All posts by Gareth Davies
Posted on June 20, 2022 by Gareth Davies
2021 was a big year for government’s commitments to the environment. The statutory target to achieve net zero greenhouse gas emissions by 2050 was backed up with a strategy and the Environment Bill gives legal force to nature recovery targets. The challenge now lies in turning targets and strategies into actions that will combat rising temperatures and restore our natural environment in a way which represents both short- and long-term value for money for taxpayers at a time when households and businesses are under intense financial pressure.
The Treasury acknowledged in its recent Net Zero Review that ‘the transition has implications for current and future taxpayers’ but ‘policy to support the transition can help make the most of the opportunities and keep costs down’.
The scale and complexity of the task is daunting which is why external scrutiny is critical. Government has recognised this by creating the Climate Change Committee and the Office for Environmental Protection to help monitor progress towards net zero and restoring the natural environment. Meanwhile, the National Audit Office’s role will be to scrutinise how efficiently and effectively public money is spent to achieve those goals.
The risks of waste, escalating costs, and projects failing to deliver significant environmental benefit are high, while failing to prepare for a changing climate is likely to impose a heavy cost on future generations. We will be keeping a close eye on how well government is spending to achieve both short-term and long-term value for money.
Our long experience of scrutinising government spending already offers many lessons. We see three particularly significant challenges: the need for a whole-economy response; the critical role of effective public engagement; and the importance of costed programmes with disciplined management.
The changes required won’t be achieved unless government action supports effective market responses, engaging public, private and voluntary sectors. We have seen the cost of failing to do this with the Green Homes Voucher Scheme where the complexity and certification requirements hindered energy-efficiency installers from mobilising to meet demand. But when government gets this coordination right, as with the covid vaccine roll-out, it is a force multiplier.
The next phase of decarbonising the economy needs buy-in from consumers and citizens. With energy and fuel costs already high, government will need to be clear on how the cost of replacing gas boilers or switching to electric cars will be managed. Our work has shown that interventions designed to promote behaviour change need careful testing if they are to be successful. The mandatory charge for plastic shopping bags has significantly reduced their use. But the roll-out of smart meters saw energy companies find it difficult to get customers to commit to installation appointments.
New technologies and innovative policies will be needed to limit the impact of climate change. However, the novelty of the problem must not distract from getting the basics right. Implementing these new solutions will require costed strategies with clear objectives, active risk management, and ways to evaluate progress so it can correct course when needed. We have often seen this go wrong, such as with the Emergency Services Network which has been beset with delays and cost overruns. A lack of robust planning failed to consider first-responder needs and how the new communications technology will integrate with other systems. This is why, as with our report yesterday on tackling local air quality breaches, it is important we look at programmes while they are underway to test that they are set up for success.
We must also consider the longer term. Poor investment decisions for infrastructure such as flood defences could result in far higher costs if they do not make us resilient in dealing with a changing climate. When we looked at the deal government struck to build Hinkley Point C we were concerned that it had not fully assessed the long-term costs for consumers. Government will need to learn from that as it seeks to deliver on its energy security strategy.
The COVID pandemic has vividly shown the cost of inadequate preparation for whole system emergencies. At a time of rising prices for consumers and inflation eating away at government spending power, government must not only spend wisely now but also for future generations.
This article was first published in the Daily Telegraph
Posted on April 22, 2021 by Gareth Davies
Like governments around the world, ours has committed unprecedented amounts of public money to the fight against coronavirus. By the end of 2020, this reached £271 billion in the UK and will continue to increase.
As the UK’s independent public spending watchdog, the National Audit Office has been tracking the Government’s pandemic spending commitments, reporting to Parliament and the public on whether that money has been accounted for correctly and spent as intended. The Committee of Public Accounts has also used our findings as the basis for taking evidence from senior civil servants and for making its own recommendations.
One year on from the start of the pandemic, what can be learned from the way government has responded to it?
Like many countries, the UK was not well prepared for this pandemic. While we recognise that government cannot be expected to plan for every eventuality, we have repeatedly found that there was no contingency plan to deal with the unfolding situation. And, where plans were in place, these did not anticipate this type of pandemic.
Reflecting on this difficult starting point, we have independently assessed each element of the Government’s response based on what was reasonable to expect in the circumstances.
The urgency and scale of action required meant that ensuring value for money for the public did not always take priority. Trade-offs were necessary, which increased the risk of financial losses. So, the question we looked to answer in our audits was how well those trade-offs were understood and managed.
The furlough scheme, designed and implemented by HMRC and HM Treasury, and the scaling up of Universal Credit payments by the Department of Work and Pensions, were delivered at impressive speed and against a sudden and huge increase in demand.
Yet, even with this sterling effort by the Civil Service, the speedy response has come at a cost – higher levels of fraud and error than government would have otherwise expected.
This increased risk of financial losses is seen most clearly in the Bounce Back Loan Scheme. The scheme has provided vital cash flow support to small- and medium-size businesses – by the end of March 2021, more than 1.5 million loans had been issued with a total value of £47 billion.
However, when initially launched, the scheme proved slow and cumbersome for smaller businesses. In response, credit and affordability checks were removed from the process for loans of up to £50,000 and government guaranteed 100 per cent of the loans. This sped up loans and proved a lifeline for thousands of smaller businesses, but is likely to come at a cost.
When we reported on this in November 2020, government estimated that 35 per cent to 60 per cent of borrowers may default on the loans. A better indication of the true cost to the public purse will begin to emerge from May when the first repayments are due, although businesses are able to apply to defer this.
Those involved in the procurement of personal protective equipment (PPE) faced the considerable challenge of an overheated global market for PPE and an inadequate UK stockpile. Necessary trade-offs, to allow for rapid acquisition of life-saving equipment, were less well managed. At the height of the emergency, it was reasonable to place urgent orders directly with suppliers, rather than use slower competitive tendering methods. But even allowing for the urgency of the situation, essential standards of government transparency were not consistently met. This includes how some suppliers were picked and how a high priority channel for considering certain suppliers was created.
In emergency situations where the assurance provided by open competition is not available, it is even more important to provide prompt and full transparency to maintain public trust in how taxpayers’ money is being used.
The public health response to the virus has required government to create and deliver a vaccine programme and a test and trace operation at a scale and pace never seen before. The success of the UK vaccine programme is based on shrewd investments in candidate vaccines, brilliant scientists, effective commercial agreements with industry and the delivery power of a National Health Service bolstered by an army of volunteers. Public money had to be committed when there was no guarantee of vaccine effectiveness and this risk was managed well, making good use of relevant scientific and commercial expertise.
As the vaccine roll-out progresses and as lockdown measures lift, NHS Test and Trace’s role in identifying and suppressing outbreaks will become more vital. Our initial work on Test and Trace in December found that it had achieved a rapid scale-up in activity and had built much new infrastructure and capacity from scratch. However, we also highlighted value for money concerns and weak evidence of the effectiveness of the service.
Test and Trace’s operations will transfer to the new UK Health Security Agency, which is expected to become fully operational later in the year. We will report again on the progress Test and Trace has made in the summer.
There is much to be learned already from the pandemic. To promote transparency, government must clearly define its appetite and tolerance of risk, particularly under emergency spending conditions. Uncompetitive procurement practices must not be allowed to become a new norm. It should also monitor how Covid-19 programmes are operating, dynamically updating demand forecasts, and ensuring it has the ability to flex its response.
Reporting on the Government’s ongoing response to the pandemic will remain a priority for the NAO. Our upcoming work will include a review of the role of Greensill Capital in Covid-19 loan schemes. We will also publish a series of lessons learned reports starting in May, designed to be of value for the remainder of this pandemic and to help the UK better prepare for future emergencies.
This article was first published in the Daily Telegraph
Posted on February 1, 2021 by Gareth Davies
Since the COVID-19 pandemic began, the NAO’s role has been to provide Parliament and the public with evidence-based reports on how public money has been used to tackle the crisis. So far we have published 12 reports on different elements of the pandemic response, including for example the test and trace programme; the procurement of PPE and ventilators; the furlough scheme; and loans to businesses. All of our COVID-19 work is on our website, along with details of the pipeline of COVID-19 work in progress, due for publication in 2021.
Our work so far has highlighted the challenge faced by government of responding effectively to an unprecedented public health and economic emergency whilst maintaining control over how (and how well) public money is spent. Our reports show how the trade-off between speed, effectiveness, cost and control has been managed in the different elements of the COVID-19 response and provide important learning for the rest of this pandemic and any future public health emergencies. The Public Accounts Committee has held public sessions on each of the topics covered by our COVID-19 reports, taking evidence from the officials responsible and issuing its own reports.
To support transparency and the effective scrutiny of government spending, we are continuing to update our COVID-19 cost tracker, with the latest update made on 29 January 2021. As well as providing the latest estimate of the cost of every significant government commitment as part of its pandemic response, the tracker shows spend to date where that is available. It also allows the data to be downloaded and analysed by type of support, department responsible and date of commitment.
Although the pandemic has rightly required significant audit attention, our work programme has also covered other important areas of public spending. In November, we reported on the state of preparations at the UK border for the end of the EU Exit transition period on 31 December 2020. We will follow up how the new border arrangements are working in practice later this year.
In December, our first report on the government’s progress in meeting its commitment to a net zero carbon economy by 2050 looked at the governance and management arrangements being put in place to deliver this big shift in how we generate power, heat our homes, use our land and travel. We are following up with audits of specific elements of the net zero strategy, such as government’s role in encouraging the transition to ultra-low emission cars.
COVID-19 has also impacted the NAO’s other major area of work, the audit of government department and arm’s-length body accounts. Finance and audit teams alike adjusted well to fully remote accounts preparation and audit for the 2019-20 annual reports and accounts. Overall, audits took longer to complete, partly due to the logistical impact of lockdown but also because of the impact of the pandemic on 31 March 2020 asset and liability valuations and on the going concern status of organisations facing significant loss of income. I had to include ‘emphasis of matter’ paragraphs in 84 of my audit reports, drawing attention to significant uncertainty in these areas.
Looking ahead, government’s 2020-21 accounts present significant accounting and audit challenges. For the departments in the front line of the pandemic response, they must account for tens of billions of unplanned spending during the year, often in risky control environments. Our audits will assess the robustness of the estimates and judgements made by departments in accounting for this spending.
As well as responding to the pandemic in the last year, we have also been making progress on the new strategic priorities we set for the NAO for the five years 2020 to 2025. This is already visible in our new series of lessons learned reports, bringing together good practice, warning signs and tips for success on important areas of public spending. The first in this series, Lessons learned from major programmes, was published in November. As part of our focus on audit quality, we’ve also embarked on an overhaul of our audit methodology and the procurement of a new audit software platform, which will incorporate powerful new data analytics.
All of this work has only been possible thanks to the commitment and professionalism of my colleagues who, like so many others, have continued to deliver our work programmes whilst managing the impact of lockdowns, home schooling and other pressures. We’re conscious that others, notably healthcare and other front line workers, are handling much greater challenges. That thought focuses us on helping government to extract as much learning as possible from this experience so that the country is prepared for any future emergency of this kind.
Posted on July 23, 2020 by Gareth Davies
I last posted to this blog in late April as the country was in the teeth of the COVID-19 pandemic, explaining how we were maintaining our operations and adjusting our work programme in the light of the government response to the virus.
Now, in late July, most of the UK is gradually emerging from lockdown following a devastating period for many families, an enormous effort by health and care workers and many others in crucial roles and an unprecedented set of government spending interventions to mitigate some of the economic effects of the crisis.
Like every organisation, the NAO has had to adapt to the new working environment, but throughout this period we have continued to deliver our core programmes of work: the audit of the 2019/20 accounts of more than 400 government departments and public bodies and a substantial programme of value for money reviews and investigations into important spending programmes.
A substantial proportion of our effort has been redirected to the audit of government’s response to COVID-19. We have published reports on the scale and nature of the public spending commitments and on readying the NHS and social care for the pandemic. We have a further seven studies already underway to begin publishing in the Autumn, and more in the planning phases. We’ve developed our COVID-19 hub for people to follow our work on this.
Looking back, at the point that Parliament rose for its summer recess, we had completed the audits of 171 departments and public bodies, including some of our larger audits such as the Department for Work and Pensions and the Home Office. Our work on the remainder continues over the summer and those audited accounts will be laid in Parliament from its resumption in September. I’m grateful to both my audit teams and the finance teams of our audited bodies for their determined approach to obtaining the audit evidence we need when working remotely, and for addressing the financial reporting challenges posed by the pandemic including volatile valuations and going concern risks.
We have continued to complete and publish value for money reports on vital areas of public interest, including universal credit, the MoD’s aircraft carrier programme, asylum accommodation and support and digital transformation in the NHS. Our factual investigations have included reports on progress in removing dangerous cladding from residential blocks, the selection of towns to bid for money from the £3.6bn Towns Fund and government’s response to the collapse of Thomas Cook. This work has supported sessions of the Public Accounts Committee which has been meeting virtually throughout.
Our Overview of the UK government’s response to the COVID-19 pandemic brought together in one place all of the main activities, costs and funding undertaken by government in the initial months and laid the foundation for us to build our programme of more in depth studies. We also looked further into the action the Department of Health & Social Care and other bodies undertook during March and April to ready the NHS and adult social care for a rapid increase in the number of infected people.
Looking forward, we have a broad and varied programme of work on COVID-19 to come once Parliament reconvenes in the Autumn. We have several reports planned on the important issue of government procurement. They include an audit of government buying in the pandemic, as well as specific studies into the efforts to increase the number of ventilators available to the NHS and on supplying the NHS and adult social care sector with PPE.
We will also examine measures aimed at protecting businesses and individuals from the economic impact of the coronavirus pandemic. This includes reports into the Bounce Back Loan Scheme and the Coronavirus Job Retention Scheme. Other studies will look into the government’s work to protect and support the vulnerable during lockdown and the Free School Meals voucher scheme. Our website has full details of our work in progress related to COVID-19, and we will continue to add further reviews to this list as they are approved.
In all of this work, we will examine how government adapted its approach to reflect the need for urgency in the first phase of the pandemic, and how it is managing the attendant risks to value for money and probity in public spending. Our reports will be published, laid in Parliament and be available to the Public Accounts Committee for its programme of inquiries in the normal way.
We will continue to respond to the risks to public money posed by this unprecedented time for the country to provide the assurance required by Parliament and the public and to draw out the lessons for future phases of this pandemic and future emergencies.
Posted on April 22, 2020 by Gareth Davies
With Parliament returning yesterday, I wanted to take the opportunity to reflect on the last few extraordinary weeks and set out what it means for the National Audit Office and its work.
Firstly though, on behalf of the whole NAO, I would like to pay tribute to everyone who is working so hard to see our country through this crisis. That of course includes our courageous health and social care workers and others on the front line of the response, but also all the public servants behind the scenes at the national and local level keeping our country going. As the organisation responsible for scrutinising so many of these public bodies, we have a privileged insight into how vital they are to everyone’s lives every day – and even more so at a time like this.
To all of the public servants rising to this unprecedented challenge, thank you.
Like many other organisations, the NAO has been home-based for a month now. In infrastructure terms, the NAO was well-prepared for homeworking as our systems are designed to support secure remote auditing. We are working hard to support our staff as they grapple with the practical and wellbeing challenges of the current situation. We are of course not the only ones. And as an organisation that supports Parliament, that has been especially brought home to us as we see the House of Commons resume business in a manner we have never seen before.
As Parliament adapts, so too are we in order to ensure that we can help it to hold government to account. The response to the global pandemic will have implications for many years for public spending and public service delivery. It is too early to tell exactly what the impact will be, but it will be profound.
What is already clear is that MPs, and the public that they represent, will expect us to carry out a substantial programme of work on the COVID-19 response so we can learn for the future. This will include looking at government spending on the direct health response as well as the wider emergency response. We will also look at the spending on the measures to protect businesses and individuals from the economic impact.
It will take us time to develop and produce our work, more importantly it will take time for the public sector to be in a place where it can learn from our findings. Our challenge is to try and provide the appropriate level of evidence-based reporting to support accountability and provide insight at the most suitable time. We must not get in the way of public servants working hard to save lives, but we must also ensure that our reporting is sufficiently prompt to support proper accountability for public money.
We have decided to begin with a factual summary of the significant government spending commitments and programmes relating to COVID-19 which we hope to publish next month. We will use this to identify a risk-based series of evaluative studies where we think there is most to learn.
What is also important to Parliament is that we do not lose sight of the wider picture. There are many other challenges facing the UK including EU Exit; progress in meeting government’s net zero carbon emissions target; major infrastructure projects and the financial sustainability of key public services. Our work programme will have to balance this with the demands of COVID-19. That is why we will be continuing to publish reports already in train. We are also working hard to meet our key statutory duty to audit the accounts of over 450 public bodies.
My colleagues and I are committed to providing Parliament and the public with the evidence they need to understand how public money has been used in tackling this crisis. We will also help ensure that the appropriate lessons are learned for the future.