Very few people would doubt that governments have an innate ability to waste money. It is particularly easy for this to occur since government departments don't actually have to work to receive your tax dollars. During the pandemic, it has been my suspicion that there have been extremely high levels of government waste in the name of "protecting the public" including purchasing PPE and temporary hospitals among other items. Thanks to the United Kingdom's Department of Health and Social Care's Annual Report and Accountability 2020-2021 report for the period ending March 31, 2021, we now have an idea of the size of waste during the pandemic for one major government:
The Department of Health and Social Care (DHSC) plays the following role in the United Kingdom:
"The Department of Health and Social Care (DHSC) supports the Government’s Health and Social Care Ministers in leading the nation’s health and care to help people live more independent, healthier lives for longer.
We support and advise our Ministers to shape policy and set direction, while remaining accountable for delivering the Government’s commitments, co- ordinating the legal, financial and policy frameworks in health and social care and, when necessary, we step in as troubleshooters to take action on complex issues, as can be seen in the Department’s response to the COVID-19 pandemic. In doing all this, we work closely with our partners in the health and care system, our Arm’s Length Bodies (ALBs) and agencies, local authorities, across Government, and with both patients and the public. We are accountable for the health and care system to Parliament and the taxpayer."
As noted above, the DHSC works through Arm's Length Bodies including the National Health Service or NHS and Public Health England or PHE which are part of
Here is a diagram showing how funds flow through the UK health and care system noting that the total funding for fiscal 2020 - 2021 was £213.7.
Here is the special funding that was provided for the pandemic which totalled around £63 billion:
1.) £18 billion revenue and £0.6 billion capital for the NHS to support the frontline response to the pandemic.
2.) £23.1 billion for the Test and Trace programme.
3.) £14.8 billion for the procurement and supply of PPE.
4.) £4.2 billion for the deployment of the COVID-19 vaccine and other COVID-19 treatments.
5.) £1.3 billion for the infection control fund and other grants.
6.) £0.6 billion for ventilators and the Critical Care National Stockpile.
The annual report is 341 pages long and, of course, no one actually expects anyone to read through the entire document which is how governments hide their misspending. If you take the time to look at the report, skip ahead to page 198 which is where you will find the most interesting part of the document. In this section, the report from the Comptroller and Auditor General to the House of Commons outlines the areas where waste took place. Let's start with the key finding with my bolds throughout:
"The COVID-19 pandemic put the Department under extraordinary pressure. It needed urgently to procure enormous volumes of goods and services in an overheated global market. The Department has stated that its priority was to ensure that it was able to meet the requirements of a reasonable worst case scenario. In order to do so, it rapidly increased its risk appetite and adapted its normal processes and procedures. The Department was not able to manage adequately some of the elevated risks, resulting in significant losses for the taxpayer. Nearly two years later, it has not fully restored effective control over some of the inventory purchased."
Here are the issues that the audit discovered:
1.) The Department estimates that there has been a loss in value of £8.7 billion of the £12.1 billion of PPE purchased in 2020-21. Of this £8.7 billion impairment, £4.7 billion relates to reductions in market prices since the goods were purchased.
Here are more detailed issues with the PPE:
a.) £0.67 billion of PPE which cannot be used, for instance because it is defective.
b.) £2.6 billion of PPE which is not suitable for use within the health and social care sector but which the Department considers might be suitable for other uses (although these potential other uses are as yet uncertain).
c.) £0.75 billion of PPE which is in excess of the amount that will ultimately be needed.
The Department’s inventory management systems were unable to cope with the significant, rapid increase in procurement and the Department did not maintain adequate records of the location or condition of £3.6 billion of inventory balances recorded in the accounts at the 31 March 2021. Since the year-end, the Department has made progress in improving its records, but significant work remains to be done.
The level of fraud risk has increased as a result of COVID-19 – related procurement. A significant increase in new suppliers, a lack of timely checks on the quality of goods received and poor inventory management all contributed to this heightened risk. In these circumstances and given the lack of physical checks on the inventory held by the Department, I have not been able to obtain assurance that there has not been a material level of losses due to fraud.
There are material levels of error and uncertainty in the accruals balance that has been recognised in the group account."
In fact, because it was so difficult to audit the Department's spending during the pandemic, the report could not be completed until ten months after the year-end of March 31, 2021.
Inventory management has been a significant issue as well as follows:
1.) The Department’s inventory management systems were unable to cope with the significant, rapid increase in COVID-related procurement. This left the Department with incomplete records of the PPE and LFTs it had purchased, what had been used and the location, condition and quality of the remaining items at the year-end.
2.) The weaknesses in its inventory records, combined with significant volumes of inventory being locked in containers at ports, other temporary locations or in storage in China, meant the Department was unable to complete its physical stock-counts at the year-end to verify the quantity and quality of the inventory it held. The Department’s records show that as at 31 March 2021, it held 7.5 billion items in 16,000 containers at UK ports plus a further 1.6 billion of items in storage in China; however, because it did not complete its year end stock counts it is unable to confirm this.
Controls over spending were also an issue as follows:
1.) The Department’s changes to its normal procurement processes in the context of an overheated global market for PPE meant it was exposed to a heightened risk of fraud in 2020-21. A significant increase in new suppliers, a lack of timely checks on the quality of goods received and poor inventory management all contributed to this heightened risk.
It was confirmed that £1.3 billion of the Department's spending did not have proper authorization and was considered "irregular" because it was spent without approval.
There is no doubt that governments, particularly those in the so-called "advanced economies" were in a panic to mount some sort of a response to the pandemic but, as the United Kingdom's example is showing, significant errors in judgement were made which resulted in a very significant level of waste and mismanagement which will take years to correct. We must remember that these wasted dollars were contributed to the Treasury by taxpayers who worked hard to earn the money that was then remitted to a government which seems to have thrown caution to the wind. We can also assure ourselves that similar levels of waste will be discovered when other government's release details of their spending on the pandemic over the coming year(s)...just around the time that they start increasing taxes to cover their overspending ways.
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