£4 billion of unusable PPE bought in first year of pandemic will be burnt “to generate power”

• PAC also voices concerns about risk of further questionable payouts as NHS commissioning restructured under upcoming reforms

The Department for Health & Social Care (DHSC) lost 75% of the £12 billion it spent on personal protective equipment (PPE) in the first year of the pandemic to inflated prices and kit that did not meet requirements – including fully £4 billion of PPE that will not be used in the NHS and needs to be disposed of. There is no clear disposal strategy for this excess but the Department says it plans to burn significant volumes of it to generate power – though there are concerns about the cost-effectiveness and environmental impact of this “strategy”. 

In a report today the Public Accounts Committee says that as a result of DHSC’s “haphazard purchasing strategy”, 24% of the PPE contracts awarded are now in dispute - including contracts for products that were not fit for purpose and one contract for 3.5 billion gloves where there are allegations of modern slavery against the manufacturer.

The Committee says this only exacerbates DHSC’s “track record of failing to comply with the requirements of Managing Public Money even before the further exceptional challenges of the pandemic response”. It also raises concerns about “inappropriate unauthorised payoffs made to staff by health bodies”, with the planned large-scale NHS restructuring “increasing the risk of this happening again.”

PAC report conclusions and recommendations

6. Having spent £12bn on PPE, the Department has £4bn of PPE in storage that will not be used in the NHS and now faces the challenges and costs of its disposal. The Department has written £8.7 billion off the value of the £12 billion it spent on PPE in 2020-21. The Department spent £4 billion on PPE which didn’t meet NHS standards and therefore has remained unused. It also bought 817 million items of PPE costing £673 million which are defective and cannot be used, donated or sold to anyone. This includes masks identified as being counterfeit; and gowns that are not water-repellent. Additionally, £2.6 billion of PPE purchased have not been used in the NHS as, while meeting technical standards, are not the type or standard preferred for use by NHS workers. A further £4.7 billion was written down to reflect that the market price at the year-end was lower than the price paid at the height of the pandemic.  The Department now needs to pay for the disposal of millions of items of PPE and is appointing two commercial waste partners to help them dispose of 15,000 pallets a month via a combination of recycling and burning to generate power. The costs and environmental impact of disposing of the excess and unusable PPE is unclear. 

Recommendation: Alongside its Treasury Minute response, the Department should write to us setting out full details on how it plans to dispose of unusable and excess PPE, the volumes and cost (of the PPE disposed of and the related storage and disposal costs) and impacts (environmental or otherwise) this may have. In addition, we ask that the Department now include an update on the progress of PPE disposal in the quarterly update they already provide the Committee following our Initial lessons from the government’s response to the COVID-19 pandemic report (Thirteenth report Session 2021-22).  

7. The procurement of PPE in response to the COVID-19 pandemic overwhelmed existing systems and has exposed weaknesses in the Department’s commercial contracting capability. At the start of the pandemic the Department faced significant challenges in sourcing and procuring PPE in the competitive global market due to the surge in demand around the world; and the temporary decline in global supply as factories temporarily shut to help reduce Covid-19 infections. PPE was purchased from new suppliers including from companies with no experience in these types of products, and where full physical product quality inspection could not always be done in advance. The Department’s subsequent review of the 364 PPE contracts it entered into identified concerns about 176 (48%) contracts. Of these 176 contracts, 24% are either currently under commercial negotiation (59 contracts); legal review (27 contracts); or in mediation (3 contracts). One of these contracts was for 3.5 billion gloves where there are allegations of modern slavery against the manufacturer. 

Recommendation: In its Treasury Minute response the Department should set out its ‘commercial reset’ plan and the timeline for scaling up its commercial capability across the Departmental Group to ensure sufficient support is in place to procure and manage existing and future contracts. The Department should also keep us informed of cases where it is has been both successful and unsuccessful in reclaiming money spent on sub-standard PPE or recovering money paid to suppliers where no goods were received. 

8. There is no clear plan for how big the PPE stockpile needs to be and how the Department will build greater resilience into the NHS supply chain so that it can respond at pace to future urgent needs. Having an appropriate PPE stockpile and a resilient NHS supply chain is crucial to the Department’s successful response to any future pandemic and infectious disease risks. The Department has historically relied on international supply chains and held a stockpile of PPE, medicines and clinical consumables to mitigate the reasonable worst-case scenario risk of an influenza pandemic only. The Department has not yet decided on what level of stockpile it will hold for future pandemics and whether it should buy PPE from British manufacturers to shorten the length of the supply chain and more effectively manage the quality and delivery speed of items. The Department estimates that if it held a stockpile sufficient to deal with a pandemic equivalent to COVID-19 then it believes it would be value for money only if there was a pandemic every 12 years. The Department has important work to do to identify an appropriate level of stockpile; balancing the need to hold sufficient PPE to mitigate the risk of potential supply chain delays and price spikes in the early stages of a pandemic, with the ongoing cost of storing PPE, and the risk of items going out of date without ever being used.   

Recommendation: The Department should develop a clear plan to increase the resilience of the NHS supply chain to be able to respond at speed if there is another pandemic or variant of concern and needs to explain in detail to the Committee how it intends to work out what items and how much PPE it needs to hold as a national stockpile going forward. 

9. The Department has regularly failed to follow public spending rules and across the Departmental Group there is a track record of failing to comply with the requirements of Managing Public Money. The Department is required to obtain approval from the Treasury before committing to expenditure where such authority is needed. The Treasury has confirmed that £1.3 billion of the Department’s spending in 2020-21 did not have HM Treasury consent and was therefore ‘irregular’. The Treasury has stated that ‘in the vast majority of cases’ this was because either the Department and/or the NHS had spent funds without approval or in express breach of conditions. While the Department consciously relaxed financial controls during its pandemic response, this is not the first-time such instances of non-compliance have been identified. In 2019-20 the value of unapproved special payments across the Departmental Group was estimated as £18 million. 

Recommendation: The Department should write to us by October 2022 setting out the systems and processes it has established as part of its ‘financial reset’ to ensure the regularity of expenditure and compliance with spending controls across the Departmental Group going forward. 

10. The Department’s COVID-19 pandemic procurement highlighted the importance of achieving transparency in respect of how it identifies and manages declarations of interests. A considerable amount of taxpayers’ money was spent on products from new suppliers, including those with no previous experience of supplying certain types of products, increasing the risk that the Department entered into contracts where conflicts of interest existed. The Department’s existing processes for collating and assessing potential related parties and related party transactions did not provide the necessary completeness assurance over the interests held by senior individuals. The Department had to subsequently rectify this and undertake further work, with a number of additional interests identified and disclosed in its Annual Report and Accounts as a result.  

Recommendation: The Department should maintain and improve accountability by embedding their revised processes so that these are undertaken on a timely basis each and every year and normalise the transparency of the results by inclusion of the full list of interests identified in every Annual Report and Accounts.  

11. There have been inappropriate unauthorised payoffs made to staff by health bodies, and the planned large-scale NHS restructuring increases the risk of this happening again. Special severance payments when staff leave public service employment should be exceptional and they require Treasury approval because they are often ‘novel, contentious and repercussive’. Three Clinical Commissioning Groups (CCGs) approved and paid special severance payments without following the required authorisation process. The C&AG qualified his regularity audit opinion on the NHS England 2020-21 Annual Report and Accounts in respect of one of these - an unapproved special severance payment made by Berkshire West CCG to its former Accountable Officer. There are currently 106 CCG’s, which as part of the planned re-organisation of the NHS will become 42 Integrated Care Boards (ICBs) on 1 July 2022, increasing the likelihood of future payoffs and further non-compliance with the rules that apply over the value of exit packages. 

Recommendation: The Department should write to us alongside its Treasury Minute response setting out how it will monitor and control the approval of all redundancy payments made by entities within the Departmental Group to ensure such payments are properly authorised in advance and are not irregular. 

12. With 23 days to go until the financial year end the UK Health Security Agency did not have an agreed budget for the new financial year. The Department established the UK Health Security Agency (UKHSA) on 1 April 2021 as a new executive agency to be the UK leader for health protection responsible for ensuring the nation can respond quickly and at greater scale to deal with pandemics and future threats. Public Health England’s (PHE’s) health protection functions transferred into UKHSA on its abolition on 1 October 2021. On the same date, UKHSA also took over the functions of NHS Test and Trace and the Joint Biosecurity Centre from the Department itself. The UKHSA budget for 2021-22 was approximately £15 billion. Despite UKHSA being up and running for a number of months, when we took evidence on 7 March 2022 the Department had still not agreed, and did not know when it would agree, a UKHSA budget for the 2022-23 financial year. 

Recommendation: The Department should not get into this position again and should write to the Committee to set out what steps it has put in place to ensure that all organisations it sponsors have a budget in place to allow sufficient time for financial planning for the year ahead. 

13. There is no clear plan as to how the Department will bring forward the publication date of its annual report and accounts.The Department prepared its 2020-21 Annual Report and Accounts in exceptional circumstances. The Department’s 2020-21 Annual Report and Accounts, and those of NHS England and the Consolidated NHS Provider Accounts, were published on 31 January 2022 - the day of the statutory deadline for all Departments. However, HM Treasury expects Departments to publish their Annual Report and Accounts prior to the parliamentary summer recess in July – the ‘administrative’ deadline it sets is 30 June - and the Department should work towards achieving this target in future. At the time of our evidence session, one NHS trust - the University Hospitals of Leicester NHS Trust (UHL) – was yet to sign and publish its own Annual Report and Accounts for both 2019-20 and 2020-21. For the second year running the Department has had to set out in its Annual Report that this NHS trust had failed to comply with the Secretary of State’s directions to prepare ‘true and fair’ accounts. 

Recommendation: The Department should develop a detailed and realistic plan for bringing forward the preparation and publication of its annual report and to improve timeliness of its accountability for the use of taxpayers’ money.