Recovering £1.1bn in Covid debts will be ‘incredibly hard’, DBT perm sec admits

“Loosey-goosey” approach to first wave of business grants created a major obstacle to getting cash back, Davies tells MPs
Department for Business and Trade perm sec Gareth Davies

By Jim Dunton

11 May 2023

Department for Business and Trade permanent secretary Gareth Davies has warned MPs that it will be “incredibly hard” to recover a significant quantity of the £1.1bn wrongly paid out to small businesses in the first wave of the government’s Covid-19 support packages.

Davies told members of the Public Accounts Committee today that DBT’s predecessor, the Department for Business, Energy and Industrial Strategy, had taken a “loosey-goosey” stance towards the rollout of funding distributed via local authorities at the start of the pandemic.

A total of £22.6bn in BEIS funding was channelled to firms through councils between March 2020 and March 2022. Among the eight schemes were the Small Business Grant Fund; the Retail, Hospitality and Leisure Grant Fund; and the Restart Grant.

This March, the National Audit Office said £1.1bn of that funding had been lost to fraud or error, and that just £11.4m had been recovered. It said 90% of the losses came in the first wave of payments in 2020, which did not require pre-payment checks.

Davies was second perm sec at the Department for Transport until last December, becoming perm sec at the Department for International Trade in January and taking the helm of the newly-created DBT the following month.

He told MPs today that staff at BEIS had been working under “incredible pressure” at the outset of the pandemic and those who were tasked with coordinating the Covid-support packages lacked the support and training to create and launch major funding programmes at the time.

“Our policy team had the relationships with [local authorities],” he said. “But they did not have the full support and training that they needed to set up a full grant programme.

“Frankly, this was new work for them and the people who did have that ability were working on other programmes at the same time.”

Davies said that the teams working to set up the first cohort of schemes had focused on trying to make it as easy as possible for local authorities to distribute money to businesses.

“The first set of schemes, the ones from March 2020, I’d say it’s probably pretty loosey-goosey in terms of how we provided the detail of the information that we required back,” Davies said. “It was very much handled on a local authority-by-local authority basis.”

The perm sec the lack of data on the first payments had made it “fundamentally hard” to chase the debt.

“On the whole, these businesses did not apply for this money, they were paid automatically,” he said.

“My judgement on this is that the ability to recoup large amounts of this debt is going to be incredibly hard.”

MPs heard that DBT now has much-strengthened capability to deliver grants and that a team of 18 is looking at debt recovery for the Covid schemes.

Davies told MPs the “overarching lesson” he took from the crisis was the importance of having a professionalised grant function with standardised approaches.

“There’s a little bit about trying to predict what you might want to do in future,” he said.

“But, actually, a lot more of it is about having the right relationships and the agility and capacity to do that. And that you’re not setting up teams to do things they haven’t been given the skills, experience or capability to do.”

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