Recommendation 2

There is an apparent lack of ownership by the Treasury of the analysis and scenario planning activities necessary to manage the impact of COVID-19 on government finances. The scale of the likely increase in government borrowing to fund government’s response to COVID-19 is a significant new challenge to the Treasury’s objective to place the public finances on a sustainable footing. While the Office for Budget Responsibility is responsible for producing economic forecasts and analysis of the public finances, it is a matter for government to determine how that information is used to make policy decisions. The Treasury has not explained how the current and future impact of COVID-19 would affect planned or committed investments, projects and programmes, and how these would be prioritised should decisions be needed on which to delay or cancel. When it comes to future spending decisions, it is important for the Treasury to have a detailed plan in order to make strategic decisions about where planned funding can be cut or re-deployed to meet changing priorities. However, the Treasury has not conducted scenario analysis on how the economic impact of COVID-19 might affect decisions to set aside projects and investments, and plans to only undertake such scenario planning as part of the next spending review. The Treasury has also not undertaken analysis of how increases in the UK’s ratio of debt to GDP as a result of COVID-19 may impact the country’s credit rating or analysed how long the country can continue to borrow at the current rate. 6 Whole of Government Accounts 2018–19 Recommendation: The Treasury should write to the committee setting out what specific analysis it is currently undertaking as it manages the economic impacts of COVID-19.