First Report - Department for Business, Energy & Industrial Strategy Annual Report and Accounts 2020–21
Select Committee
Public Accounts Committee
HC 59
18 May 2022
Recommendations
1 results
5
Acknowledged
The Department has yet to set out how it is learning lessons from managing its...
Recommendation
The Department has yet to set out how it is learning lessons from managing its COVID-19 business support schemes to better protect taxpayers’ money Department for Business, Energy & Industrial Strategy Annual Report and Accounts 2020–21 7 in future. The …
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Government Response Summary
The department continues to refine its estimates of the levels of fraud and error across its COVID-19 business support schemes and will publish revised estimates in its 2021-22 annual report and accounts due to be published in Autumn 2022. The COVID-19 loan schemes are delegated schemes, and primary responsibility for detection, investigation and recovery of fraud sits with lenders, in line with their usual processes.
HM Treasury
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Conclusions (11) Observations and findings — click to expand
1
Conclusion
Acknowledged
On the basis of a report by the Comptroller and Auditor General we took evidence from the Department for Business, Energy & Industrial Strategy (the Department) on its performance in 2020–21.1
Government Response Summary
The government agrees with the Committee’s recommendation and will publish revised estimates in its 2021-22 accounts. The Department will publish revised estimates in its 2021-22 accounts.
8
Conclusion
Acknowledged
Of the £21.8 billion grant funding the Department provided to local authorities to distribute in their areas in 2020–21, the Department has so far attempted to assess the extent of fraud and error in only £11.5 billion of this funding, and through a sample of only 476 grants. This very …
Government Response Summary
The government agrees with the Committee’s recommendation. The general principle applies that local authorities are responsible and accountable for the lawful use of funds under Section 151 of the Local Government Act 1972. Further details to be provided in due course, detailing how full cooperation from local authorities will enable robust fraud and error estimates.
9
Conclusion
Acknowledged
The success of these larger samples relies on the capacity and cooperation of local authorities to respond to the Department’s requests for information.34 The Department considers that it has not yet given local authorities the opportunity to do the necessary reconciliations, as it has been asking so much of them …
Government Response Summary
The government agrees with the Committee’s recommendation, noting that local authorities are responsible for the lawful use of funds and must take steps to recover any payment made in fraud or error before BEIS becomes liable. BEIS will pursue collection of all outstanding debt unless there is a value for money (VFM) case for not doing so.
10
Conclusion
Acknowledged
Despite recognising these limitations and uncertainty in its current estimates, the Department does not believe that its grant funding has been subject to significant fraud.40 It suggests that fraud will ultimately range between 1% and 2%, which it would consider as ‘normal’ and consistent with its expectations.41 Conversely, it suggests …
Government Response Summary
The government acknowledges the limitations and uncertainty in its current estimates, states that over £4 million has been voluntarily repaid from large companies and debt recovery of irregular payments due to error, fraud, or non-compliance is underway, and that full assurance work is underway and expected to be completed by the end of the calendar year.
12
Conclusion
Acknowledged
Having sampled only 476 grants distributed by local authorities out of circa one million grants made, the Department therefore has very little visibility of which businesses have benefited from these schemes.45 It cannot say whether many businesses in receipt of grants were eligible, and whether those that were both eligible …
Government Response Summary
The government agrees with the recommendation and states that lessons learned from delivering the initial COVID-19 support grants is that greater assurance can be obtained through mandating pre-payment eligibility checks by local authorities, improved assurance sampling design, innovative data collection and management, as well as independent evaluation.
13
Conclusion
Acknowledged
The Department was responsible for a substantial component of government’s overall financial response to the pandemic, resulting in the third-largest estimated lifetime costs of any department, as reported by the National Audit Office’s COVID-19 cost tracker.46 We have previously reported that government prioritised speed when designing and implementing measures to …
Government Response Summary
The government acknowledges the economic crisis brought about by the COVID-19 pandemic required an extraordinary response from government and that the design of certain COVID-19 business support schemes, combined with the pace at which they were being implemented, would create a heightened vulnerability to fraud and there would be a significant risk of credit losses.
14
Conclusion
Acknowledged
Registrations of new companies on Companies House increased sharply during 2020–21. During the period 2015–16 to 2019–20, annual new company registrations averaged 640,000. By comparison, in 2020–21 there were more than 810,000, making new company registrations in that year more than 20% higher than in any of the preceding five.51 …
Government Response Summary
The government agrees with the Committee’s recommendation. The economic crisis brought about by the COVID-19 pandemic required an extraordinary response from government. The department was clear at the outset that the design of certain COVID-19 business support schemes, combined with the pace at which they were being implemented, would create a heightened vulnerability to fraud and there would be a significant risk of credit losses.
15
Conclusion
Acknowledged
The Department launched its first COVID-19 business support scheme shortly after the first lockdown was announced on 23 March 2020. Since then, the Department has launched many more, and now has around two years’ worth of experience of designing, implementing, and managing its COVID-19 business support schemes.56 It has taken …
Government Response Summary
The government agrees with the Committee’s recommendation and will publish revised estimates for Cohort 1 grants and first estimates for the subsequent schemes in its 2021-22 annual report and accounts. The department will write to local authorities with the findings and asking them were relevant to start the debt recovery process.
17
Conclusion
Acknowledged
The Department has commissioned evaluation of its business support schemes; however, it cautioned that it is proving challenging to separate the impact of various aspects of government’s overall support package which also included, for example the furlough scheme.61 Several of the Department’s major areas of expenditure in the coming years, …
Government Response Summary
The government agrees with the committee's recommendation to refine estimates of fraud and error across its COVID-19 business support schemes and will publish revised estimates in its 2021-22 annual report and accounts, and will write to local authorities to start the debt recovery process.
18
Conclusion
Acknowledged
Between 1997 and 2000 the Post Office implemented a new IT system called Horizon. This system is now known to be responsible for accounting discrepancies that suggested, for example, shortfalls of cash in Post Office branches.62 At the time, the Post Office considered some of these shortfalls to be caused …
Government Response Summary
The government acknowledges the devastating impact of the Horizon scandal on postmasters and states that it is right that affected postmasters are properly compensated. They will share letters with the Committee from BEIS to Post Office, providing assurances for the Historical Shortfall Scheme, interim and full payments for those with overturned criminal convictions.
20
Conclusion
Acknowledged
The Department currently estimates that the scheme is likely to cost £153 million, of which £89 million is from the Post Office and £65 million is from the Department.65 The Department noted that its contribution was its current best estimate, and did not represent a hard and fast limit: should …
Government Response Summary
The government agrees with the committee's recommendation and states it has provided over £2.5 billion in funding to the Post Office network over the past decade and will provide a further £335 million over the next three years, and will share letters with the Committee from BEIS to Post Office, providing assurances for the Historical Shortfall Scheme, interim and full payments for those with overturned criminal convictions.