Treasury 'didn't expect' impact of latest covid restrictions on businesses

Tuesday 18 January 2022

Treasury didn't start readying plans for more financial support for businesses as an omicron wave was looming because they didn't expect the impact fresh covid restrictions would have on businesses.

Treasurer Richard Bell said that the timescale given to his department to reintroduce the co-funded payroll scheme was not long enough, and that it was “very unclear whether it was the right measure”, with no “time to develop alternative measures.”

The comments came during a hearing of the Public Accounts Committee - a panel of politicians tasked with reviewing the Government's spending - after Constable Karen Shenton-Stone referred to a letter of instruction sent by Mr Bell and Customer and Local Services Director General Ian Burns to the Treasury Minister on 22 December, shortly before the revived payroll scheme was due to come in.

In the letter - which is a formal way for officers to say they are not prepared to take legal responsibility for a Ministerial decision - they stated that they felt “more effective and efficient policy measures could have been adopted.” 

Pictured: In December, both the Treasurer and the Director of Customer and Legal Services wrote to Government saying they were not willing to be legally responsible for the new co-funded payroll scheme.

When asked yesterday by Deputy Inna Gardiner why the department did not draft up the business case and why it was a surprise considering previous waves, Mr Bell said that they had not expected the measures to cause such an impact, with their numeric figures "misrepresent[ing]" the situation compared to the representations they were receiving from businesses.

“…So the Minister had wound down the co-funded payroll scheme and committed to implement when mandatory health restrictions were put back in place,” he said.

“Our initial views leading into January were that the wearing of masks and perhaps working from home would not necessarily amount to the health restrictions we were thinking of in terms of, for example, two-metre distancing, or as we’d seen previously certain sectors being closed.

“We didn’t at that time expect the scale of potential impact that came through from the representations from business, and therefore we were not expecting to turn the co-funded payroll scheme on for those particular measures that were put in place.”

Pictured: The revived scheme was introduced in December, and this week began including restaurants, bars and sole traders. 

He said that there was a “behavioural aspect... with organisations taking it upon themselves in light of the guidance rather than in light of any restrictions having been put in place.”

He added: “We are broadly there, it has to be remembered that co-funded was initially targeted at those very strong health restrictions when we were in lockdown when sectors were closed.

“It was not necessarily as effective a measure as we come out of those harsher measures to a more guidance territory coming from the health team.”

Elsewhere in the hearing, Senator Tracey Vallois brought up the Comptroller and Auditor General’s report on the scheme, and in particular an observation that there had been a ‘lag’ between payments being made for the scheme and then being audited.

In total, £5.32m of overclaims were identified by an independent audit firm on 25 July 2021, representing 6.6% of the payments made to 31 August 2020 - at the time of the report, £3.74m had been recovered with some organisations repaying in instalments.

Faced with the question over whether the Treasury was considering write-offs for any overpayments or errors, Mr Bell responded: “I think it’s too early for considering on a wide-scale basis the write-offs of those particular amounts, but certainly we would proceed with the provision against them as we come to conclude the end of this year’s accounts production."

The latest iteration of the co-funded payroll was recently extended to include restaurants, bars and sole traders. They are now able to claim up to £1,250 per employee if their income for December 2021 fell by more than 20% compared to December 2019.

However, retail and hairdressing, and other close contact services, have not yet been added because ministers say then need more information in order to understand the impact that public health measures are having on them.

During the hearing, the panel was also informed that Customer satisfaction remains the biggest challenge to improving the performance of the Treasury and Exchequer department, with the Comptroller of Revenue, Richard Summersgill, saying: "there is still a long way to go". 

They also noted there had been problems with the timescale for the Integrated Technology Solution programme, and that there is no central business case for the delivery of Target Operating Models across the Government.

PAC Chair, Deputy Inna Gardiner, said in a statement following the hearing: "The Public Accounts Committee thanks the Treasurer and officers for attending today's public hearing. 

"It is clear that the successful delivery of the ITS project will become crucial to the functioning of the Treasury and Exchequer department in the future, however, the resources and benefits of this programme will require continual assessment. 

"The Committee would benefit from further clarity regarding the benefits of the Target Operating Model, including a clearer distinction between the number of permanent and temporary staff employed within the department before and after the programme was implemented. We wish to know how the programme has demonstrated value for money and will seek further clarity in relation to this."