It doesn’t take a pandemic, but a pandemic will do. The eternal Groundhog Day of politicians losing the taxpayer millions – these days, billions – of pounds of cash continues.
The rate may even be accelerating, which was rather the point of the film, Groundhog Day. It just keeps on happening. Though, to be strictly accurate, the annual accounts of the Department of Health and Social Care were actually published on 31 January – two days before Groundhog Day.
However, it is the words of Gareth Davies, the comptroller and auditor general, in his audit report, that trigger the deepest worries about the cultural failings. He recognises the extraordinary problems that the pandemic created. And any sensible person will think back to those early, panic-stricken days and have a degree of sympathy.
But that is equating our own personal worries about supply chains, and whether in times of need we will be able to restock the wine rack, with those of the government. What we are talking about here is the mightiest public-sector business in the land and its embedded systems, and whether their existing systems – all that worst-case-scenario planning – held up or buckled.
Many of the systems that might have helped in an emergency simply didn’t exist in the first place
The great PPE emergency
The answer appears to be that many of the systems that might have helped in an emergency simply didn’t exist in the first place. This was the great emergency around the availability of personal protective equipment (PPE).
The department ‘needed urgently to procure enormous volumes of goods and services in an overheated global market’, says the report. This is Battle of Britain stuff – all those aircrews in old black-and-white movies scrambling to rise to the challenge in the nation’s hour of need.
The department ‘stated that its priority was to ensure that it was able to meet the requirements of a reasonable worst-case scenario’. All well and good. And in order to do so ‘it rapidly increased its risk appetite and adapted its normal processes and procedures’.
Then, at the point when fighter aircraft would, in cultural memory, be rising high in the skies to deal with the emergency, ‘the Department was not able to manage adequately some of the elevated risks, resulting in significant losses for the taxpayer’.
A huge amount of fraud was involved, but no one has much idea about what that figure might be
Staggering losses
All of us are still staring bleakly over the wreckage. ‘Nearly two years later’, says Davies, ‘it has not fully restored effective control over some of the inventory purchased’. Out of the £12.1bn bought in 2020/21, a staggering £8.7bn has been lost. Not only that, but no one has much idea where vast amounts of the stuff actually are. Or, as the report says politely, ‘The Department’s inventory management systems were unable to cope with the significant, rapid increase in Covid-related procurement’.
The report points out that the department has hired ‘external accountancy support to remediate these issues’ and, as a result, ‘some progress has been made but significant weaknesses and gaps in the Department’s inventory records remain’. That is to put the problems somewhat mildly.
The report shows that, as at 31 March 2021, the department held 7.5 billion items in 16,000 containers at UK ports, plus a further 1.6 billion of items in storage in China, but 'because it did not complete its year end stock counts it is unable to confirm this’.
Unsurprisingly, there is an assumption that a huge amount of fraud was involved, but no one has much idea about what that figure might be. Changing the procurement processes meant that the department ‘was exposed to a heightened risk of fraud’, says the report. But without much evidence in the chaos, Davies simply reports that he has ‘not been able to obtain assurance that there is not a material level of losses due to fraud’.
It is the regular issues – of principle, structure and cultural behaviours – that failed to get off the ground and come to the nation’s aid
Out of control
Other controls over spending had also gone out of the window. The Treasury had set specific conditions that the department had to follow in such areas as advance payments for PPE. So it comes as no surprise to find that the Treasury wrote to the department in mid-December last year to point out that £1.3bn of the spending did not have proper consent and ‘was irregular’.
‘In the vast majority of cases’, said the chief secretary to the Treasury in his letter, this was because the department, or NHS England, ‘had spent funds without approval or in express breach of the conditions that had been set’.
None of this is easy stuff, but for years the accounting and business world has talked of the importance of resilience. These pandemic times were extraordinary times. They still continue. The comptroller and auditor general has promised an update on the whole PPE farrago later this year. But the difficulties were of scale. The fundamentals of risk and accountability should have held firm.
‘Fraud losses’, as the comptroller and auditor general wryly notes, ‘are always irregular’. In the whole story of this accounting disaster it is the regular issues – of principle, structure and cultural behaviours – that failed to get off the ground and come to the nation’s aid. Perhaps a lasting lesson from the pandemic is that government simply can’t manage.
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See also 'Inflation grips public sector'
