Recommendations & Conclusions
6 items
3
Recommendation
First Report - Department for Business,…
Accepted
The Department does not know whether grants distributed by local authorities on its behalf have benefited businesses, including those most in need of that funding. Although the Department set the eligibility criteria for grant schemes administered by local authorities, it delegated most grant decisions to them. The Department told us …
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The Department does not know whether grants distributed by local authorities on its behalf have benefited businesses, including those most in need of that funding. Although the Department set the eligibility criteria for grant schemes administered by local authorities, it delegated most grant decisions to them. The Department told us that pre-payment checks did not apply to all these schemes, and that ministers prioritised delivery of grants over faster post-payment assurance sampling work. However, with only 476 grants tested, the Department does not know where the vast majority of this £21.8 billion grant funding has gone, nor the eligibility of those in receipt of it. In the absence of more granular information, the assessment it has done is already indicative of ineligible businesses receiving grant funding, eligible businesses receiving a value of grant funding they were ineligible for, or most likely a combination of both. Fraud and error in these grant payments reduces the effectiveness of these schemes to achieve their objective of providing funds to support those businesses most in need. Recommendation: The Department should, alongside its Treasury Minute response, explain to the Committee how it is going to obtain greater assurance over the regularity and value for money of grant payments made on its behalf.
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Government response AI summary
The government agrees with the recommendation and states that lessons learned from delivering the initial COVID-19 support grants is that greater assurance can be obtained through mandating pre-payment eligibility checks by local authorities, improved assurance sampling design, innovative data collection and management, as well as …
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HM Treasury
4
Conclusion
First Report - Department for Business,…
Accepted
The Department was aware of heightened fraud risks within its COVID-19 business support schemes from the outset but did not make full use of all the tools at its disposal to prevent and detect fraud. The Department expected that some potential recipients of funding for its COVID-19 business support schemes …
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The Department was aware of heightened fraud risks within its COVID-19 business support schemes from the outset but did not make full use of all the tools at its disposal to prevent and detect fraud. The Department expected that some potential recipients of funding for its COVID-19 business support schemes would attempt to defraud the exchequer. It sought ministerial directions on these schemes highlighting some of the risks posed by fraud, but did not attempt to quantify the potential fraud exposure. These requests for ministerial directions also did not sufficiently identify or reflect the potential risks from organised economic crime. The number of new companies being registered in 2020–21 rose by more than 20% compared to any of the previous five years. Although the Department indicated that disruption can also present opportunity, we feel around 170,000 new companies would certainly appear to be a warning sign warranting closer scrutiny. However, the Department could not tell us whether it sought or received information from Companies House on company formation trends, and so this is unlikely to have featured in the Department’s understanding of evolving fraud risks. Each new company could potentially apply for COVID-19 business support. Lord Agnew suggested more than 1,000 companies received emergency business support despite not trading at the start of the pandemic, referring to this as a “schoolboy error”. Recommendation: The Department should ensure that the expected scale and sources of fraud risk should be clearly communicated to ministers when ministerial directions are sought, including mitigating actions such as, for example, how the Department and Companies House would work together sharing information to prevent fraud. The Department should, as part of its Treasury Minute response, clearly explain how it is planning to recover funds it identifies as claimed fraudulently or paid out in error.
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Government response AI summary
The government agrees with the Committee’s recommendation and states that the exchange of letters for schemes implemented under Ministerial Direction have since been published on GOV.UK, and that external advice was received ahead of the Bounce Back Loan Scheme’s launch on measures to try to …
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HM Treasury
6
Recommendation
First Report - Department for Business,…
Accepted
The Post Office’s mismanagement of its Horizon programme has had devastating consequences for individuals wrongly accused of fraud. The financial cost of compensating these individuals will largely fall to the public purse. The Horizon accounting system erroneously recorded shortfalls of cash in local Post Office branches over its more than …
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The Post Office’s mismanagement of its Horizon programme has had devastating consequences for individuals wrongly accused of fraud. The financial cost of compensating these individuals will largely fall to the public purse. The Horizon accounting system erroneously recorded shortfalls of cash in local Post Office branches over its more than 20-year lifetime. The Post Office considered some of these shortfalls to be caused by subpostmasters and subpostmistresses, resulting in those staff being dismissed and the Post Office taking action to attempt to recover the ‘losses’ and in some cases leading to prosecutions and people being wrongly convicted. The Department estimates that the ‘Historical Shortfall Scheme’, set up by the Post Office to compensate those who may have experienced and repaid shortfalls (for example from their own funds), is likely to cost £153 million, of which it has set aside £65 million. The Secretary of State for the Department is the sole shareholder of the Post Office, and the Department will provide sufficient financial support to Post Office to cover the scheme. The government has also committed to paying compensation for overturned criminal convictions and estimates that this may cost the taxpayer up to £780 million. The government has also committed to covering the cost of this compensation. Recommendation: The Department should write to the Committee alongside its Treasury Minute response to set out what actions are being taken to ensure Post Office Ltd remains a viable company. Where the Department (or HM Government) provides assurances to Post Office Ltd over the funding of its liabilities, it should inform the Committee at the earliest opportunity. 8 Department for Business, Energy & Industrial Strategy Annual Report and Accounts 2020–21 1 COVID-19 business support schemes
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Government response AI summary
The government agrees and has provided over £2.5 billion in funding over the past decade, and is providing a further £335 million over the next three years, and will share letters with the Committee from BEIS to Post Office, providing assurances for the Historical Shortfall …
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HM Treasury
11
Conclusion
First Report - Department for Business,…
Accepted
Although the Department set eligibility criteria for grant schemes administered by local authorities, it delegated most grant decisions to them. The Department told us that it provided clear guidance to local authorities on recordkeeping requirements and the need to be able to reconcile payments for the purposes of audit.43 However, …
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Although the Department set eligibility criteria for grant schemes administered by local authorities, it delegated most grant decisions to them. The Department told us that it provided clear guidance to local authorities on recordkeeping requirements and the need to be able to reconcile payments for the purposes of audit.43 However, it also told us that administering these grants had put real pressure on local authorities, despite the Department not always requiring them to conduct pre-payment eligibility checks before making grant payments to businesses. As with other schemes set up during the pandemic that we have reported on, the Department told us that it launched schemes with ‘consciously insufficient levels of upfront control’, and with ministers prioritising delivery of grants to businesses over doing (post-payment assurance) sampling faster.44 34 Q 67 35 Q 69 36 ICAEW, paras 24–25 37 68–70 38 Qq 12, 68–71, 77, 97, 103 39 Qq 63, 97–99, 103 40 Department for Business, Energy & Industrial Strategy, Annual report and accounts 2020–21, 25 November 2021, Accountability report, page 122 41 Qq 9–10, 13 42 Q 17 43 Q 67 44 Qq 15, 63 12 Department for Business, Energy & Industrial Strategy Annual Report and Accounts 2020–21
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Government response AI summary
Responsibility for checking that all grant awards were issued in a compliant manner and to eligible businesses rests with the local authority. It is a condition of BEIS grants to local authorities that they must take all reasonable and practicable steps to recover any payment …
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HM Treasury
16
Conclusion
First Report - Department for Business,…
Accepted
As some COVID-19 business support schemes have increasingly become part of business as usual, the Department told us that, for example in relation to grants distributed by local authorities, its systems and methods are now approaching maturity. It considers it has improved its guidance to local authorities and refined its …
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As some COVID-19 business support schemes have increasingly become part of business as usual, the Department told us that, for example in relation to grants distributed by local authorities, its systems and methods are now approaching maturity. It considers it has improved its guidance to local authorities and refined its approach to identifying fraud and error in these grant schemes.59 However, lessons learnt seem to have been largely actions in pursuit of reducing shortcomings in existing schemes rather than learning wider lessons that could be applied to limit fraud and error in future schemes. The ICAEW recommends that the government establishes a standard framework for assuring grants delivered through local authorities, providing clarity to the respective reporting roles of central and local government, as well as measures to be used to detect and prevent fraud and error.60
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Government response AI summary
The government agrees with the recommendation to establish a standard framework for assuring grants delivered through local authorities, with a target implementation date of December 2022.
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HM Treasury
19
Conclusion
First Report - Department for Business,…
Accepted
In December 2020 the Department wrote to the Post Office, noting that the number of applications to the Scheme was ‘…materially higher than expected resulting in a corresponding increase in possible scheme claims and costs…’ and that the Post Office considered ‘…any amount in excess of the original budget will …
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In December 2020 the Department wrote to the Post Office, noting that the number of applications to the Scheme was ‘…materially higher than expected resulting in a corresponding increase in possible scheme claims and costs…’ and that the Post Office considered ‘…any amount in excess of the original budget will be unaffordable…’. With the Secretary of State as sole shareholder of the Post Office, the Department determined that it would apply to HM Treasury for future funding so the Post Office could meet its obligations for payments under the scheme (providing so-called ‘comfort’ to the Post Office that it would be able to meet its liabilities as and when they fall due).64
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Government response AI summary
The government agrees with the Committee’s recommendation and states it has provided over £2.5 billion in funding to support the Post Office network over the past decade, and is providing a further £335 million over the next three years.
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HM Treasury