Source · Select Committees · Public Accounts Committee
Recommendation 10
10
The government’s view that businesses were unable to survive more than a two- week lockdown...
Conclusion
The government’s view that businesses were unable to survive more than a two- week lockdown period was based on anecdotal evidence, and a survey conducted by the Association of Chartered Certified Accountants in mid-April.23 The Department told us that its prime role when gathering data to inform decisions on support schemes is to consider the economic impact, however it did not prepare a business case for the Scheme.24 Furthermore, the Department was not aware of any estimates made of the anticipated loss to the economy if the Scheme had been designed differently.25 Nor did Government have any information on which types of business were most in need of support, and which would be unsustainable even in the absence of a pandemic.26 Shortcomings in the Scheme’s design
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.