When Power Goes Wrong · Who Pays? · Part 23

Can the Crown promise in advance to meet someone else’s liability?

Yes, but Crown guarantees and indemnities are tightly controlled by the Public Finance Act. The Crown cannot give one except under statutory authority; the Minister may give one in the public interest under s 65ZD, and payments under a lawful indemnity have their own statutory spending authority.

An indemnity is different from paying damages after losing a case. It is a prior or contemporaneous promise to meet another person's liability if the specified event occurs.

Public Finance Act s 65ZC states that a guarantee or indemnity by the Crown must not be given except under statute. Section 65ZD authorises the responsible Minister to give one if satisfied it is necessary or expedient in the public interest and on terms the Minister thinks fit.

Section 65ZG then provides authority for Crown payments and related expenses under such guarantees or indemnities without further appropriation.

Indemnity is itself a public-finance power.A Minister or department cannot casually promise that “the Crown will cover it”. The promise and the eventual payment both require statutory authority.

Giving the indemnityMust be authorised by statute.

Ministerial routePFA s 65ZD public-interest power.

Departmental routeOnly specified indemnities under regulations/public-interest requirements.

Payments 65ZG supplies statutory payment authority for lawful indemnities.

This is another point where liability and who ultimately bears the financial risk can diverge.

Primary fiscal statutePublic Finance Act 1989, ss 65ZC–65ZG.

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