DHSC blasted for ‘track record’ of breaking public-spending rules

MPs berate department over £9bn “lost” in PPE procurement and unauthorised severance payments to NHS staff
PAC said DHSC had effectively lost £9bn of the £12bn spent on PPE during the first year of the pandemic. Photo: Lenscap/Alamy Stock Photo

By Jim Dunton

10 Jun 2022

The Department of Health and Social Care had a “track record” of failing to comply with the Treasury's public spending rules even before the coronavirus pandemic prompted it to drop its value-for-money guards still further, watchdog MPs have said.

Members of parliament’s Public Accounts Committee said DHSC had effectively lost £9bn of the £12bn spent on PPE during the first year of the pandemic because of “inflated prices and kit that did not meet requirements”. Some £4bn of the equipment purchased will never be used by the NHS and needs to be disposed of – potentially by being burned to generate power.

The committee has examined DHSC’s annual report and accounts for 2020-21, published in January this year. The accounts showed DHSC’s departmental group spending was £191.9bn in the year, up 30% on 2019-20, partly because of a £20.9bn increase in operating expenditure for pandemic-related goods and services.

The PAC said DHSC’s “haphazard purchasing strategy” for PPE has resulted in disputes of some form with around one-quarter of the contracts it entered into as a result of the pandemic.

But MPs said the accounts also reveal that DHSC spent £1.3bn without Treasury approval during 2020-21 and needed to seek retrospective consent for pandemic-related spending in many other cases.

Damningly, the report said DHSC’s “track record” showed it had “regularly failed to follow public spending rules and across the departmental group” and the situation was “exacerbated further as a result of the Covid-19” response.

MPs expressed particular concerns about “inappropriate unauthorised payoffs” made to staff by health organisations, and said the planned large-scale NHS restructuring that will create 42 new Integrated Care Bodies from next month increased the risk of this happening again.

The report said three clinical commissioning groups – clusters of GP surgeries – had approved and made special severance payments to staff without following the required authorisation process during the financial year. It added that a payout to a senior staff member at West Berkshire CCG  had prompted National Audit Office head Gareth Davies to qualify his regulatory audit opinion on the NHS England 2020-21 accounts.

Public Accounts Committee chair Dame Meg Hillier said the story of PPE purchasing was “perhaps the most shameful episode” of the UK government response to the pandemic, while the“inappropriate” and “unauthorised” Clinical Commissioning Group payouts were a further departure from what the public should expect.

“At the start of the pandemic health service and social care staff were left to risk their own and their families’ lives due to the lack of basic PPE,” she said.

“In a desperate bid to catch up, the government splurged huge amounts of money, paying obscenely inflated prices and payments to middlemen in a chaotic rush during which they chucked out even the most cursory due diligence.

“This has left us with massive public contracts now under investigation by the National Crime Agency or in dispute because of allegations of modern slavery in the supply chain.

“DHSC singularly failed to manage this crisis, despite years of clear and known risk of a pandemic. The challenges facing it now are vast, from getting the NHS back on its feet to preparing for the next major crisis. There are frankly too few signs that it is putting its house in order or knows how to.”

Committee members said DHSC had to learn from its experience of responding to the pandemic and quickly develop clear post-Covid plans to transition back to business as usual.

They said this should include implementing a robust procurement and inventory-management processes and controls to ensure proper financial management, and having a clear coordinated strategy for dealing with the significant volumes of excess PPE in the most cost effective and environmentally friendly way.

MPs gave DHSC until October to set out the systems and processes it has established as part of its promised “financial reset” to ensure the regularity of its future expenditure and compliance with spending controls.

A DHSC spokesperson said some elements of PAC's report were “misleading”. They cited the suggestion that £4bn of unusable PPE would be burned and that there was “no clear disposal strategy for excess PPE” as examples.

The PAC report says DHSC had told it disposal of unwanted PPE items would be through a combination of recycling and burning to generate power. In April, CSW revealed that Veolia UK and SUEZ Recycling and Recovery UK had been contracted for the work, in a deal worth up to £35m.

The DHSC spokesperson said the department would “make no apology” for procuring too much PPE rather than too little “in the face of an unpredictable and dangerous virus” and that only 3% of the PPE procured was “unusable in any context”.

“At the height of the pandemic, there was unprecedented global demand for and massive inflation in prices of PPE,” they said.

“But despite these global challenges, we delivered over 19.8 billion items of PPE to frontline staff to keep them safe.

“Now we are confident we have sufficient PPE to cover any future Covid demands, we are taking decisive action and have reduced storage costs by 82% since October 2020.”

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