COVID 19: Cost Tracker Update Contents

1HM Treasury’s understanding of COVID-19 costs

1.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

2.Shortly after COVID-19 was declared a pandemic on 11 March 2020, the government began to announce a series of measures to support public services, workers and businesses. Since then, the National Audit Office (NAO) has been collecting information on the government’s COVID-19 response measures. In its initial report Overview of the UK government’s response to the COVID-19 pandemic, the NAO estimated the total cost of government’s measures at May 2020 to be £124 billion.2

3.Subsequently, the NAO has collated and presented this information in a web-only published database—the COVID-19 cost tracker—updating it every four months. The cost tracker describes the range of government measures, categorised by lead department and the nature of the measures. Where data are available to the NAO, it presents the relevant department’s estimated total cost for implementing the measure, and how much has been spent to date.3

4.The first NAO COVID-19 cost tracker was published on 8 September 2020 and estimated that the combined cost of COVID-19 measures at that point to be in excess of £210 billion, of which £70 billion was reported spent. By the first update in January 2021, the total estimated cost of measures had risen to £271 billion, of which £116 billion was reported spent. The latest NAO cost tracker estimates that at May 2021 the total cost of measures has increased further to £372 billion, with £172 billion reported spent.4

5.The NAO estimates the total value of loans guaranteed by government to be £92 billion, comprising loans issued through business support schemes such as the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce-Back Loan Scheme, the Future Fund and the Covid Corporate Financing Facility. The total write-off cost associated with the loan schemes is estimated to be £26 billion.5

Capturing timely data

6.HM Treasury acknowledged how valuable the NAO’s COVID-19 cost tracker is in documenting and understanding government’s costs in responding to the pandemic, and how helpful it’s collaboration with the NAO to produce the cost tracker had been. It described the cost tracker as a very useful framing mechanism for presenting the detail of departments’ expenditure, stating that if the NAO had not created the cost tracker then HM Treasury would have needed to devise something similar.6

7.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 tracking particular items of COVID-19 spending because they are large and, in many cases, novel.7 It has used the cost tracker to corroborate departments’ spend-to-date data, and to reconcile and challenge consistency of data across departments. Through the cost tracker, HM Treasury has picked up issues with categorisation of cost data, with the way in which departments are recording data, and with the completeness of information. It plans to use the cost tracker as a source of key information for the Whole of Government Accounts.8

8.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 to categorise expenditure as COVID-driven or not, for example, spending in the NHS – it is possible to identify the net increase in spend, but not how much of that is driven by COVID-19. Similarly, for universal credit spending, the number and amount of universal credit claims is known, but individual claims are not categorised as resulting from the impact of COVID-19 or otherwise.10

Completeness of departmental data

9.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 remarked that the NAO’s estimate is close to the figure of £407 billion for the COVID-19 funding made available at the Budget, and that it can reconcile the £35 billion difference between the two.11

10.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 of COVID-19 on receipts to public finances. HM Treasury told us that it is better that the scope of the cost tracker remains as it is, and that wider effects of the pandemic are covered elsewhere, for example in the Office for Budget Responsibility’s forecasts. The cost tracker is therefore a good measure of the gross cost of government’s policy response to the pandemic, but there are broader measures of the overall cost of the pandemic that could be drawn.12

11.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 to base cost estimates, and how some departments have concentrated on the quality of estimates rather than producing more timely, but rougher, estimates. HM Treasury drew attention to two groups of government measures where evidence is lacking: those measures that have yet to start, and those that relate to tax where the effect has not yet been seen. There are measures where the cost will depend on take-up, and that in turn will depend on the progress of the pandemic, for example the cost of the testing programme. HM Treasury expects the estimated total cost of the pandemic to change over time and expressed confidence that it would have a much clearer assessment of the total cost of the pandemic within the next 12 months.13

12.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 information from local authorities, which enabled it to understand what local authorities were spending on and put in place escalation routes for emergency funding that could be transferred quickly. When asked why information to the same level of detail and accuracy could not be gathered from the NHS, we heard that the Department of Health and Social Care has good standardised data capture tools, but data from across the entire group is only consolidated at year end because of the huge scale of the exercise. HM Treasury said that as part of this year’s year-end production of reports on accounts, it would have conversations with all departments about lessons learned and consider what best practice should be, including how the NHS can gather timelier data that can be aggregated more quickly.15

1 The COVID-19 cost tracker, available at: COVID-19 cost tracker - National Audit Office (NAO)

2 C&AG’s Report, Overview of the UK government’s response to the COVID-19 pandemic, Session 2019–21, HC 366, 21 May 2020

3 The COVID-19 cost tracker, available at: COVID-19 cost tracker – National Audit Office (NAO)

4 Qq 12, 13, 56

5 Q 47

6 Qq 1, 14, 15

7 Qq 1, 2

8 Qq 3, 14

9 Q 1

10 Qq 3, 4, 6, 7

11 Qq 12, 13

12 Qq 5, 16, 17, 22

13 Qq 8–12

14 Q 9

15 Qq 25, 28

Published: 25 July 2021 Site information    Accessibility statement