Pandemic lessons “cannot wait for Government inquiry” with massive taxpayer exposure & “unacceptably high waste”, say MPs

In two reports published today the Public Accounts Committee says the UK Government’s response to the pandemic has exposed the taxpayer to “significant financial risks for decades to come”, with the estimated lifetime cost of the government’s measures reaching £372 billion in May 2021. The total value of government-backed loans has increased greatly during the crisis, with the taxpayer already on the hook for an estimated £26 billion of credit and fraud losses in the SME bounce back loan scheme.

The Committee “remains concerned that despite spending over £10 billion on supplies, the PPE stockpile is not fit for purpose”. Of 32 billion items of PPE ordered by the Department of Health & Social Care as of May 2021, 11 billion have been distributed, 12.6 billion are stored in the UK as central stock, and 8.4 billion on order from other parts of the world have still not arrived in the UK.

The current stockpile is costing DHSC approximately £6.7 million a week to store and potential waste levels are “unacceptably high”: with 10,000 shipping containers of PPE still to be unpacked by May this year, 2.1 billion items of PPE had already been found unsuitable for use in medical settings - equating to over £2 billion of taxpayers’ money and over five times the estimate of PPE unfit for purpose given to the Committee by DHSC in January 2021.

For the excess PPE that is suitable for medical use, the Government is yet to create any robust plans for repurposing and distributing this essential stock in a way which ensures value for money and protects staff and patients.

The NHS was already carrying about 40,000 nursing vacancies and 9,000 medical staff vacancies going into the pandemic and by last September, six months in, over a third of remaining nurses were considering leaving. With the health and social care workforces “under constant pressure” throughout the pandemic, patient waiting times continue to slip and wait lists for non-urgent treatment are growing significantly.

Government’s repeated failure to provide a full rationale for key decisions is undermining public trust and accountability for the pandemic response. Of 1,644 contracts with a value over £25,000 awarded up to the end of July 2020, 75% were not published within the 90-day target. Achieving value for money from government expenditure during COVID-19 has been compromised by poor quality impact assessments and Accounting Officer assessments.

Lack of clarity and timeliness and the volume of government communications has hindered the public’s understanding of public health guidelines and ability to comply with them.

The Government inquiry is expected to start in spring 2022 and will take years to complete – the PAC is “clear that government cannot wait for the review before learning important lessons”. The Committee expects Government to “set out a fully costed plan for recovering from the COVID-19 pandemic” in the autumn Spending Review, alongside a comprehensive framework for managing the risks to public finances resulting from the COVID-19 response.

Dame Meg Hillier MP, Chair of the Public Accounts Committee, said: “With eye watering sums of money spent on Covid measures so far the government needs to be clear, now, how this will be managed going forward, and over what period of time.

"The ongoing risk to the taxpayer will run for 20 years on things like arts & culture recovery loans, let alone the other new risks that departments across Government must quickly learn to manage.

"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."

PAC report HC-175: Initial lessons from the Government response to Covid 19- conclusions and recommendations

5 We remain seriously concerned by the extent of PPE supply that is not fit for purpose. The Department of Health & Social Care (the Department) has ordered 32 billion items of personal protective equipment (PPE) at a cost of approximately £15 billion. As of 7 June 2021, 2.1 billion items of PPE had not passed the initial quality assurance for use in medical settings, representing 6.8% of the items purchased. This is over five times more than the estimate of the amount of PPE which was unfit for purpose that the Department provided to us in January 2021. The Department has committed to ensuring that it makes the best use of the large number of items which are unsuitable for medical settings, but we are concerned that its planning on how to repurpose them is not yet complete. Storing its central stock of PPE currently costs the Department approximately £6.7 million a week, down from £11.7 million a week in January 2021.

Recommendation: The Department should update us with the following data on a quarterly basis:

• the number and cost of PPE items which, during the quarter: have been received; have been cancelled, with all relevant prepayments recovered; have been (received and) quality assured; have been distributed; have failed the initial quality assurance and are not fit for use in medical settings (i.e. ‘not fit for intended purpose’); have failed the initial quality assurance and are not fit for any purpose (‘exit stock’);
• the percentage of the total items of PPE ordered in the last complete quarter which were manufactured in the UK;
• the number and cost of items of PPE currently held in central/pandemic stocks;
• whether there are any types of PPE for which the central stocks do not contain at least 4-months’ supply under the Department’s current planning assumptions (if yes, describe); and
• the weekly cost of storage of the central stocks of PPE (or, if preferred, the total running cost to date of PPE storage).

6 Government’s ability to make well-informed decisions and address issues as they arise during the pandemic has been hampered by slow progress in addressing longstanding issues with data and legacy IT. We have repeatedly highlighted longstanding data issues within government, including the lack of data standards, ageing IT systems, fragmented leadership, and a culture that does not support sharing data across departmental boundaries. These issues came to a head during the pandemic. For instance, missing or inaccurate telephone numbers within NHS patient records meant that the shielding programme was unable to follow-up letters to 375,000 vulnerable people with phone calls. Similarly, local government lacked access to key information from NHS Test and Trace and public health officials lacked timely information on tests conducted in privately-run sites, hindering their ability to understand and manage outbreaks within their communities. HM Treasury and the Cabinet Office recognise that a key lesson from the pandemic has been the need to improve the quality of data available and assert that. investing in data and dealing with legacy IT issues is high on their priority list.

Recommendation: HM Treasury and the Cabinet Office should write to us by 31 October 2021 setting out how they plan to reflect the need to address data and IT issues when prioritising bids for the next spending review. The Cabinet Office should also provide us with a list of its ongoing projects aimed at improving the quality and interoperability of the data available to government by 31 October 2021, detailing goals, target dates and progress for each project.

7 Government risks undermining public trust and accountability for the pandemic response because of departments’ repeated failure to provide a full rationale for key decisions. We recognise that the pandemic has required departments to work at speed in difficult circumstances. But, as we have found in our previous examinations of the response to the pandemic, proper record keeping of how decisions are made and by whom is key for public confidence and to demonstrate value for money for the taxpayer. A key element of this is being transparent about the data on which decisions are made, the assumptions which have been used, and the uncertainty and limitations of the data used. Yet, government has often failed to publish full cost-benefit analyses or the data and statistics that it cites as evidence for key policy decisions. Government has also failed 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 over £25,000, 75% were not published within the 90-day target. This risks negatively affecting 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 Department and its national bodies.

Recommendation: The Department should update us by 31 October 2021 on the number of contracts awarded during the pandemic that are yet to be published.

In the longer term, the Cabinet Office should ensure that lead departments for each of the main pandemic response programmes publish post-project evaluations in a timely manner. These should provide an evidence-based assessment of each project’s impact and the extent to which it met its objectives.

8 A lack of clarity, timeliness and the volume of government communications has, at times, hindered the public’s understanding of guidelines and ability to comply with them. Government published a large amount of guidance during the early stages of the pandemic. Some departments, for example HM Revenue & Customs, developed effective, clear and consistent communications and engagement plans for initiatives such as employment support schemes. Communications from other areas of government were not always clear or timely. The Department for Education alone published 148 new guidance documents or updates to existing materials between 16 March and 1 May 2020. Guidance was often published at the end of the week or late in the evening, putting schools under additional pressure, especially when guidance was for immediate implementation. Stakeholders have identified a wide range of language-related issues in government’s official communications, ranging from complex use of vocabulary and grammar to vague references and inaccurate information. Some intended recipients may have also been excluded from communications. Government communications have focused on medical data far more than on the social and economic consequences of the pandemic, potentially limiting the public’s ability to form a complete picture of the pandemic’s impact. Announcements surrounding restrictions in Bolton and Blackburn on the 14 May indicate that communication errors are still taking place.

Recommendation: The Cabinet Office should write to us by 31 October 2021, setting out what lessons it has learnt regarding communicating with the public and stakeholders and what guidelines or procedures it has implemented to minimise issues concerning the volume, clarity and timeliness of communications.

PAC report HC-173: Covid19 cost-tracker conclusions and recommendations

1. The NAO’s COVID-19 cost tracker shows the importance and value of capturing, sharing and presenting timely data on government’s actions and costs during a crisis. The cost tracker collates information from across all central government ministerial departments, and HM Revenue & Customs. It represents the only single record bringing together all of government’s measures in response to the pandemic, their costs and how much has been spent against them. HM Treasury has worked closely with the NAO on the production of the cost tracker, supplementing it with internal departmental spend data, which is in part categorised into COVID-related and non-COVID-related spend. HM Treasury confirmed that the cost tracker presented a good snapshot of the government’s pandemic response, and a very reasonable estimate of the total whole-life cost. HM Treasury highlighted the value of the cost tracker and the relationship it has established with the NAO. We consider the NAO’s COVID-19 cost tracker to be a model that could be applied in other situations and in planning for large cross-government programmes, such as achieving net-zero greenhouse gases by 2050.

Recommendation: HM Treasury should develop a closer partnership with the NAO to produce the next, and future, updates to the cost tracker, through sharing its COVID/non-COVID categorised data, and the reconciliation to its own data.

Recommendation: By the end of the year, the Government should write to us and explain how it will monitor the costs of other large cross-government programmes that would benefit from an approach similar to the cost tracker, for example, the drive to achieve net-zero greenhouse emissions, and the ongoing costs of EU exit.

1. The value of the cost tracker is lessened by poor data from some government departments and functions. The level of completeness and accuracy of COVID-related data is variable across government departments. Several departments are still not able to provide a robust assessment of their COVID-related activity, or the extent to which other activity has been cancelled or displaced. While HM Treasury is working with government finance functions to improve definitions and recognition of COVID-19 related expenditure in the accounts, these systems have only been put in place recently and more needs to be done to embed them. Existing systems are still not adequate to provide timely and accurate data. There also remain areas of spending where it is not possible to distinguish between COVID-driven or non-COVID-driven expenditure, for example, spending in the NHS, and Universal Credit (DWP).

Recommendation: To support the next iteration of the cost tracker, and in advance of the autumn Spending Review, HM Treasury should continue working with departments to develop robust methodologies for identifying and capturing the full cost of COVID-19, including economic impacts and the extent of displaced activity, to have a clear basis for future fiscal decisions and recovery plans.

1. The COVID-19 response means government will be exposed to significant financial risks for decades to come. As a consequence of responding quickly to the pandemic, government has taken on significant financial risks that are spread across multiple government departments and schemes. 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. A clear example of risks from the government’s approach materialising is the 10,000 shipping containers of personal protective equipment (PPE) ordered earlier in the pandemic that we heard in May were still yet to be unpacked. HM Treasury used the example of vaccines development to show how government took on necessary risk, in this case to develop vaccines much more quickly, with government spending more to achieve that speed. The Chief Secretary to the Treasury has explained, in his 1 April 2021 letter to the Chair of the Treasury Committee, government’s approach to spending controls during COVID-19, acknowledging that there were successes and areas where lessons need to be learnt on how best to apply an emergency control framework.

Recommendation: 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-offs that will need to be made.

1. Achieving value for money from government expenditure during COVID-19 is being compromised by poor quality impact assessments and Accounting Officer assessments. 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 moneyprinciples to the extraordinary situation. It flexed its approach to value for money to adapt to the need to act quickly and provide funding rapidly. HM Treasury believes that the Managing public money framework worked well over the pandemic. However, it acknowledges that impact assessments for some COVID-19 measures needed better data and better evidence to justify the financial investment. Furthermore, it accepts that there needs to be clearer guidance around Accounting Officer assessments, particularly around how you assess risk appetite in an emergency, and assessments across multiple departments. It is planning on identifying and sharing examples of good assessments, and more training across finance functions on how Managing public money works, including for ministers.

Recommendation: HM Treasury should report back to this Committee by the end of 2021 on its progress improving the quality of impact assessments and Accounting Officer assessments, and its roll out of training on Managing public money, so that proper emphasis on achieving value for money is restored.

Recommendation: HM Treasury should review major COVID-related spending decisions to identify cases where decisions made during the pandemic have resulted in poor value for money. It should report its findings back to this Committee by the end of 2021, and use the lessons learnt to produce guidance to minimise the risk of this happening in the future.

1. The total value of government-backed loans has increased greatly during the crisis. To provide businesses with access to funding quickly during the pandemic,government launched a number of loan schemes, delivered by private sector providers under the direction of the British Business Bank. The total value of loans issued is currently expected to be £92 billion. Government guaranteed these loans by up to 100% of their value in order to compensate the private sector for an increased risk of borrower default. Government currently estimates that the calls on these guarantees may amount to as much as £26 billion, which would represent a significant drain on the public sector budget. HM Treasury expects all loans to be repaid but accepts that there is a high degree of uncertainty around this, as the repayment profile will depend on the strength of the economy and of the underlying businesses. HM Treasury is unclear about how it plans to manage the expanded loan book and the associated risks.

Recommendation: Through the autumn Spending Review, HM Treasury should set out how it is managing the significant expansion of the value of government loan guarantees and the associated risk of write-offs, and the steps being taking to reclaim the taxpayer’s investment.

1. It will become increasingly important to distinguish between spending that is aimed at economic and societal recovery from COVID-19, from spending in direct response to COVID-19. The cost tracker suggests that around 92% of the cost of government’s COVID-19 measures is categorised as being in direct response to the pandemic, with the remaining 8% attributed to the wider economic and societal recovery from the pandemic. However, this distinction is inexact, as for some measures it can be difficult to precisely define whether spending relates to the response phase or the recovery phase of government’s overall response to the pandemic. Some measures contribute to both objectives, for example the vaccines programme. For some measures, it is difficult to distinguish activity that results directly from COVID-19 from business-as-usual activity, for example with new Universal Credit claims. HM Treasury acknowledges the need for better understanding of the progress of the pandemic and the economy in order to assess the cost of recovering from COVID-19. It expects more reliable information to be available by September as the uptake and repayments against major schemes like the Bounce Back Loans Scheme become clearer.

Recommendation: Government should, through the autumn Spending Review, set out a fully costed plan for recovering from the COVID-19 pandemic and returning to ‘business as usual’.