Twelfth Report - COVID 19: Cost Tracker Update

Achieving value for money from government expenditure during COVID-19 is being compromised by poor quality impact assessments and Accounting Officer assessments. Government accepted the need for a higher risk appetite in order to make decisions and move funding more quickly … Read more Achieving value for money from government expenditure during COVID-19 is being compromised by poor quality impact assessments and Accounting Officer assessments. Government accepted the need for a higher risk appetite in order to make decisions and move funding more quickly for COVID-related measures, adapting the Managing public money principles to the extraordinary situation. It flexed its approach to value for money to adapt to the need to act quickly and provide funding rapidly. HM Treasury believes that the Managing public money framework worked well over the pandemic. However, it acknowledges that impact assessments for some COVID-19 measures needed better data and better evidence to justify the financial investment. Furthermore, it accepts that there needs to be clearer guidance around Accounting Officer assessments, particularly around how you assess risk appetite in an emergency, and assessments across multiple departments. It is planning on identifying and sharing examples of good assessments, and more training across finance functions on how Managing public money works, including for ministers. Recommendation: HM Treasury should report back to this Committee by the end of 2021 on its progress improving the quality of impact assessments and Accounting Officer assessments, and its roll out of training on Managing public money, so that proper emphasis on achieving value for money is restored. Recommendation: HM Treasury should review major COVID-related spending decisions to identify cases where decisions made during the pandemic have resulted in poor value for money. It should report its findings back to this Committee by the end of 2021, and use the lessons learnt to produce guidance to minimise the risk of this happening in the future. Show less

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The total value of government-backed loans has increased greatly during the crisis. To provide businesses with access to funding quickly during the pandemic, government launched a number of loan schemes, delivered by private sector COVID 19: Cost Tracker Update 7 … Read more The total value of government-backed loans has increased greatly during the crisis. To provide businesses with access to funding quickly during the pandemic, government launched a number of loan schemes, delivered by private sector COVID 19: Cost Tracker Update 7 providers under the direction of the British Business Bank. The total value of loans issued is currently expected to be £92 billion. Government guaranteed these loans by up to 100% of their value in order to compensate the private sector for an increased risk of borrower default. Government currently estimates that the calls on these guarantees may amount to as much as £26 billion, which would represent a significant drain on the public sector budget. HM Treasury expects all loans to be repaid but accepts that there is a high degree of uncertainty around this, as the repayment profile will depend on the strength of the economy and of the underlying businesses. HM Treasury is unclear about how it plans to manage the expanded loan book and the associated risks. Recommendation: Through the autumn Spending Review, HM Treasury should set out how it is managing the significant expansion of the value of government loan guarantees and the associated risk of write-offs, and the steps being taking to reclaim the taxpayer’s investment. Show less

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The value of the cost tracker is lessened by poor data from some government departments and functions. The level of completeness and accuracy of COVID- related data is variable across government departments. Several departments are still not able to provide a robust assessment of their COVID-related activity, or the extent …

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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 …

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It will become increasingly important to distinguish between spending that is aimed at economic and societal recovery from COVID-19, from spending in direct response to COVID-19. The cost tracker suggests that around 92% of the cost of government’s COVID-19 measures is categorised as being in direct response to the pandemic, …

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On the basis of the COVID-19 cost tracker published by the Comptroller and Auditor General, we took evidence from HM Treasury about the costs of government’s response to the COVID-19 pandemic.1

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HM Treasury told us that it is tracking and controlling public expenditure on COVID-19 in the same way that it does routinely for all public expenditure, through regular monthly reporting of departments’ spending, which it described as a robust mechanism for tracking spend. It puts more focus and effort on …

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HM Treasury has, over the last few months, started to identify items of spending that are COVID-related, and designate them as such.9 It described how for some areas of expenditure it is straightforward to do so, for example, the business support grant schemes. For other areas, it is not possible …

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HM Treasury confirmed that it regards the NAO’s £372 billion estimate of the total cost of the government’s response to the pandemic to be a good representation of the total gross lifetime costs of policy decisions driven by COVID-19, and a reliable snapshot based on what is known now. It …

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The cost tracker purposefully excludes some financial decisions that government has taken as a result of the pandemic to support the recovery from the pandemic, for example the corporation tax super deduction and increases in capital spending that were announced in Budget 2020. It also does not include the effect …

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We challenged HM Treasury on why several departments are not able to provide the NAO with a complete assessment of the costs and spend of their COVID-related activity. We heard how there are measures for which estimating the lifetime cost is difficult because of a lack of evidence upon which …

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HM Treasury told us of what it is doing to improve its understanding of the costs of the pandemic. It has provided departments with instructions on how to gather the information that is needed to make cost estimates of COVID-19 measures.14 It described how it had instigated monthly tracking of …

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HM Treasury reiterated what the Chief Secretary to the Treasury set out in his letter of 1 April 2021 to the Chair of the Treasury Committee: that the COVID-19 pandemic is a national health emergency that has required a response by government without precedent in terms of speed and scale.16 …

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HM Treasury used the example of vaccines development to explain how government took on necessary risk, in this case to develop vaccines much more quickly than would usually have been the case. The rapid development of a vaccine was central to dealing with the pandemic and recovering from it, and …

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The Chief Secretary to the Treasury acknowledged in his letter of 1 April 2021 that a consequence of an enhanced risk appetite is that risks are more likely to crystalize. A clear example of risks from the government’s approach materialising is the 10,000 shipping containers of personal protective equipment (PPE) …

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HM Treasury told us that over the pandemic it had kept the same basic framework for public expenditure decisions, with a strong emphasis on value for money, but that it had adapted it and made it more flexible to recognise the circumstances. In some areas, value for money was best …

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HM Treasury explained that it told accounting officers that throughout the pandemic they remained responsible for assuring themselves that public money was being properly spent, for applying the principles of Managing public money and for accounting to Parliament for their spending.24 HM Treasury considers that Managing public money has worked …

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HM Treasury acknowledged that the process of undertaking impact assessments for some major COVID-19 schemes had been challenging and hampered by poor data and evidence.28 It used the example of the excess stockpiles of PPE to illustrate that big lessons need to be learned.29 This fits with a trend the …

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The NAO’s COVID-19 cost tracker presents a current estimate of the cost of write- offs of government-backed loans made in response to the pandemic of £26 billion.31 HM Treasury confirmed that it recognises this amount as a good snapshot based on current information on what the total losses might be.32 …

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HM Treasury referred specifically to the Bounce Back Loan Scheme, which accounts for £22.8 billion of the forecast total write-off costs of £26 billion.36 It told us that the first loan schemes had been too slow to grant loans to small businesses with no borrowing history and therefore no existing …

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HM Treasury told us that it is currently considering its longer-term approach to the management of COVID-19 legacy schemes, including the outstanding loans to businesses. It has not yet decided whether there is benefit in consolidating loan books across departments. As part of its overall monitoring of the economy, it …

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The NAO’s latest COVID-19 cost tracker estimates that around 90% of the projected cost of the pandemic will be spent on the government’s response to COVID-19, and around 10% on the recovery phase.40 HM Treasury explained that it is extremely difficult to categorise much COVID-related spending as either part of …

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HM Treasury assured us that in broad terms government’s pre-pandemic plans and programmes have remained largely in place. It told us that the areas where there has been significant reprioritisation or pausing have tended to be the ones that have been badly affected by COVID-19, the most obvious example being …

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HM Treasury expected more reliable information on the cost of the recovery to become available around September 2021, as the uptake and repayments against major schemes like the Bounce Back Loans Scheme become clearer.45 It told us that the government will give further details on its plans for recovering from …

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