Government has risked & lost “unacceptable” billions of taxpayers’ money in its Covid response - and must account to the generations that will pay for it, say MPs

In a report today the Public Accounts Committee says the total cost of UK Government losses in the response to the Covid 19 pandemic remains uncertain, but it has clearly exposed the taxpayer to substantial, long-term financial risks and “large amounts” - now running into many billions of pounds - of taxpayer’s money will be lost to fraud and error.

The Coronavirus Job Retention – or furlough - Scheme alone is estimated to lose £5.3 billion to fraud and error - 8.7% of the funding distributed through the scheme. The estimated loss to fraud and error across all Covid 19 response measures is not known but is expected to be at least £15 billion across the schemes and loans implemented by HM Revenue & Customs, the Department for Work & Pensions and the Department for Business, Energy & Industrial Strategy.

The National Audit Office Covid 19 cost tracker (see notes) September 2021 update reports that government has spent £261 billion on 374 measures in response to the pandemic. The measures are expected to cost a total of £370 billion over their lifetime – up to 10 years in the repayment term of the Bounce Back Loan Scheme (BBLS) and typically 20 years in the Cultural Recovery Fund.

The Committee is concerned that HM Treasury does not currently plan to distinguish the cost of COVID-19 from departments’ business-as-usual spending in future, saying that “as the UK recovers from the pandemic it is more vital than ever that government maintains accountability for public money and transparency over what is being spent”. The Committee has repeatedly said this will be crucial to ensure lessons are properly learned and embedded so the same mistakes that led to these “unacceptably high” losses and risk, already to be borne by generations of taxpayers, are not repeated in any future crisis.

Dame Meg Hillier MP, Chair of the Public Accounts Committee, said: “As the PAC has made clear across a series of reports on the costs of Covid, lack of preparedness and planning, combined with weaknesses in existing systems across Government, have led to an unacceptable level of mistakes, waste, loss and openings for fraudsters which will all end up robbing current and future taxpayers of billions of pounds.

“It is essential that for as long as we will be paying the costs of Covid19, which is at least the next 20 years just in some of the loan repayment terms, the Treasury and all of Government continue to account specifically for what it has spent in response to the pandemic. Government must be held accountable in this way to all the future taxpayers who will be paying for this response. Crucially this must ensure lessons are learned for when the next big crisis hits - be it climate, health or financial.”

PAC report conclusions and recommendations

1. The COVID-19 cost tracker has increased transparency and helped hold government to account for its funding commitments and spending to date. In September 2021, the NAO published the fourth iteration of the COVID-19 cost tracker, setting out the cumulative costs of government’s response to COVID-19. Throughout the pandemic, the cost tracker has demonstrated the importance and value of capturing and sharing timely data on government’s actions and costs. We have used the information provided in the cost tracker to inform our work looking at departments’ responses to COVID-19 and to hold them to account for their performance during the pandemic. The format of a single, comprehensive and updateable dataset covering all cross-government spending relating to a single theme has been a useful tool for monitoring the spending of taxpayers’ money. It is essential that the strengths of the cost tracker’s format are replicated in future government reporting. We previously recommended that government consider using a similar technique to monitor other areas of thematic spend, such as Net Zero. While HM Treasury recognises the helpful role the NAO’s cost tracker has played in improving the transparency of the cost of COVID-19 and its role as the definitive source of information on the associated costs, it has not outlined how it will use the cost tracker model to inform its approach to monitoring and reporting on costs in future.  

Recommendation: As part of its Treasury Minute response, HM Treasury should explain how the strengths it identified from the cost tracker approach, including transparency and accessibility, can be applied to the presentation of other thematic areas of public spending. 

1. We are concerned that HM Treasury does not intend to adequately monitor and update the ongoing cost of COVID-19 to the taxpayer.Monitoring the forecast costs and actual spend related to COVID-19 is crucial for Parliamentary scrutiny and for holding departments to account for their use of taxpayers’ money. The cost-tracker has enabled Parliament and the public to have full visibility over what government has spent and committed to spend in response to the pandemic and the financial risks to the public purse. Government estimates that it will lose £21 billion as a result of loans that it does not expect will be repaid. HM Treasury will know more about how much will be lost in connection to these loan schemes over time as more repayment data is received. HM Treasury has committed to conduct a routine review of material changes to the estimated costs, including updating the costs associated with the COVID-19 loan schemes and some public services measures, where these can be reliably attributed to COVID-19. However, it has not specified which elements of government’s response to the pandemic will be included in these updates, what will constitute material changes to estimated costs, or how the costs of those elements which are excluded will continue to be monitored and Departments held to account for spending taxpayers’ money. From 2022-23 onwards, funding to tackle issues arising from COVID-19 will not be ring-fenced. Some of the costs currently included in the cost tracker will form part of departments’ ongoing activities.  

Recommendation: As part of its Treasury Minute response, HM Treasury should explain how, when, and which subsets of the data captured by the NAO in the COVID-19 cost tracker it will continue to update. This should also address how loan book commitments, including those made under the Culture Recovery Fund, and any associated liabilities, such as estimated write-off costs under the Bounce Back Loans Scheme, will be monitored.  

1. HM Treasury does not yet know how much money has been lost to fraud and error across government’s response to COVID-19. Our previous work on government’s response to COVID-19 has revealed that the risk of fraud and error to public finances has risen substantially during the pandemic. As a result, government is likely to be exposed to significant financial risk. Some of the larger COVID-19 measures are likely to lose large sums of taxpayers’ money to fraud and error. For example, the Coronavirus Job Retention Scheme is estimated to lose £5.3 billion to fraud and error - equating to 8.7% of the funding distributed through the scheme. HM Treasury asserts that it has increased its investment in the detection and recovery of fraud and expects this to have a significant return. However, HM Treasury is not able to put a figure to the expected return on investment or the amount of fraud and error across the breadth of government’s response to COVID-19. Given that the increased risk of fraud and error could cost the taxpayer billions of pounds, it is crucial that HM Treasury can identify, estimate the volume of, and attempt to recover, funding that was distributed in error or through fraudulent claims. 

Recommendation: HM Treasury should write to the committee by the end of the financial year with its estimate of: 

• how much taxpayers’ money has been lost to fraud and error within schemes introduced in response to the pandemic; and 
• how much it expects will be recovered for each pound it spends doing so. 

1. HM Treasury has not set out what lessons it has learnt from the government’s response to COVID-19 and how it will apply these in future. The pandemic required government to respond rapidly to emerging issues across all areas of society. It is essential that government learns from its response to the pandemic and identifies what it should do to ensure that those lessons are applied, both to improve its ability to respond to emergencies, and to improve its business-as-usual service delivery. Departments cannot wait until the public inquiry, which may take some years to complete, to learn the lessons from government’s handling of the pandemic. HM Treasury agreed that it is now an appropriate time to undertake a lessons learned exercise covering the whole of government’s initial response to the pandemic. The sooner this exercise takes place, the quicker departments can embed the lessons they have learned in their practices and guidance. 

Recommendation: HM Treasury should write to the committee by the end of the financial year setting out: 

• what it has learned from the government’s response to the COVID-19 pandemic; and 

• what action it is taking to identify and collate learning from across government departments. /ENDS

Notes:

Full inquiry info: https://committees.parliament.uk/work/1572/covid19-cost-tracker-update-spending-review/

Table of total costs of UK pandemic response from the NAO’s Covid costs tracker - see also PAC report Introduction: