Source · Select Committees · Public Accounts Committee
Recommendation 2
2
The Scheme was implemented with impressive speed but does not strike the right balance between...
Conclusion
The Scheme was implemented with impressive speed but does not strike the right balance between supporting business and protecting the taxpayer. Thanks to the hard work and effort of civil servants, the Scheme was launched within two weeks of the Chancellor of the Exchequer proposing it to the Department and the Bank. Re- tasking one of the Bank’s existing business support schemes enabled Government to get things up and running quickly. But Government’s desire to move quickly was based on anecdotal evidence, and a survey in mid-April that concluded one- third of businesses would probably not be able to access enough cash to last more than two weeks of lockdown. Beyond this, no clear estimates were drawn up to consider the cost of not delivering cash to the businesses within this 2-week period. The Scheme had no business case which means we heard limited evidence of a consideration of how many businesses might be unviable irrespective of the impacts of the pandemic, which business sectors needed support and how much, or the level of losses Government might be prepared to bear on the Scheme. Recommendation: The Department should use all available data when implementing new business support schemes. It should use this to develop scenario- based analysis of most likely outcomes and use this to minimise taxpayer risk. It should be clear where data is insufficient to form evidence-based judgements.
Government Response
Not Addressed
HM Government
Not Addressed
2: PAC conclusion: The Scheme was implemented with impressive speed but does not strike the right balance between supporting business and protecting the taxpayer. 2: PAC recommendation: The Department should use all available data when implementing new business support schemes. It should use this to develop scenario-based analysis of most likely outcomes and use this to minimise taxpayer risk. It should be clear where data is insufficient to form evidence-based judgements. 2. 1 The government agrees with the Committee’s recommendation. Recommendation implemented 2.2 The department seeks to use all available data in the design and implementation of its business support schemes to help strike the right balance between protecting the taxpayer and delivering policy objectives. 2.3 The department was unable to conduct a robust value for money assessment ahead of the scheme’s launch. Initial analysis indicated that the 100% guarantee, the removal of checks and the reliance on self- certification would create significant risks around fraud and credit losses. The department considered that it was unclear whether the benefits of the scheme would compensate for these issues by ensuring more businesses could access the finance they needed. The then departmental Accounting Officer set out these concerns in her letter to the then-Secretary of State on 1 May 2020 seeking a ministerial direction to implement the scheme on the grounds of highly uncertain value for money and propriety. Given the seriousness of the economic circumstances faced by businesses as a result of COVID-19, ministers considered it was appropriate to take this step. 2.4 Since the Scheme’s launch, the department and the Bank have undertaken a range of analytical work to understand better the impacts of the Scheme and to inform future policy development. This includes designing dashboards to monitor management information and comparing Scheme data with the Inter- Departmental Business Register and Companies House data to provide a more detailed view of the loan book. With external support, the department has also developed a model to estimate the net liquidity needs of small and medium-sized businesses resulting from the pandemic, providing further insights. A comprehensive monitoring and evaluation plan has been developed across all three loan guarantee schemes, and an Invitation to Tender is currently live, seeking to appoint an external contractor to conduct a process, impact and economic evaluation. This will make thorough use of all existing data sources in addition to conducting primary data collection across a range of areas. Analytical work will continue as the availability of data improves.