Recommendations & Conclusions
19 items
2
Recommendation
Thirty-Fifth Report - The pharmacy earl…
Accepted
Crown Commercial Service (CCS) failed to sufficiently manage and consider conflicts of interest for the appointment of contractors. Lex Greensill was appointed as senior adviser to government on supply chain finance in November 2011 and continued to provide advice to government until March 2017. In July 2012 he set up …
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Crown Commercial Service (CCS) failed to sufficiently manage and consider conflicts of interest for the appointment of contractors. Lex Greensill was appointed as senior adviser to government on supply chain finance in November 2011 and continued to provide advice to government until March 2017. In July 2012 he set up a company (Greensill Capital) which subsequently participated in the provision of supply chain finance to government. In November 2017 Greensill Capital emerged as the key subcontractor and financial guarantor to Taulia, which was appointed in March 2018 as the sole supplier to the Supplier Early Payment Solution framework. Greensill Capital facilitated an operational contract to provide private finance into the pharmacy reimbursement process and, therefore, Lex Greensill stood to gain from his relationship with government. CCS has stated that when it first became aware that Greensill Capital had been appointed as subcontractor to Taulia, it did not consider Lex Greensill’s previous engagement with government sufficient grounds under the regulations to reject Taulia’s bid. Ex-senior civil servants with privileged access to government officials by virtue of previous senior roles in the civil service on taking up private sector positions exploited this access. This was the case with Greensill Capital’s staff who provided a credible face when promoting the Earnd salary advance scheme and other Greensill Capital products to NHS leadership – winning over their confidence. Recommendation: The Department and CCS should formalise the process for considering conflicts of interest, to ensure that actual and perceived conflicts of interest are managed appropriately.
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Government response AI summary
The Department and CCS have formalized the process for considering conflicts of interest, including updating templates and implementing PPN 04/2021, to ensure actual and perceived conflicts are managed appropriately, with ongoing reviews and contractor declarations.
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HM Treasury
3
Recommendation
Thirty-Fifth Report - The pharmacy earl…
Accepted
Despite previous experience of contractor failures, CCS and the Department did not act on lessons from previous cases. The Department, CCS and NHS Business Services Authority (NHSBSA) assessments of risks did not flag issues with having a single supplier on the Supplier Early Payment Solution framework or that taxpayers’ The …
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Despite previous experience of contractor failures, CCS and the Department did not act on lessons from previous cases. The Department, CCS and NHS Business Services Authority (NHSBSA) assessments of risks did not flag issues with having a single supplier on the Supplier Early Payment Solution framework or that taxpayers’ The pharmacy early payment and salary advance schemes in the NHS 7 funds may be required in the event of supplier failure. We do now know that this risk crystallised, as Greensill Capital eventually failed. Although CCS considered the risk of Taulia failing, and requested a financial guarantor, it did not consider the risk of Greensill Capital failing, and Greensill was the key sub-contractor. This Committee has reported before that understanding what capability government still lacked in letting and managing contracts was an important strategic issue and identifying and plugging these gaps may have helped to avoid the lack of a proper risk assessment on supplier resilience and the consequences of Greensill Capital’s failure for government Issues around the continued challenges in quality, accessibility and integrity of data raised by the inquiry into the collapse of Carillion reverberate here, as we now know that the predicted savings for the NHS cannot be reliably measured. The lack of a business case to support the decision made in July 2020 to reimburse pharmacies even earlier than previous arrangements also points to a continuing challenge in the quality, accessibility and integrity of data. Recommendation: The Department and CCS should establish a cohesive and robust methodology for assessing suppliers’ risk profiles and resilience and develop steps to improve information sharing between the two organisations and across government. Procedures should include processes for assessing contractors’ financial viability; potential to deliver the required goods and services; and that assessments are reviewed at appropriate intervals, such as when cont
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Government response AI summary
The government agrees to robust financial checks for suppliers bidding for CCS contracts, ongoing risk monitoring, information sharing across the Government Commercial Function, and a tiered approach to contract and supplier classification based on risk.
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HM Treasury
4
Recommendation
Thirty-Fifth Report - The pharmacy earl…
Accepted
The Department failed to provide adequate oversight to its arm’s length bodies (ALBs) and NHS trusts. Guidance issued by Civil Service Human Resources in December 2020 to accounting officers warned that novel financing arrangements, including salary advance schemes, required caution, and needed departmental accounting officer and HM Treasury approvals. The …
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The Department failed to provide adequate oversight to its arm’s length bodies (ALBs) and NHS trusts. Guidance issued by Civil Service Human Resources in December 2020 to accounting officers warned that novel financing arrangements, including salary advance schemes, required caution, and needed departmental accounting officer and HM Treasury approvals. The Department has indicated that owing to an oversight, it only recently cascaded the advice to its ALBs. The Department argues that it would not be normal practice for it to disseminate such advice to NHS trusts, because they are not ALBs of the Department, and so the guidance was not passed to NHS trusts. A number of NHS trusts subscribed to or piloted the Greensill Capital’s scheme, and following its collapse, some moved to paid-for scheme providers. There is also evidence that some salary advance scheme providers have sought and received endorsements from NHS staff and have used these along with the NHS logo and branding to promote their products online. Recommendation: The Department, working with NHSE&I, should adopt a formal process for ensuring that government advice is disseminated to NHS trust leadership for consideration and implementation if relevant. The plan should also include a protocol for ensuring that the NHS logo or brand is not exploited or used by unauthorised individuals or companies and that the staff code of practice includes a protocol for personal endorsements.
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Government response AI summary
The government agrees with the Committee’s recommendation. NHSE&I has a process for disseminating relevant government advice to NHS trusts through their Healthcare Leaders Bulletin, and also has a formal route to system leaders through its Single Point of Contact team for items requiring immediate attention.
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HM Treasury
6
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Accepted
The Department’s business case targeted annual savings of £100 million in pharmacy margins through early payment settlements with drug manufacturers, based on advice supplied by Lex Greensill in his capacity as government adviser. The Department has stated that it is unable to quantify the savings from the early payment scheme …
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The Department’s business case targeted annual savings of £100 million in pharmacy margins through early payment settlements with drug manufacturers, based on advice supplied by Lex Greensill in his capacity as government adviser. The Department has stated that it is unable to quantify the savings from the early payment scheme to pharmacies. HM Treasury remained unconvinced that there was market failure or that government needed to be involved but approved the business case in December 2012.7 2 C&AG’s Report, Investigation into supply chain finance in the NHS, Session 2021–22, HC 734, 29 October 2021 3 C&AG’s Report, para 1 4 C&AG’s Report, para 7 5 C&AG’s Report, paras 8, 9 6 C&AG’s Report, para 2.8 7 C&AG’s Report, para 2.9 10 The pharmacy early payment and salary advance schemes in the NHS
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Government response AI summary
The government agrees with the committee's item and reissued updated guidance (DAO 03/22) in March 2022 to Accounting Officers, reiterating their responsibilities regarding novel and complex financing arrangements.
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HM Treasury
7
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Accepted
We asked the Department that given the pharmacy scheme involved an unusual and novel use of public money and in relation to the entire episode with Greensill Capital whether HM Treasury’s initial scepticism about the use of supply chain finance in the NHS has been validated. The Department told us …
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We asked the Department that given the pharmacy scheme involved an unusual and novel use of public money and in relation to the entire episode with Greensill Capital whether HM Treasury’s initial scepticism about the use of supply chain finance in the NHS has been validated. The Department told us that knowing what it knows now, it would not embark on the scheme again. The Committee asked a broad question about the large percentage of suppliers to government—in the high 90%s—paid within 30 days and many paid even more quickly than that and why that mechanism could not have been used at the time the pharmacy scheme was introduced. The Department highlighted that the new scheme for reimbursing pharmacies that has been introduced following the Greensill collapse means that, as of the month of November, pharmacies send their prescriptions to NHSBSA by the fifth of the month and are reimbursed by NHSBSA in four working days.8
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Government response AI summary
The government agrees with the committee's observation and, in response, HM Treasury reissued updated guidance (DAO 03/22) in March 2022, reiterating accounting officers' responsibilities regarding novel and complex financing arrangements.
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HM Treasury
8
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Accepted
The Department told us that the original business case had quite a large level of projected savings—£100 million as quoted by the National Audit Office. We asked how much of that £100 million quoted in the report was actually realised and the Department confirmed that it would have been much …
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The Department told us that the original business case had quite a large level of projected savings—£100 million as quoted by the National Audit Office. We asked how much of that £100 million quoted in the report was actually realised and the Department confirmed that it would have been much lower than that. The Department also stated that there was an in-principle case that savings ought to be achievable, at almost no cost and no risk to the taxpayer, and that was the basis of the decision in 2012. However, the business case would probably not have been sufficient if government funds were being invested.9
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Government response AI summary
The government agrees with the committee's item and reissued updated guidance (DAO 03/22) in March 2022 to Accounting Officers, reiterating their responsibilities regarding novel and complex financing arrangements.
Read full response →
HM Treasury
9
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Accepted
We asked whether any cash analysis was done in 2012 as to whether the proposed scheme would save any money—it was assumed by the Department that it might. The Department confirmed that there is no accurate basis for estimating the amount of savings that would give a number that that …
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We asked whether any cash analysis was done in 2012 as to whether the proposed scheme would save any money—it was assumed by the Department that it might. The Department confirmed that there is no accurate basis for estimating the amount of savings that would give a number that that the Department would be confident in, but given the level of take-up in the scheme, any savings would be considerably lower than the original £100 million estimate. The £100 million was clearly a large overestimate of what happened in practice, because the take-up was considerably lower.10 8 Qq 8–9; C&AG’s Report, para 21 9 Qq 18–20 10 Qq 18, 29–31 The pharmacy early payment and salary advance schemes in the NHS 11 2 Contractor risk assessment and evaluation Conflicts of interest
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Government response AI summary
The government agrees with the committee's item and reissued updated guidance (DAO 03/22) in March 2022 to Accounting Officers, reiterating their responsibilities regarding novel and complex financing arrangements.
Read full response →
HM Treasury
10
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Accepted
Following his appointment as a senior adviser in November 2011, Lex Greensill advised the government on supply chain finance until March 2017. He also founded Greensill Capital, which was a subcontractor to Taulia as part of its November 2017 bid to provide supply chain finance services to the public sector. …
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Following his appointment as a senior adviser in November 2011, Lex Greensill advised the government on supply chain finance until March 2017. He also founded Greensill Capital, which was a subcontractor to Taulia as part of its November 2017 bid to provide supply chain finance services to the public sector. Greensill Capital was incorporated in June 2012. Lex Greensill was a government adviser for supply chain finance in the Cabinet Office between 2012 and 2015. He continued to provide market and pricing advice to government on supply chain finance. He attended a key meeting in March 2017 which considered the setting up of a government framework agreement for supply chain finance.11
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Government response AI summary
The government agrees with the Committee’s recommendation to formalise the process for considering conflicts of interest and has implemented Procurement Policy Notice (PPN) 04/2021 covering conflicts of interest in awarding contracts. CCS ensures contemporaneous confirmation is sought and captured that teams have considered any perceived …
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HM Treasury
13
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Accepted
CCS stated that in terms of procurement regulations, there was no reason to preclude Taulia based on Greensill Capital being a subcontractor named in their bid. CCS also told us that based on submissions received from the various bidding companies, its assessment was that there was no conflict in relation …
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CCS stated that in terms of procurement regulations, there was no reason to preclude Taulia based on Greensill Capital being a subcontractor named in their bid. CCS also told us that based on submissions received from the various bidding companies, its assessment was that there was no conflict in relation to the procurement itself and, therefore, it carried on with the procurement. CCS also confirmed that Taulia had failed on one particular question during the procurement process. CCS highlighted that it took legal advice from both the Government Legal Department and counsel and both confirmed that CCS could proceed with the procurement.14
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Government response AI summary
The government agrees with the Committee’s recommendation to formalise the process for considering conflicts of interest and has implemented Procurement Policy Notice (PPN) 04/2021 covering conflicts of interest in awarding contracts. CCS ensures contemporaneous confirmation is sought and captured that teams have considered any perceived …
Read full response →
HM Treasury
14
Recommendation
Thirty-Fifth Report - The pharmacy earl…
Accepted
CCS knew, before legal correspondence came in from Taulia, that Greensill Capital was listed as a financial backer—the guarantor—to the Taulia bid. CCS agreed that if there 11 C&AG’s Report, para 12, Figure 1 12 C&AG’s Report, para 2.21 13 Qq 55–56 14 Qq 57–58 12 The pharmacy early payment …
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CCS knew, before legal correspondence came in from Taulia, that Greensill Capital was listed as a financial backer—the guarantor—to the Taulia bid. CCS agreed that if there 11 C&AG’s Report, para 12, Figure 1 12 C&AG’s Report, para 2.21 13 Qq 55–56 14 Qq 57–58 12 The pharmacy early payment and salary advance schemes in the NHS was anything it could have done better as an organisation, it would be the documentation of its consideration around whether there were any conflicts at that point. This was not documented.15
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Government response AI summary
The Department and CCS have formalized the process for considering conflicts of interest, including updating templates and implementing PPN 04/2021, to ensure actual and perceived conflicts are managed appropriately, with ongoing reviews and contractor declarations.
Read full response →
HM Treasury
15
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Accepted
Mr Bill Crothers was a former Government Commercial Officer and was a director for both Greensill Capital and its subsidiary Earnd (UK) Limited. We asked whether Mr Crothers was using his contacts within the NHS to promote the work of Greensill Capital. CCS told us that though Mr Crothers was …
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Mr Bill Crothers was a former Government Commercial Officer and was a director for both Greensill Capital and its subsidiary Earnd (UK) Limited. We asked whether Mr Crothers was using his contacts within the NHS to promote the work of Greensill Capital. CCS told us that though Mr Crothers was copied in on an email which Mr Greensill wrote to the then CCS chief executive, there was no contact between CCS and Mr Crothers. However, there was awareness amongst CCS senior leadership that Mr Crothers was speaking to different NHS organisations across the country, promoting the work of Greensill Capital across both supply chain finance and the Earnd salary advance scheme.16
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Government response AI summary
The government agrees with the Committee’s recommendation to formalise the process for considering conflicts of interest and has implemented Procurement Policy Notice (PPN) 04/2021 covering conflicts of interest in awarding contracts. CCS ensures contemporaneous confirmation is sought and captured that teams have considered any perceived …
Read full response →
HM Treasury
16
Recommendation
Thirty-Fifth Report - The pharmacy earl…
Accepted
The Government is currently considering the recommendations from Nigel Boardman’s recent review of standards in public life and we expect that the outcome of those considerations would be far reaching and wide enough to address all of these issues relating to conflicts of interest of senior government officials and advisers.17 …
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The Government is currently considering the recommendations from Nigel Boardman’s recent review of standards in public life and we expect that the outcome of those considerations would be far reaching and wide enough to address all of these issues relating to conflicts of interest of senior government officials and advisers.17 Contractor failure
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Government response AI summary
The government will formalize the process for considering conflicts of interest. CCS is updating templates to ensure confirmation is sought regarding conflicts of interest, and the DHSC has implemented a clear process, with contract managers and contractors completing conflict of interest declarations.
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HM Treasury
19
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Accepted
The combined effect of the introduction of an even earlier reimbursement process for pharmacies and the failure of Greensill Capital placed the Department in a position 15 Q 59 16 Qq 65–66 17 Supply Chain Finance in Government: Boardman Review 18 C&AG’s Report, para 18 19 C&AG’s Report, paras 2.29–2.30 …
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The combined effect of the introduction of an even earlier reimbursement process for pharmacies and the failure of Greensill Capital placed the Department in a position 15 Q 59 16 Qq 65–66 17 Supply Chain Finance in Government: Boardman Review 18 C&AG’s Report, para 18 19 C&AG’s Report, paras 2.29–2.30 The pharmacy early payment and salary advance schemes in the NHS 13 of making payments in advance of need, which Managing Public Money states should be “exceptional, and should only be considered if a good value for money case for the Exchequer can be made”. HM Treasury approval was sought and obtained for the payment to pharmacies to be made in advance. We asked NHSBSA if it had no idea in the run up to the end of February that there was a problem? NHSBSA told us that it had seen in the news about Greensill Capital and the difficulties it was having with Credit Suisse. NHSBSA also stated that the risk it was mitigating against was the risk of pharmacies failing.20
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Government response AI summary
The government agrees with the committee's observation and, in response, HM Treasury reissued updated guidance (DAO 03/22) in March 2022, reiterating accounting officers' responsibilities regarding novel and complex financing arrangements.
Read full response →
HM Treasury
21
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Accepted
We further questioned CCS if it was normal when dealing with what is, effectively, a financial product, to end up with only one supplier, with no resilience built in. CCS told us that it does not like putting single suppliers on a framework, but it was its engagement with the …
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We further questioned CCS if it was normal when dealing with what is, effectively, a financial product, to end up with only one supplier, with no resilience built in. CCS told us that it does not like putting single suppliers on a framework, but it was its engagement with the marketplace that meant that on this occasion, it made sense for it to be a single- supplier framework. CCS stated that market intelligence had suggested that, because of the thin margins, splitting the agreement into two suppliers would likely lead to no market to award the contract to.22
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Government response AI summary
The government agrees with the committee's item and states it already implements robust financial checks, risk monitoring, and a tiering approach for suppliers throughout the contract life to ensure resilience.
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HM Treasury
22
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Accepted
Over the three-year period of the pharmacy scheme with Taulia and Greensill Capital as subcontractor, a cumulative transaction value of £3.32 billion of pharmacy loans passed through the supply chain finance. Taulia received in the region of £840,000 over the three-year period. We asked CCS whether it felt at any …
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Over the three-year period of the pharmacy scheme with Taulia and Greensill Capital as subcontractor, a cumulative transaction value of £3.32 billion of pharmacy loans passed through the supply chain finance. Taulia received in the region of £840,000 over the three-year period. We asked CCS whether it felt at any point that it had a role in advising other parts of Government about the marginal benefit to any company of running the scheme and, therefore, the potential risk. CCS stated that it had been asked to deliver on a framework and to procure someone to deliver it. CCS highlighted that it proceeded on the basis that it thought it was the right thing to do and that it was not technically CCS’s role to question the approach to supply chain finance but to consider the request from its customers. The consideration in this case, led to CCS thinking that it could bring dynamic discounting into the agreement as well and offer that service more widely to the public sector.23
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Government response AI summary
The government agrees with the committee's item and reissued updated guidance (DAO 03/22) in March 2022 to Accounting Officers, reiterating their responsibilities regarding novel and complex financing arrangements.
Read full response →
HM Treasury
23
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Accepted
CCS told us that it had put an information notice out to say that it was starting to look at the replacement for supply chain finance but the decision had yet to be formalised internally—though it had gone to the CCS board. CCS agreed that its guidance to the board …
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CCS told us that it had put an information notice out to say that it was starting to look at the replacement for supply chain finance but the decision had yet to be formalised internally—though it had gone to the CCS board. CCS agreed that its guidance to the board would be to come out of this particular marketplace, especially as the Department 20 Qq 120–123; C&AG’s Report, paras 2.27–2.28; HM Treasury, Managing Public Money, June 2021. Available at: www.gov.uk/government/publications/managing-public-money 21 C&AG’s Report, para 29 22 Qq 88–89 23 Qq 91–94; C&AG’s Report, para 16 14 The pharmacy early payment and salary advance schemes in the NHS of Health and Social Care and NHSBSA have now put something else in place for pharmacies. Therefore, the intention is not to put in place a replacement for the Taulia supply chain finance or dynamic discounting agreement across government.24 24 Qq 128–131 The pharmacy early payment and salary advance schemes in the NHS 15 3 Oversight and assurance Failure to cascade government advice
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Government response AI summary
The government states that Suppliers bidding for CCS contracts are subject to robust financial checks and regular risk monitoring, including discussions with Taulia to identify an alternative funder and engagement with NHS Business Services Authority.
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HM Treasury
24
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Accepted
Greensill Capital actively marketed its salary advance scheme, Earnd, to NHS trusts at no cost to employers or employees. Representatives of Greensill Capital often attended NHS group meetings of trust leadership and senior management to pitch the service. Greensill Capital had explained to NHS trusts that providing a free alternative …
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Greensill Capital actively marketed its salary advance scheme, Earnd, to NHS trusts at no cost to employers or employees. Representatives of Greensill Capital often attended NHS group meetings of trust leadership and senior management to pitch the service. Greensill Capital had explained to NHS trusts that providing a free alternative to high- cost loans for NHS employees was an act of corporate social responsibility.25
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Government response AI summary
The government agrees with the implied recommendation to address the perception of NHS endorsement and will update the NHS Identity Guidelines by May 2022 to explicitly state that NHS/DHSC and staff are not permitted to endorse third-party goods or services.
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HM Treasury
25
Recommendation
Thirty-Fifth Report - The pharmacy earl…
Accepted
Government advised departments not to implement salary advance schemes, but this advice was not cascaded to the Department’s arm’s-length bodies (ALBs). Guidance issued by Civil Service Human Resources in December 2020 to accounting officers reminded them that novel financing arrangements, including salary advance schemes, required caution, and needed departmental accounting …
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Government advised departments not to implement salary advance schemes, but this advice was not cascaded to the Department’s arm’s-length bodies (ALBs). Guidance issued by Civil Service Human Resources in December 2020 to accounting officers reminded them that novel financing arrangements, including salary advance schemes, required caution, and needed departmental accounting officer and HM Treasury approvals. There is evidence that some departments declined approaches by Greensill Capital to subscribe to its salary advance scheme, but it appears they may not all have cascaded this information to their ALBs. The Department told us that, owing to an oversight, it cascaded guidance to its ALBs only recently. It also told us that as NHS trusts are not ALBs of the Department it would not be normal practice to disseminate this advice to the NHS.26
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Government response AI summary
The Department, working with NHSE&I, has adopted a formal process for ensuring that government advice is disseminated to NHS trust leadership for consideration and implementation if relevant through regular updates and the Single Point of Contact team.
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HM Treasury
27
Conclusion
Thirty-Fifth Report - The pharmacy earl…
Accepted
On the basis that there was not a lot of cash to be earned from this scheme by Greensill Capital, we asked what it was that the company was hoping to get out of this line of busines at the time. The National Audit Office has reported that Greensill Capital …
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On the basis that there was not a lot of cash to be earned from this scheme by Greensill Capital, we asked what it was that the company was hoping to get out of this line of busines at the time. The National Audit Office has reported that Greensill Capital considered that a track record for Earnd with NHS employers would convince private sector employers to engage on a commercial basis. Greensill Capital also proposed other supply chain finance solutions to NHS trusts, but trusts surveyed by the National Audit Office reported that they had not taken this forward. The Department told us that the NHS logo and the NHS is a trademark owned by the Secretary of State and cannot be used without his permission. The Department stated that it intervenes when companies and others seek to do so and recognised the concern. The Department highlighted that people trying to access the NHS brand, which is a very powerful brand, was something it took direct interest in, with set measures in place to protect the NHS brand and also take action where misuse is identified.28 25 C&AG’s Report, para 23 26 C&AG’s Report, para 28 27 , Qq 142–147; C&AG’s Report, para 27 28 Qq 173–174; C&AG’s Report, paras 3.16–3.17, 16 The pharmacy early payment and salary advance schemes in the NHS Unregulated consumer lending
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Government response AI summary
The government agrees with the committee's item and has implemented Procurement Policy Notice (PPN) 04/2021 to manage conflicts of interest, with CCS updating procurement processes and DHSC introducing a clear process for declarations throughout the contract lifecycle.
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HM Treasury