The provision for the Government Indemnity Scheme is made by the National Heritage Act 1980. The scheme facilitates public access to loans of works of art and other objects for public display made to museums, galleries and other such institutions by private owners and non-national institutions. It does this by indemnifying lenders against loss or damage to objects they loan. Loans covered by the scheme must be for public benefit. The scheme also covers loans of such objects for study purposes within borrowing institutions where this would contribute materially to the public's understanding or appreciation of the object loaned. Examples of this are enhancing interpretation or explanation to the public of objects, or bringing into the public domain the conclusions of any study.

In the six month period ended 30 September 2005, a total of 854 undertakings were given to indemnify objects on loan to national and non-national institutions under section 16 by the relevant Departments. The Museums, Libraries and Archives Council (MLA), which manages the scheme on behalf of the Department for Culture, Media and Sport, issued a total of 666 undertakings to national museums and 73 undertakings to non-national museums in England, the Scottish Executive Education Department issued two undertakings and the National Assembly for Wales issued one.

Finally, the Government Art Collection issued 112 in the same period.

The value of contingent liabilities in respect of undertakings given at any time under section 16 and which remained outstanding as at 30 September 2005 for national museums are £2,038,824,046 and are £1,286,220,079 for non-nationals in England. The value of section 16 contingent liabilities as at 30 September 2005 for the Scottish Executive Education Department are £22,035,000; £34,009,500 for the National Assembly for Wales, and £4,750,000 for the Government Art Collection.

The value of non-statutory undertakings given to Her Majesty in respect of loans from the Royal Collection and which remained outstanding as at 30 September 2005 are £198,160,725; £259,000 for non-national museums issued by the MLA, and £25,000 issued by the Government Art Collections.

The total value of loans out by national institutions as remained outstanding at 30 September 2005 is £378,260,895.

The limit on the contingent liabilities which may be incurred in relation to the Government Indemnity Scheme for non-national museums and galleries in England approved by the Treasury in May 2004 was £1,200,000,000. As a result of an increase in the number of temporary exhibitions put on by the non-national museums and galleries, and in the value of the objects included in such exhibitions it has proved necessary for this limit to be temporarily increased to £1,287,000,000 effective until May 2006. The Government Indemnity Scheme will be reviewed in 2006 to see if a permanent increase of the limits on the contingent liabilities which may be incurred under the scheme is justified.