The Public Accounts Committee (PAC) of the House of Commons, has produced two reports on ‘significant financial risks for decades to come’ for taxpayers, as a result of government spend during the Covid pandemic.
The key theme is: ‘Pandemic lessons cannot wait for a government inquiry’ with massive taxpayer exposure and ‘unacceptably high waste.’
It estimates that £372 billion is the lifetime cost of government measures taken to combat the disease and tide over the economy up till May 2021.
In papers released in advance of its full publication on Sunday 25 July, excerpts show a list of severe problems with cost accounting and other criticisms of the handling of the pandemic including the lack of clear health guidelines to the public.
The PAC says that it has already learnt some lessons from the government’s handling of the pandemic, such as considerable wastage of money on PPE and other contracts, which simply cannot wait for the proposed official inquiry.
The official government inquiry is not scheduled to start till 2022, and could well take years to draw any conclusions.
The PAC expects the autumn spending review of the Treasury, to ‘set out a fully costed plan for recovering from the Covid-19 pandemic,’ and to include an explanation of how the risks to public finances will be handled properly as a result of the Covid-19 response.
Dame Meg Hillier MP, Chair of the PAC, said: ‘As well as monitoring procurement and its effectiveness through the next few years, the PAC will be watching this spending and risk for decades to come.
‘If coronavirus is with us for a long time, the financial hangover could leave future generations with a big headache.’
Below are some of the points made in the two reports.
From PAC report HC-175, point 5 states: ‘We remain seriously concerned by the extent of PPE supply that is not fit for purpose.’ The Department of Health and Social Care ‘has ordered 32 billion items of personal protective equipment (PPE) at a cost of approximately £15billion.’ 6.6% of these items have not passed quality assurance for use in medical settings.
Also, the storage of the central stock of PPE costs £6.7million a week as of January 2021.
The PAC recommends that the Department of Health and social Care (DHSC) should keep it informed of all the details of PPE every quarter year.
In the PAC report HC-173, there is further reference to problems with PPE as an example of how the government will be exposed to significant financial risk for decades to come.
The committee appears to partly forgive the government’s cavalier attitude to procurement in the pandemic stating: ‘While we acknowledge that there was a need to relax the usual rules surrounding major spending decisions and introduce flexibilities due to the emergency circumstances of the pandemic, we are concerned that this has created serious risks that may require managing for years.’
However, the report then adds: ‘A clear example of risks from the government’s approach materialising is the 10,000 shipping containers of PPE ordered earlier in the pandemic that we heard in May were still yet to be unpacked.’
The PAC recommendation is that: ‘HM Treasury should develop a single cross government framework for monitoring and managing the risks to public finances stemming from government’s Covid-19 response.
‘HM Treasury should then explain in the Autumn Spending Review how it plans to manage these risks and any fiscal trade-off that will need to be made.’
So the PAC is clear that the colossal debts that have been run up during the pandemic, a lot of them unnecessarily through lax procurement and accounting, will have to be remedied by ‘fiscal trade-offs’, i.e. tax rises that the public will have to pay.
Point 6 of the PAC report HC-175 criticises long-standing issues with data and legacy. It says there is a lack of data standards, ageing IT systems, fragmented leadership, and a culture that does not support sharing data across departmental boundaries.
It gave examples, such as the telephone numbers of 375,000 people who were shielding were not known, and so it was not possible to phone them to follow up after sending them letters.
It said that local government was unable to get timely information on Covid test results for residents in their areas, when the tests had been performed on privately-run test sites, which led to difficulties recognising outbreaks in their areas and dealing with them.
The PAC recommends that HM Treasury, and the Cabinet Office should inform them of improvements and plans by 31 October 2021.
Another major charge was HC-175, Point 7, that ‘Government risks undermining public trust and accountability for the pandemic response because of the DHSC’s repeated failure to provide a full rationale for key decisions.’
It said: ‘Government has often failed to publish full cost-benefit analyses or the data and statistics that it cites as evidence for key policy decisions.’
On this score, there has been much criticism in the British Medical Journal of the government decisions to spend colossal sums of money on Lateral Flow tests, which many experts regard as so unreliable that they should not be used.
The report criticises the government’s failure ‘to publish the details of contracts awarded during the pandemic in a timely fashion.
‘Of the 1,644 contracts awarded across government up to the end of July 2020 with a value of over £25,000, 75% were not published within the 90-day target.
‘This risks negatively affecting the public perception of government’s openness and accountability for public money. Most of the contracts awarded up to the end of July 2020 were awarded by the DHSC and its national bodies.’
The PAC recommends that the DHSC update them on the number of contracts awarded during the pandemic that are yet to be published. In future the Cabinet Office should examine each project afterwards to see if objectives were met.
The ability of the government to communicate clearly is raised in point 8, HC-175. Where this has not been the case, it is blamed ‘for hindering the public’s understanding of guidelines and ability to comply with them’.
The Department of Education is pointed to as a government agency which produced 148 new guidance documents in six weeks between March and May 2020. The instructions were usually produced late in the evening or at the end of the week, making it difficult for schools to immediately comply.
Also, the language used in official communications was complicated, with ‘vague references and inaccurate information.’
The PAC recommends that the Cabinet Office write to it by 31 October stating how the ‘volume, clarity and timeliness of communications’ will be improved.
Point 5, of HC-173, confirms that the National Audit Office (NAO) runs a Covid-19 cost tracker which brings together the costs of all government departments in measures to fight the pandemic, and estimates of ‘whole life costs’ and logs the amount of money which has been spent on them. Most of the information comes from the Treasury.
The PAC thinks that this cost tracker has been so useful in tracking costs during the pandemic, that similar collaborations between the NAO and the Treasury should be used for all other large cross government programmes, such as the drive to achieve net-zero greenhouse emissions, and the costs of exiting the EU.
However, the report slams government departments which only provide poor data to the Covid-19 Cost Tracker in point 6.
It says that there are areas of spending where spending on the pandemic gets muddled up with spending on the non-Covid NHS, and Universal Credit.
The PAC also finds problems with the functioning of a framework called ‘Managing public money’, which was used by the Treasury during the pandemic.
In point 8 of HC-173, it states: ‘The government accepted the need for a higher risk appetite in order to make decisions and move funding more quickly for Covid related measures, adapting the managing public money principles to the extraordinary situation.’
The report says that the Treasury acknowledges that impact assessments for some Covid-19 measures needed better data and better evidence to justify the financial investment. It agreed that: ‘Accounting Officer assessments around how you assess risk appetite in an emergency, and assessments across multiple departments’ needed ‘clearer guidance’.
The PAC recommends that the Treasury report back to the committee, by the end of 2021, on Accounting Officers assessments and its roll out on managing public money, ‘so that proper emphasis on achieving value for money is restored’.
The Treasury should also review major Covid-related spending decisions to identify cases where decision made during the pandemic have resulted in poor value for money, and ‘use the lessons learnt to produce guidance to minimise the risk of this happening in the future’.
A key considerations broached in point 9, describes how £92 billion of loans was delivered by private sector providers to businesses, under the direction of the British Business Bank.
Moreover, the government guaranteed these loans by up to 100% of their value so as to ‘compensate the private sector an increased risk of borrower default’.
The PAC report says that: ‘The government currently estimates that the calls on these guarantees may amount to as much as £26 billion’ and that this would ‘represent a significant drain on the public sector budget’.
The PAC adds that: ‘HM Treasury is unclear about how it plans to manage the expanded loan book and the associated risks.’
The PAC recommends that HM Treasury should explain in the Autumn Spending Review, how it will manage ‘the significant expansion of the value of the government loan guarantees and the associated risk of write-offs’.
It should also outline the steps it is taking to ‘reclaim the taxpayer’s investment’.
Large amounts of money have been loaned to businesses from private sources as directed by the British Business Bank, with the state as guarantor of last resort, leaving the government with a huge public sector debt of around £26 billion, ‘from credit and fraud losses in the SME bounce back loan scheme’.
Numerous contracts were given to private companies to provide PPE which was medically unusable, much of which remains in storage at large cost.
As point 7 of HC-173, makes clear: ‘The Covid-19 response means government will be exposed to significant financial risk for decades to come, due to responding quickly to the pandemic, with government responses spread across multiple governmental departments and schemes, without sufficient impact assessments and Accounting Officer assessments at the time.’
The PAC records that the government has exposed the taxpayer to ‘significant financial risks for decades to come’ with an estimated lifetime cost of the government’s Covid pandemic measures reaching £372 billion by May 2021.
These excerpts politely expose huge laxity in control of public money with billions of pounds spent by the DHSC and the Treasury on dodgy contracts.
No doubt the government will seek to recoup these huge debts from the population through wage cuts and increased taxation. A stormy path lies ahead.