Public spending watchdog names eight ‘departments of concern’

PPE stockpile and backlog woes help DHSC top PAC chair's problem list

By Jim Dunton

26 May 2022

The chair of parliament’s Public Accounts Committee has named eight “departments of concern” in her annual report on the financial watchdog’s work.

The Department of Health and Social Care tops the list of ministries with the biggest issues, with Dame Meg Hillier saying the organisation is “facing immense challenges” as a result of the coronavirus pandemic.

The list also includes the Department for Levelling Up, Housing and Communities; the Ministry of Defence; the Department for Work and Pensions; the Department for Education; the Ministry of Justice; HM Revenue and Customs; and the Department for Business, Energy and Industrial Strategy.

Hillier’s sixth annual report as PAC chair notes that DHSC’s accounts for 2020-21 were “complex” because of the pandemic and that they needed to be qualified because of the challenge faced by the department in keeping track of its PPE stocks.

She said the department still had 11,500 shipping containers of PPE awaiting proper storage, and around 750 containers that do not have a full inventory. Some of the PPE stock is still in storage in China waiting to be shipped to the UK. Hillier’s report said the stock was currently worth  £4.7bn less than it was bought for.

“The department’s management approach includes recycling and incineration, with plans to burn up to 15,000 pallets a month of unusable or unwanted PPE to generate power,” she said.

Hillier also pointed to the “huge knock-on effect” on NHS business as usual work that Covid had caused. She said that at the end of December 2021, only 67% of cancer referral patients were seen within 62 days, compared to the 85% target. Meanwhile, more than six million patients were waiting for elective care – the biggest waiting list since records began – and likely to get worse.

Hillier said that while the increase in national insurance contributions that came into effect last month was set to provide an additional £12bn for NHS coffers, pressures on staffing, maintenance and backlogs meant it was likely to be absorbed into day-to-day funding rather than provide its eventual intended assistance for social care.

Concerns over DLUHCs council remit

Elsewhere, Hillier said that while DLUHC maintained that the local government sector remains financially sustainable, repeated PAC reports had highlighted concerns over local government finances and sustainability.

“We have seen a number of councils with serious financial difficulties, such as Bexley, Copeland, Croydon, Eastbourne, Luton, Nottingham, Peterborough, Slough and Wirral,” she said.

“Luton was hit hard by Covid because of its ownership of the airport but most others had serious financial problems before Covid.”

Hillier said  the squeeze on local council budgets was made worse by the “meltdown in local government audit”. She said just 9% of 2020-21 local government body audits were completed before the already extended deadline of 30 September 2021, while 70 audits were outstanding from 2019–20, and 15 from 2018.

“This means that many councils are making decisions about future budgets without sight of the auditors’ reports or even the audited accounts,” she said.

Hillier also questioned the department’s record on the Levelling Up Fund. “Just as the Towns Fund had very woolly criteria so the Levelling Up fund is vague in its aims,” she said.

“Whitehall struggles to implement a policy which is little more than a slogan. Experience shows that when the criteria for funding is not clear and outcomes vague, value for money for the taxpayer is at risk.”

MoD “will always be a department of concern”

Hillier said that the sheer scale of government funding provided to the MoD meant it would “always be a department of concern” but she also questioned the level of institutional knowledge in the ministry.

“The war in Ukraine has shown up in sharp relief the requirements of our armed forces in a land war,” she said. “Yet the impact of delays, poor management and project overruns have serious operational consequences.

“We still do not have the excepted number of aircraft for Carrier Strike; have further delays in the armoured vehicle modernisation programme and are behind the curve on some new technologies.”

Hillier said the “high turnover” of key staff such as project senior responsible owners remained a concern in the department – and said the fact that departmental perm secs were now on five-year contracts was also an issue.

“The current defence permanent secretary has a list on his office wall showing the huge number of issues to tackle before the end of his current five-year term,” she said.

“In defence projects, five years is a short time. Uniformed advisors in the department are also on rotation. These factors combine to weaken institutional memory. It is sobering that we have not had a witness from the department who has as long a memory of major projects as the committee’s deputy chair, Sir Geoffrey Clifton-Brown.”

Hillier said DWP made the list because of the sheer scale of its Covid work and “a long legacy of fraud and error”.

She praised the department for acting quickly to adapt its controls against fraud and error to process the surge in Universal Credit claims that accompanied the onset of the pandemic. But she said the department had “still not adequately determined how it will learn from this experience to reduce fraud back to pre-existing levels” – which were already at the highest rate since records began before the pandemic.

Hillier said the impact of the pandemic on a whole generation of children is what guaranteed the DfE’s place on this year’s list.

“The underlying concerns about the financial sustainability of schools remain,” she said. “Teacher and other staffing costs are increasing, there is a backlog of building maintenance and the outside challenges of inflation and price rises affect the bottom line of budgets.”

Hillier said the department’s “big challenge” is how to ensure that the cohort of young people who lost out during the pandemic do not lose out for the rest of their lives. “Catch up has to have real meaning and measurable targets so that the department can be held to account,” she said.

Prison building, probation reform, courts reorganisation and severe backlogs in court cases will put the MoJ on the list of concern “for many years”, Hillier said.

She said the department’s target for reducing court backlogs by March 2025 still aimed for a level that was “considerably higher than pre-pandemic levels”. She added that the MoJ did not have a clear plan for how to manage the potential increase in court cases that could result from the scheduled additional 20,000 police officers who are due to be in place by March 2023.

HMRC fraud and error woes

Hillier said the the scale of fraud and error as a result of Covid interventions and the growth of tax debt leads was the reason for HMRC’s inclusion on the list.

“Although it was alert to the risks of fraud and error because of the speed of introducing Covid schemes it is not showing enough urgency in tackling these,” she said.

“It has secured more staff to tackle fraud and error within the Covid-19 support schemes through the Taxpayer Protection Taskforce. However, HMRC has told the PAC that some of its more complex cases would not be dealt with until after the 2022–23 financial year. HMRC has a strong return on recouping money for every pound it spends so it is puzzling why it is not moving faster.”

Finally, Hillier said BEIS had a “lot on its plate” over the coming years, with net zero, managing the future procurement of Covid-19 vaccines and dealing with the “long tail” of covid loans.

She said the long-term impact of the department’s Bounce Back Loans for business would not be apparent for up to 10 years, but added that the PAC “will be watching closely to see how the department will be measuring the scheme’s success”.

Likewise, Hillier said her committee would be monitoring BEIS’s work on ensuring the right skills are in place to deliver on the government’s net zero commitments – both within the civil service and in the private sector.

“While it is confident of this capability in the future, the recent failure with the Green Homes Grant Voucher Scheme means the PAC will need to monitor progress to ensure mistakes are not repeated,” she said.

Hiller also referenced BEIS’s oversight of the “costly and long-running nuclear procurement and decommissioning”, which forms a significant part of the department’s budget.

“The committee has a long-standing interest in the management of this and will be keeping a close eye on the decommissioning of the current generation of UK nuclear power stations,” she said.

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