Source · Select Committees · Public Accounts Committee
Recommendation 2
2
The Department and the Bank struck the wrong balance between making decisions quickly and protecting...
Conclusion
The Department and the Bank struck the wrong balance between making decisions quickly and protecting taxpayer interests. We have previously found that the need to work at speed in responding to the pandemic has in some instances resulted in increased risk and potentially exposed the taxpayer to huge losses. The Bank’s approach to assurance consists of: the initial accreditation of lenders; post-lending assurance; and legal and contractual protections within the scheme guarantee agreement. The Bank’s decision to follow a streamlined accreditation process when assessing Greensill’s application—as with other non-bank lenders— placed greater reliance on post-lending audits and legal protections rather than performing detailed upfront due diligence. The Bank asserts that it adopted a tiered approach to accreditation, which differentiated between regulated banks and non-bank lenders. For example, regulated banks and lenders with which the Bank had an existing relationship underwent an accelerated process. The Bank accepts that delivering at speed has exposed it to risk, but it considers the interests of the taxpayer to be very well protected through its contractual arrangements with each lender. While the Bank has legal protection in preventing a guarantee being called if it believes scheme rules have not been followed, this is by no means a certain outcome—Greensill’s administrators have stated their belief that Greensill is compliant with the scheme rules. With more time and due diligence, the Bank might have reached a different decision on Greensill’s accreditation. 6 Lessons from Greensill Capital: accreditation to business support schemes Recommendation: The Bank should write to the Committee by the end of the year setting out how it will better balance between speed of delivery and value for money in future and what trade-offs it is prepared to accept. The response should detail how the Bank will identify these trade-offs early, perform scenario analysis of potentia
Government Response
Acknowledged
HM Government
Acknowledged
agree with the Committee’s conclusion. The department assesses the value for money of all its investments. Value for money is evidenced and scrutinised at key approvals and assurance milestones and all programmes in the Government Major Programmes Portfolio must comply with HM Treasury’s Accounting Officer Assessments: guidance (2021). Programmes are also considered against the accounting officer tests where the programme is in breach, or potential breach, of the agreed performance, cost, and time envelope. 2.3 The department has a well-documented and embedded accounting officer assessment process, whereby assessments and their accompanying letters are generated by the relevant SRO, before being considered by the Director General Finance and finally decided on by the Permanent Secretary. All four standards - regularity, propriety, value for money, and feasibility - are carefully considered as part of this process. In considering value for money, all assessments are based on evidence and in line with HM Treasury guidance “…make the most plausible projection available”.1 2.4 To ensure continuous review and improvement of activities to drive value for money, the department will ensure that in the future, letters to the Committee contain more of the detailed evidence provided to the Permanent Secretary on which value for money is assessed. The Permanent Secretary writes annually to all SROs as a reminder of this obligation to the Accounting Officer and to ensure the transparency of this process and will do so again by 31 January 2022.