This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.
Date Published: 6 September 2023
Between March 2020 and March 2022, the government distributed over £22 billion through local authorities to help mitigate the impact of the COVID-19 pandemic and public health restrictions on small businesses. While the government’s approach achieved its main objective of moving at speed, the early schemes it introduced were poorly targeted and widely failed to provide the level of basic checks required to protect the public purse from fraud and error. Over 90% of the estimated £1.1 billion of losses relating to pandemic grants are attributed to early schemes, but the then Department for Business, Energy and Industrial Strategy (BEIS) made no serious attempt to recover funds that were distributed wrongly while the pandemic was ongoing. The Department for Business and Trade (DBT) has since taken over the residual responsibilities for the schemes, but if funds are to be recovered and public trust is to be restored, it must set out the specific steps it will take to tackle this fraud and error.1
At the design stage and during the early implementation of the grant schemes, there were clear gaps in both the government’s understanding of small businesses and in its consultation with local authorities. The government was slow to act on feedback from local authorities and businesses when specific problem issues emerged, such as the interpretation of eligibility criteria, which created further uncertainty for businesses seeking support. Despite these flaws, BEIS did take positive steps to improve its management of those grants as the pandemic evolved. Supporting the new department’s increased focus on implementation and delivery alongside policy development, DBT is continuing to develop its approach to grant management through the work of its expanded grants unit.
DBT and HM Treasury have recognised the need to evaluate the impact of these grants, but they should not wait for the COVID-19 inquiry before learning from the scheme. The Department should publish its evaluation of these schemes during summer 2023 and HM Treasury should carry out its own work in this area. To ensure that it does not repeat the failings of the past, future governments must establish contingency plans for responding directly to the financial consequences of a global health crisis, not just those relating to health and essential services.