Gareth Davies, head of the National Audit Office in a Press Release on ‘Delivery of employment support schemes in response to the COVID-19 pandemic’, 13 October 2022.

By stewartb

If this was about a Scottish Government scheme of commensurate or even lesser scale, what would be the political opposition, corporate media and BBC’s response?

On 13 October, 2022 the National Audit Office (NAO) published a ‘value for money’ report: ‘Delivery of employment support schemes in response to the COVID-19 pandemic’.

See https://www.nao.org.uk/press-releases/delivery-of-employment-support-schemes-in-response-to-the-covid-19-pandemic/

NAO reports don’t get much if any attention from the BBC, the broadcaster ‘devoted’ to PUBLIC SERVICE, even when huge amounts of government money are involved. I wonder why! Is it the nature of the NAO’s house style of writing that puts its journalists off? Must be something! After all, reports published by Scotland’s equivalent – Audit Scotland – are often regarded as VERY newsworthy by the BBC, sometimes meriting coverage day after day!

An example

The full quote above from the head of the NAO concludes with this: “The government must improve the way it estimates levels of fraud and error and allocate sufficient resources to tackle this issue.” So a call from the NAO for government to act on ‘fraud and error’. Newsworthy? As best as I can ascertain, not!

On 16 June 2022, the Scotland page of the BBC News website had this headline: ‘Audit Scotland calls for more clarity over Covid funding’. The article provided a public platform for opposition politicians in Scotland to berate the Scottish Government.

According to the BBC, the nub of Audit Scotland’s findings was this: ‘the Scottish government had managed its budget effectively over the past two years, but some Covid funding remained unspent. Some £15.5bn was allocated for Scotland’s Covid response between 2020-2022, of which an estimated £11.8bn spent between March 2020 and December 2021.

‘It said £2bn had been added to reserves by the government, councils and other public bodies at the end of 2020/21, but it was not possible to say how much of that was from Covid funding.’ (my emphasis)

I think this comparison is a fair one: Audit Scotland was concerned that some funding earmarked for Covid support may have been squirrelled away in the reserve accounts of diverse public bodies in Scotland. OK, it’s news! By contrast, the NAO is concerned about Covid support funding being wasted i.e. given to many that may not have really needed it. And the NAO is also concerned about the scale of funds lost through fraud and error. So which are the MORE ‘newsworthy’ findings from an audit body — billions possibly placed in reserve vs. more billions known to have been wasted plus more billions lost through fraud? It’s not obvious that its only the former!  Is it the ‘Scottish Government factor’ that has a big influence on editorial decision making?

Background

Two UK government schemes were announced in March 2020 to support employment during the pandemic: (1) the Coronavirus Job Retention Scheme (CJRS) – grant payments to employers to cover part of the wages of furloughed employees; and (2) the Self-Employment Income Support Scheme (SEISS) – grant payments to self-employed individuals whose businesses had been adversely affected by the pandemic.

Basic financials

• SEISS grants worth £28.1 billion were distributed to 2.9 million individuals
• CJRS furlough payments worth £68.9 billion were distributed to 1.3 million employers covering 11.7 million individual jobs.

NAO findings

The NAO acknowledges: ’Employment support schemes introduced during the COVID-19 pandemic successfully protected jobs and businesses, although the need to design the schemes at speed led to some flaws and significant levels of fraud and error …’

So the UK government’s approach had a downside:

1. ‘Several billion pounds were distributed to taxpayers whose incomes were not significantly affected by the pandemic.’ 
2. between November 2020 and February 2021 ’15% of companies receiving CJRS experienced no reduction in turnover during the first six months of the scheme, although a large majority of these firms said that without the scheme they would have made redundancies or closed.’
3. however, ‘Firms who said they would not have made redundancies or closed permanently and saw their incomes stay the same or increase as a result of the pandemic still claimed grants for 354,000 jobs, equivalent to £1.5 billion.’
4. ‘In June 2022 HMRC analysis of the first three SEISS grants found that 18% of the first three SEISS grants were paid to people who saw their turnover increase even without the scheme. This equates to £3.5 billion of grants paid during that period.’ 
5. ‘Some £140 million was paid out to 140,000 SEISS claimants who reported no decrease in turnover in the final tranche of funding. Earlier use of clear financial impact tests could have provided better value for money, even allowing for the risk of claimant fraud and error when applying such a test.’

As the above indicates, a theme running through the NAO report is the occurrence of ‘deadweight loss’ i.e. the occurrence of desired outcomes that would have happened anyway without the government intervention under consideration. Because the total scheme value is so large, close to £100 billion, estimates of deadweight loss – essentially wasted money – run into £billions too.

Interestingly, the NAO highlights the financial impact of a later change – a tightening –  in the grant awarding procedure: ‘The introduction of a financial impact declaration from July 2021 saved up to £2.5 billion in SEISS grants. It coincided with a large drop in the number of people making claims for SEISS grants.’

Fraud and error

The NAO reports on HMRC’s latest estimate for fraud and error:

1. total of fraud and error in the schemes is £4.5 billion (4.6% of the total cost), however:
   1. HMRC’s estimate of CJRS fraud is based on limited data
   1. HMRC’s programme of random checks would not have picked up certain types of fraud
   1. HMRC did not commission sufficient research with employees to understand how much went undetected.
2. HMRC is unlikely ever to know how much it paid to employers opportunistically claiming furlough for working employees – this was the main cause of fraud and error.
   1. the NAO also notes: ‘With HMRC needing to meet a high burden of proof, and no mechanism to penalise claimants for not taking reasonable care, few employers are likely to be penalised for inflating claims.’
3. the estimates of furlough paid for working employees (best estimate of £2.3 billion) relies heavily on survey data covering just the first few months of the scheme.

Finally

The NAO does cut the UK government some slack: ‘Due to the urgency created by the pandemic, the Departments had insufficient time to produce the detailed documentation that would normally be expected to support major spending decisions. They decided the spending on the schemes was ultimately beneficial compared to the expected negative impacts for households and the labour market if no support was provided.’

However, it also concludes: ‘… it could have done more in bearing down on deadweight loss and the cost of error and fraud’.

And adds: ‘The earlier use of clear financial impact tests could have helped the Departments target financial support to those whose incomes were genuinely affected by the pandemic and provided better value for money’.

Yes, governing is tough – even in Westminster! Its this context, its relevant to evidence how a public service media outlet operates in different ways in different parts of the UK as these differences are likely to influence public (i.e. voter) perceptions of the relative performance of different parties of governments!

To end where I started: just imagine if something comparable – with financial waste, fraud and error – was contained in an Audit Scotland report on an SNP Scottish Government scheme of any scale. We know that it would be ‘newsworthy’: we know how the coverage would be framed!