risk as loans and receivables are comprised of trade and other receivables. The maximum exposure to credit risk is the risk that arises from potential default of a debtor and is equal to the total amount of these outstanding. HMPPS manages its credit risk by undertaking background and credit checks prior to establishing a debtor relationship. HMPPS has no collateral to mitigate against credit risk.

Interest rate risk

HMPPS is not exposed to significant interest rate risk. Most of the cash balances carry nil or fixed interest rates.

Liquidity risk

HMPPS’ financial liabilities are trade payables, other payables, accruals and finance leases. It is unlikely that HMPPS will encounter difficulty in meeting its obligations associated with these liabilities, as it is financed by the MoJ, whose resources and capital are voted annually by Parliament.

Foreign currency risk

HMPPS undertakes few foreign currency transactions and is not exposed to significant exchange rate risk.

20. Related party transactions

HMPPS is an executive agency of the MoJ, which is regarded as a related party. During the year HMPPS has had material transactions with the MoJ and other entities for which the MoJ is regarded as the parent entity.

HMPPS has also had material transactions with a number of other government departments and central government bodies. The most significant of these transactions have been with HMRC, Home Office, Department for Work and Pensions and Cabinet Office: Civil Superannuation.

In accordance with the requirements of the FReM, these transactions have not been reported.

No board member, key manager or other related party has undertaken any material transactions with HMPPS during the year. Compensation paid to management, including taxable benefits, is disclosed in the remuneration and staff report.

21. Events after the reporting period

In accordance with the requirements of IAS 10, events after the reporting period are considered up to the date on which the accounts are authorised for issue. This is interpreted as the date of the Certificate and Report of the Comptroller and Auditor General.

Since 31 March 2025 the decision has been taken to descope several prison build projects. The related assets have been considered for impairment and the accounts adjusted accordingly as we consider this to be an adjusting post‑balance sheet event in accordance with IAS 10 Events After the Reporting Period. Where these represented a loss they have been included within the losses statement in the parliamentary accountability report.

On 11 April, subsequent to the reporting date but prior to the approval of these financial statements, Amy Rees left her position as Chief Executive of HMPPS to become Interim Permanent Secretary of the MoJ. Phil Copple (formerly HMPPS Director General Operations) was appointed as Interim HMPPS Director General Chief Executive Officer from 1 April 2025 until James McEwen took up the position of HMPPS Director General Chief Executive Officer from 13 October 2025. Changes to the membership of HAB and HLT are detailed in the corporate governance report.

1. Using a reasonable alternative assumption, it has been assumed that an increase of 50% of capex has been included in the valuations. Note that the calculated amounts for change related to capex is calculated at a high level, comparing desktop and actual figures, which provides a result that is not in our opinion sufficiently robust as it does not consider other factors that might affect the valuations. The value of the estate could be up to 0.3% or £23 million higher under this scenario. ↩

2. The movement in the BCIS All In Tender Price Index, which tracks contractors’ construction pricing levels, is applied to the DRC valuations each year to reflect increased build costs. This estimate considers a change to TPI, where the actual TPI forecast figure is confirmed and there is a difference of +/– 2 points from the TPI level used in the valuation. ↩

3. The movement in the BCIS All In Tender Price Index, which tracks contractors’ construction pricing levels, is applied to the DRC valuations each year to reflect increased build costs. This estimate considers a change to TPI, where the actual TPI forecast figure is confirmed and there is a difference of +/– 2 points from the TPI level used in the valuation. ↩

4. This assumption considers the application of physical depreciation, which is directly related to the remaining lives. Here it has been moderated to 90% of the projection on the assumption that works undertaken across the estate have had a moderating effect on remaining lives. ↩

5. This assumption considers the impact of functional obsolescence. This is difficult to quantify as it is not readily possible to calculate an average addition, but for this test 15% is assumed as an average (based upon experience and empirical evidence) and this is varied by 5% either way. The current value of the estate could be up to +/– 0.05% or +/– £4 million. ↩

6. This assumption considers the impact of functional obsolescence. This is difficult to quantify as it is not readily possible to calculate an average addition, but for this test 15% is assumed as an average (based upon experience and empirical evidence) and this is varied by 5% either way. The current value of the estate could be up to +/– 0.05% or +/– £4 million. ↩

7. This assumption considers the impact of professional fee additions. This considers a 1% reduction in fee additions which would reduce the current value of the estate by –0.4% or –£32 million. ↩

8. Opening and closing balances include the life‑cycle value for annuities, which is separate from the extracted litigation provisions total. ↩

9. Department for Work and Pensions (2025), Retrospective actuarial confirmation of benefit changes, available at: https://www.gov.uk/government/news/retrospective-actuarial-confirmation-of-benefit-changes ↩

10. Department for Levelling Up, Housing and Communities (2023), Amendements to the Local Government Pension Scheme statutory underpin: government response, available at: https://www.gov.uk/government/consultations/local-government-pension-scheme-amendments-to-the-statutory-underpin/outcome/amendments-to-the-local-government-pension-scheme-statutory-underpin-government-response ↩