Taxpayers face “significant financial risk for the foreseeable future” because of the “eye-watering” spending levels during the coronavirus crisis, a committee of MPs has said.
As of the end of March, the estimated lifetime cost of measures announced as part of the government’s response was £372bn, with £172bn reported spent so far, the Public Accounts Committee has said.
The taxpayer is already on the hook for an estimated £26n of credit and fraud losses in the SME bounce back loan scheme alone, the MPs said in a report based on the National Audit Office’s cost tracker that charted spending during the coronavirus crisis.
The value of government-backed loans has shot up during the pandemic, and there is a “high degree of uncertainty” around how much of those will be repaid, the cost-tracker report found.
The MPs urged the Treasury to use the upcoming Spending Review to set out how it plans to manage this expansion of loan guarantees and associated risk of write-offs, and steps to reclaim the taxpayer’s investment.
They also identified gaps in the Treasury’s understanding of the money being spent on managing the crisis.
Patchy data across departments means it is impossible to know exactly how much is being spent, according to the report, with some parts of government unable to provide “robust assessments” of the costs they have incurred.
The cost tracker has shown the importance and value of capturing, sharing and presenting timely data on government’s actions and costs during a crisis, the MPs said.
As such, it will be “vital” in helping government prepare for future crises or large programmes by enabling it “to make well-informed and rapid financial decisions”, the MPs said.
They urged government to support the NAO’s cost-tracking approach and replicate it in situations such as work towards its net-zero target.
However, they noted that the Covid cost tracker’s value has been lessened by poor data from some departments and functions.
“Several departments are still not able to provide a robust assessment of their Covid-related activity, or the extent to which other activity has been cancelled or displaced,” the report said.
It said that while the Treasury is now working with government finance functions to improve the way Covid-19 related expenditure is identified in departmental accounts, “these systems have only been put in place recently and more needs to be done to embed them”.
“Existing systems are still not adequate to provide timely and accurate data. There also remain areas of spending where it is not possible to distinguish between Covid-driven or non-Covid-driven expenditure, for example, spending in the NHS, and Universal Credit,” it added.
The MPs called on the Treasury to continue working with departments to develop “robust methodologies” to identify the full cost of Covid-19, including its economic impacts and the extent of displaced activity. This work should support the next iteration of the cost tracker and the upcoming Spending Review “to have a clear basis for future fiscal decisions and recovery plans”, they said.
The Treasury must also improve its understanding of the spending breakdown between the direct response to Covid-19 and the economic and societal recovery from the pandemic, the MPs urged.
According to the cost tracker, 92% of the cost of government’s Covid-19 measures is categorised as being in direct response to the pandemic, with just 8% attributed to the wider economic and societal recovery.
“However, this distinction is inexact, as for some measures it can be difficult to precisely define whether spending relates to the response phase or the recovery phase of government’s overall response to the pandemic,” the report said.
The exchequer must set out a fully-costed plan for recovering from the pandemic and returning to business as usual, taking this into account, it said.
“As the UK recovers from the pandemic, it is now more vital than ever that the government, and HM Treasury as custodians of our future finances, maintain accountability for public money, transparency over how it is being used and clarity over what it is achieving,” the report said.
"We therefore expect HM Treasury to include a comprehensive framework for managing the risks to public finances resulting from the Covid-19 response in its upcoming Spending Review."