Source · Select Committees · Public Accounts Committee
Recommendation 3
3
The COVID-19 response means government will be exposed to significant financial risks for decades to...
Conclusion
The COVID-19 response means government will be exposed to significant financial risks for decades to come. As a consequence of responding quickly to the pandemic, government has taken on significant financial risks that are spread across multiple government departments and schemes. While we acknowledge that 6 COVID 19: Cost Tracker Update there was a need to relax the usual rules surrounding major spending decisions and introduce flexibilities due to the emergency circumstances of the pandemic, we are concerned that this has created serious risks that may require managing for years. A clear example of risks from the government’s approach materialising is the 10,000 shipping containers of personal protective equipment (PPE) ordered earlier in the pandemic that we heard in May were still yet to be unpacked. HM Treasury used the example of vaccines development to show how government took on necessary risk, in this case to develop vaccines much more quickly, with government spending more to achieve that speed. The Chief Secretary to the Treasury has explained, in his 1 April 2021 letter to the Chair of the Treasury Committee, government’s approach to spending controls during COVID-19, acknowledging that there were successes and areas where lessons need to be learnt on how best to apply an emergency control framework. Recommendation: HM Treasury should develop a single cross-government framework for monitoring and managing the risks to public finances stemming from government’s COVID-19 response. HM Treasury should then explain in the autumn Spending Review how it plans to manage these risks and any fiscal trade- offs that will need to be made.
Government Response
Acknowledged
HM Government
Acknowledged
3.1 The government agrees with the Committee’s recommendation. Recommendation implemented 3.2 The government is already committed to active management of fiscal risks, including risks stemming from its COVID-19 response. HM Treasury surveys these from the centre of government, including through its Fiscal Risks Group (FRG), which reviews the most important fiscal risks and actions being taken to manage them. The FRG sits alongside groups responsible for the oversight and management of risks to the economy, tax, and spending. HM Treasury works directly with other government departments to assess risks to the public finances, in line with the principles set out in HM Treasury’s Orange Book. 3.3 Since 2016, the government has asked the Office for Budget Responsibility (OBR) to publish a fiscal risks statement to improve disclosure and management of fiscal risks. The statement draws on contributions from government and other stakeholders, and has been recognised by the International Monetary Fund and Organisation for Economic Cooperation and Development as one of the most comprehensive of its kind. The 2021 Fiscal Risks Report included a chapter on risks stemming from COVID-19; the government is committed to respond within 12 months. 3.4 The government set out its spending plans and choices up to 2024-25 in the Autumn Budget and Spending Review 2021 document. The pandemic has highlighted the importance of ensuring the right capability is in place to manage contingent liabilities in the public sector. The last 12 months have seen the launch of the Contingent Liabilities Approvals Framework and Contingent Liabilities Central Capability and they will provide tools to mitigate and manage contingent liabilities risks before they arise.