The Department for Culture, Media and Sport's permanent secretary has pushed back on claims that there is a major gap in the department's accountability for its £474m Covid-loan book.
In response to a newly-published report from the Public Accounts Committee, which criticised DCMS’s oversight of its the loan book, Susannah Storey said in a letter to the committee's chair that some of its findings were "inaccurate".
Some £400m of the £474m DCMS loaned to sports and cultural organisations between 2020 and 2022 has yet to be repaid, according to the PAC report, which was published today. The biggest chunk of the loans – £218m – went to sporting bodies, including £124m to support Premiership rugby union clubs.
The report also raised concerns about what it called a “concerning and avoidable” gap in oversight and accountability to parliament for the loan book, which arose because permanent secretary Susannah Storey is married to Pev Hooper, a director of Premiership Rugby and a managing partner of CVC Capital Partners.
“[Storey] has properly declared this conflict and recused herself from relevant discussions and decisions, and the department has put in place arrangements involving other department staff to handle the conflict. However, the department is most heavily exposed to rugby union in terms of both the amount of loans it has made and the financial health of the sport,” the report said.
The conflict of interest meant the committee could not question Storey directly about the £124m of loans to top-tier rugby union clubs and its subsequent management of these loans, it said.
PAC said the department should consider alternative arrangements for filling the accountability gap, such as appointing the perm sec of another department as the accounting officer for the loans.
But in a letter to the committee, published alongside the report, Storey said it is “not accurate to state that there is a gap in accountability”.
“Accounting officer decisions on rugby union are delegated to the chief financial officer at present (and previously the director general for strategy and operations until he left DCMS in November 2024). The day-to-day oversight of the Loan Book, including rugby union loans and wider sports policy, is provided by the director generals for policy, Polly Payne and Ruth Hannant. This is in line with the Managing Public Money Guidance on conflicts which states that after declaring the conflict other individuals can have delegated responsibility to make decisions,” she said.
“Further, if the PAC wished to see the individual to whom the rugby AO responsibility is delegated as part of the hearing, we could have facilitated that, alongside the responsible director general, and senior responsible owner for the Covid Loan Book who appeared at the hearing with me, but this was not raised before the hearing at any stage,” she added.
The perm sec referred to the Osmotherley rules, which state: “Departments may respond immediately to correct mis-statements of fact, to provide background information, or to draw attention to particular passages in the committee's report or in the published government evidence the committee”.
“If it is not possible to address these comments in the report or in the press release, we will have to address these factual issues in responding to the press release and to queries from the media,” she said.
In his response, PAC chair Sir Geoffrey Clifton-Brown said the report “does not suggest, or seek to imply, any impropriety whatsoever in your handling of your declared conflict of interest in relation to this matter”.
“My committee, however, took the view that such a large amount of departmental expenditure not being overseen by a permanent secretary was an oddity and far from ideal. Decisions on this level of expenditure would in any other circumstances be led by a permanent secretary with direct accountability to parliament and to this committee,” he said.
In her letter, Storey also said the claim that the department is “overly optimistic” about recouping all the funding is inaccurate because DCMS expects up to 14% of borrowers to fail over a 10-year period.
In response, Clifton-Brown reiterated that the committee believes “the department is over-optimistic in its expectation that up to 14% of borrowers will default, given how many have already defaulted”.
“Indeed, more borrowers have failed than DCMS expected at this point,” he said.
Just £41m recovered so far
PAC’s report found that as of October, the department had recovered just £41m of the loans – representing 97% of expected repayments. Nine of the 120 borrowers, who together received loans of £46m, had become insolvent, and over half had still to make any repayments.
There is a “high degree of uncertainty” over how much will ever be repaid and DCMS’s ability to recover more of the loans is being put at risk by its need to maintain the financial viability of the sectors that received them, the committee said.
Meanwhile, the department is incurring high costs associated with managing the loans, which has cost £17m so far. It is unable to say when the cost of managing the loans in-house would start to exceed the level of repayments received, according to the report.
The MPs have urged DCMS to assess long-term options for its Covid loans, including the potential to sell them, and to “demonstrate a tough approach on behalf of taxpayers to managing those borrowers in trouble”.
The committee has also questioned DCMS’s decision to award loans to clubs in the Premiership Rugby League, which received 57% of the total value of the sports loans. The report says DCMS “insisted” that the clubs were financially viable when it awarded the loans, despite public reports at the time to the contrary. Three of the clubs, which owed a total of £41.6m, had been declared insolvent by June 2023.
“The PAC’s view is that loans, which were introduced as Covid support, should not be extended to provide support for bodies which are financially unviable five years post-pandemic,” the report says.
Commenting on the report, Clifton-Brown said that while support for cultural and sporting events during Covid lockdowns was necessary, "such support was contingent on the unprecedented nature of a global crisis, not to provide a lifetime guarantee to institutions like rugby union which may be experiencing financial difficulties five years later".
“DCMS is inherently conflicted in the management of its Covid loan-book. As a lender, its priority will be to secure best value for the taxpayer from these loans. As a department, its priority is to do everything in its power to support a sector which has become its debtor," he said.
"DCMS has shown that while it has tried its best at acting in the role of a specialist loan provider, it should stick to what it knows. The department should be considering all options for the long-term future of these loans, including their outright sale," he added.
A DCMS spokesperson said: "This government will always protect taxpayers' money and we are committed to recovering funds paid out under the previous administration. We have recovered 97% of repayments due and we are set to see all borrowers begin their repayments by later this year.
"Ministers and the department continue to actively engage with the chief executives of the Rugby Football Union, Premiership Rugby and Championship Rugby to support the ongoing sustainability of the sport.
"We will take time to consider the full contents of the report and will respond in due course."