Recommendations & Conclusions
6 items
7
Conclusion
20th Report - DCMS management of COVID-…
Deferred
We therefore asked the Department what it would have done differently if it had to set up a similar loan scheme again. It told us that it had tried to build in lessons learned as it went through the process. For example, it had been optimistic about the number of …
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We therefore asked the Department what it would have done differently if it had to set up a similar loan scheme again. It told us that it had tried to build in lessons learned as it went through the process. For example, it had been optimistic about the number of staff and the capability it required to manage the loans. It had since, therefore, increased significantly the resources in its loan team, with recruitment almost complete by July 2024, and had embedded in this team digital, data and technology expertise, which it previously had not had. It had also clarified the scheme’s governance arrangements in July 2024 and codified its processes. The Department emphasised that it was now in a solid place with regard to 4 C&AG’s Report, paras 14, 15, 17 and 21 5 C&AG’s Report, para 6 6 Qq 7, 9 9 the scheme’s objectives, governance and expertise, and had managed the scheme in a solid and effective way. It was cautiously optimistic about the effectiveness of its management model going forward.7
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Government response AI summary
The department will be undertaking a strategic review of its loan book management this financial year, including an external evaluation of the current operating model and alternative management options.
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HM Treasury
8
Conclusion
20th Report - DCMS management of COVID-…
Deferred
During 2020, the Department had appointed two of its arm’s–length bodies, Arts Council England and Sport England, as its loan agents for the day–to–day monitoring and management of the loans, including relationships with borrowers. However, both Arts Council England and Sport England were new to loan management on this scale …
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During 2020, the Department had appointed two of its arm’s–length bodies, Arts Council England and Sport England, as its loan agents for the day–to–day monitoring and management of the loans, including relationships with borrowers. However, both Arts Council England and Sport England were new to loan management on this scale and were initially short on loan–specific expertise, such as knowledge of loan restructuring and the use of digital technology to identify problem cases.8 The Department told us that it had subsequently appointed PwC as the managed service provider for its loan book in February 2023 as it required additional specialist help.9
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Government response AI summary
The department will be undertaking a strategic review of its loan book management this financial year, including an external evaluation of the current operating model and alternative management options.
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HM Treasury
14
Conclusion
20th Report - DCMS management of COVID-…
Deferred
The Department has conducted minimal analysis of the costs of managing the loans over their lifetime, with no assessment of the factors that might increase costs or reduce income. It forecast that it would spend £17.3 million over the three years to March 2025, which we calculated would already represent …
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The Department has conducted minimal analysis of the costs of managing the loans over their lifetime, with no assessment of the factors that might increase costs or reduce income. It forecast that it would spend £17.3 million over the three years to March 2025, which we calculated would already represent 22% of its total expected income from interest on its loans.28 Beyond that, it expects its one–off costs to fall after the introduction of its loan management system and its ongoing management costs to come down, with overall costs lower from 2025–26.29 However, the Department had only carried out detailed forecasts of the costs of running the loan for the current Spending Review period ending in 2024–25, and had not estimated its costs beyond March 2025.30 The Department informed us that it had now been given its spending settlement to March 2026. It therefore has an expectation of the costs of running the scheme in 2025–26, and was in the process of undertaking its business planning for this year.31
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Government response AI summary
The department will be undertaking a review of the programme to re-assess its strategic options, which will assess options including a sale or partial sale of the loan book.
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HM Treasury
15
Conclusion
20th Report - DCMS management of COVID-…
Deferred
We therefore asked the Department how, if it did not have estimates of future costs beyond 2025–26, it was modelling the expected balance of costs against income in future years. It replied that it was conducting 24 Qq 62, 73; C&AG’s Report, paras 10 and 2.9 25 Qq 67, 71, …
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We therefore asked the Department how, if it did not have estimates of future costs beyond 2025–26, it was modelling the expected balance of costs against income in future years. It replied that it was conducting 24 Qq 62, 73; C&AG’s Report, paras 10 and 2.9 25 Qq 67, 71, 72 26 Q 80; C&AG’s Report, paras 10 and 2.9 27 Qq 73–75, 81–82; Letter from DCMS Permanent Secretary, 25 February 2025 28 Q30; C&AG’s Report, paras 17 and 3.3 29 C&AG’s Report, paras 17 and 3.4 30 Q 28; C&AG’s Report, para 3.3 31 Q 29 12 a review of its strategic options for the future of the loan book.32 The Department had undertaken such a review in 2021 and into 2022 when PwC had given it advice on all its options for the loan book, including the current hybrid approach to its management and its sale.33 It told us that it intends to undertake a similar review later in 2025–26 once all borrowers have made at least one repayment and the scheme is in a steady state with a solid operating model, experience of operating the loan management system, and a track record of repayment in place.34 The review will include more detailed costings and a review of various options.35 The Department said that it was keen to look at as many scenarios as it could think of. Future options include: the current arrangements for managing the loan book; the loan book’s sale; its consolidation with other government loans; or the appointment by the Department of specialists to manage its loans.36 The Department informed us that it had obtained an indicative range of the sale price back when PwC had advised it on its options in 2021 and 2022.37 We noted that an up–to–date valuation of potential receipts from the loan book’s sale will form an essential benchmark for this review.38 32 Qq 30, 31 33 Q 35; Letter from DCMS Permanent Secretary, 25 February 2025; C&AG’s Report, para 3.5 34 Qq 10, 12, 29–32 35 Qq 28, 30 36 Qq 31, 33, 35 37 Q 36 38 Q 33 13 2 Managing future risks Future repayment and insolvency levels
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Government response AI summary
The department will be undertaking a review of the programme to re-assess its strategic options, which will assess options including a sale or partial sale of the loan book.
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HM Treasury
17
Conclusion
20th Report - DCMS management of COVID-…
Deferred
The Department told us that, to some extent, the fact that some borrowers had become insolvent was outside its control.41 However, it considered that it has a good degree of financial information about borrowers and therefore has a good sense of their financial positions. Borrowers had also, in some cases, …
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The Department told us that, to some extent, the fact that some borrowers had become insolvent was outside its control.41 However, it considered that it has a good degree of financial information about borrowers and therefore has a good sense of their financial positions. Borrowers had also, in some cases, had repayment holidays of up to four years to prepare for repayment.42 As a result, the Department assured us that it expected that all remaining borrowers will have made their first repayment by September
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Government response AI summary
The department will be undertaking further cost, repayment and insolvency modelling through the department’s strategic review.
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HM Treasury
18
Conclusion
20th Report - DCMS management of COVID-…
Deferred
The Department has not updated its assumptions on borrower failure since December 2022, for example, in light of the number of insolvencies to date.44 We therefore asked what actions it would take for borrowers in financial difficulties. The Department told us it would need to make decisions on a 39 …
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The Department has not updated its assumptions on borrower failure since December 2022, for example, in light of the number of insolvencies to date.44 We therefore asked what actions it would take for borrowers in financial difficulties. The Department told us it would need to make decisions on a 39 C&AG’s Report, para 14 40 Qq 41, 42; C&AG’s Report, para 21 41 Q 41 42 Qq 21, 32 43 Qq 37–39 44 Qq 92, 93; C&AG’s Report, para 2.20 14 case–by–case basis. It said that it would not hesitate to use all the financial levers it had to get the maximum of taxpayers’ money back. It would, for example, be willing to initiate insolvency procedures for those who started defaulting on their loans, except if there was a policy objective not to because of the impact of the insolvency on the wider sport or cultural area. In such cases, it would go to ministers for a decision.45 The Department told us that it and its loan agents would carry out negotiations on individual insolvencies, supported by external advisers as required, and that the loans team within the Department and loan agents included professionals with experience of insolvency.46
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Government response AI summary
The department will revisit its strategic repayment forecasts and undertake further cost, repayment and insolvency modelling through the department’s strategic review by December 2025.
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HM Treasury