1.The NAO’s COVID-19 cost tracker shows the importance and value of capturing, sharing and presenting timely data on government’s actions and costs during a crisis. The cost tracker collates information from across all central government ministerial departments, and HM Revenue & Customs. It represents the only single record bringing together all of government’s measures in response to the pandemic, their costs and how much has been spent against them. HM Treasury has worked closely with the NAO on the production of the cost tracker, supplementing it with internal departmental spend data, which is in part categorised into COVID-related and non-COVID-related spend. HM Treasury confirmed that the cost tracker presented a good snapshot of the government’s pandemic response, and a very reasonable estimate of the total whole-life cost. HM Treasury highlighted the value of the cost tracker and the relationship it has established with the NAO. We consider the NAO’s COVID-19 cost tracker to be a model that could be applied in other situations and in planning for large cross-government programmes, such as achieving net-zero greenhouse gases by 2050.
Recommendation: HM Treasury should develop a closer partnership with the NAO to produce the next, and future, updates to the cost tracker, through sharing its COVID/non-COVID categorised data, and the reconciliation to its own data.
Recommendation: By the end of the year, the Government should write to us and explain how it will monitor the costs of other large cross-government programmes that would benefit from an approach similar to the cost tracker, for example, the drive to achieve net-zero greenhouse emissions, and the ongoing costs of EU exit.
2.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 to which other activity has been cancelled or displaced. While HM Treasury is working with government finance functions to improve definitions and recognition of COVID-19 related expenditure in the accounts, these systems have only been put in place recently and more needs to be done to embed them. Existing systems are still not adequate to provide timely and accurate data. There also remain areas of spending where it is not possible to distinguish between COVID-driven or non-COVID-driven expenditure, for example, spending in the NHS, and Universal Credit (DWP).
Recommendation: To support the next iteration of the cost tracker, and in advance of the autumn Spending Review, HM Treasury should continue working with departments to develop robust methodologies for identifying and capturing the full cost of COVID-19, including economic impacts and the extent of displaced activity, to have a clear basis for future fiscal decisions and recovery plans.
3.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 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.
4.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.
5.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 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.
6.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, with the remaining 8% attributed to the wider economic and societal recovery from the pandemic. However, this distinction is inexact, as for some measures it can be difficult to precisely define whether spending relates to the response phase or the recovery phase of government’s overall response to the pandemic. Some measures contribute to both objectives, for example the vaccines programme. For some measures, it is difficult to distinguish activity that results directly from COVID-19 from business-as-usual activity, for example with new Universal Credit claims. HM Treasury acknowledges the need for better understanding of the progress of the pandemic and the economy in order to assess the cost of recovering from COVID-19. It expects more reliable information to be available by September as the uptake and repayments against major schemes like the Bounce Back Loans Scheme become clearer.
Recommendation: Government should, through the autumn Spending Review, set out a fully costed plan for recovering from the COVID-19 pandemic and returning to ‘business as usual’.