Prof Prem Sikka: The government is plumbing to new depths of waste, incompetence and fraud

'The latest evidence of incompetence is in the annual report and accounts of the Department of Health and Social Care for the period ended 31 March 2021.'

Levelling up

Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.

With each passing day, the UK government is plumbing to new depths of waste, incompetence, fraud and fiddles.

The latest evidence of incompetence is in the annual report and accounts of the Department of Health and Social Care for the period ended 31 March 2021. The report shows that in 2020-21, the government spent £12.1bn on Personal Protective Equipment (PPE) to combat the Covid pandemic. Of this £8.7bn has been written-off. These reasons are as follows:

  • £0.67 billion of PPE which cannot be used, for instance because it is defective;
  •  £2.6 billion of PPE which is not suitable for use within the health and social care sector;
  • • £0.75 billion of PPE which is in excess of the amount that will ultimately be needed; and
  • £4.7 billion of adjustment to the year-end valuation of PPE due to the market price of equivalent PPE at the year-end being lower than the original purchase price

That is not all. On page 201 of the report the Comptroller and Auditor General says “I have been unable to obtain sufficient, appropriate audit evidence to support the valuation of the Core Department & Agencies’ and Group’s onerous contract provisions of £1.2 billion”.

That is a waste of nearly £10bn out of a spend of £12.1bn.

We all remember how the government ran unlawful VIP lanes to hand contracts to Conservative Party cronies. Transparency International reported that at least 73 contracts worth £3.7bn had systemic bias towards those with connections to the party of government. Companies with no experience of medical supplies were handed vast contracts. These included a company engaged in pest control, a hedge fund and a publican friend of the Health Secretary. No checks were made on the quality of PPE and there were poorly co-ordinated purchasing and distribution facilities.

The government’s claims that it had to act in an emergency are not credible. In 2016, “Exercise Cygnus” simulated the National Health Service’s (NHS) ability to manage an influenza pandemic. It concluded that the NHS would struggle to handle a pandemic. This did not persuade the government to increase investment in the NHS. The number of NHS beds continued to be reduced and the stock of PPE was also run down.

The news of £12bn waste comes days after the outgoing Minister of State, Cabinet Office and the Treasury told parliament that losses due to frauds across government departments were running at around £29bn a year. The Treasury is estimated to have written-off £4.3bn in Covid payments lost to fraudulent claims of furlough support and business loans.

Billions have been handed out without basic fraud prevention checks which would have taken a few seconds. For example, no one in the UK can open an Individual Savings Account (ISA) without providing their National Insurance (NI) number. This deters fraudsters from stashing money in tax-free accounts. The check is automated and takes few seconds. Yet companies applying for furlough support were not asked to provide NI numbers for their staff. Inevitably, support has been claimed for phantom staff.

Billions have been handed out in Covid loans to businesses but applicants were not asked to provide their tax reference number. The applicants’ names were not checked against any police crime register. In this environment, crooks, dormant and newly formed companies  obtained public money.

The government is now chasing fraudsters but its chances of success are not very good. The reason is that anyone from anywhere in the world can form a company in the UK by filing documents at Companies House. It makes no checks on the authenticity of information and that is an invitation to crime.

It accepted a director with the name “The Chicken Thief”, whose occupation was “Fraudster” and resided at “the “Street of the 40 Thieves” in town called Ali Babba in Italy. This week, I have drawn the government’s attention to some implausible director names and occupations. These include directors named “Mr Adolf Tooth Fairy Hitler“, “Lord Truman Hell Christ”, “Judas Superadio Iskariot” and “Victor Les-Appy Hugo“. One company boasted a director named “James Bond” and stated his occupation to be “Security Controller”. Another had a director named “Joseph Smith Jr” and listed his occupations as “Steward of the Ring of Mormon”, “Prophet and Ringwatcher” and “Guardian Angel of the Ring of Mormon”. There is also a “Lord Truman Michael Spypriest” with occupations give as “Secret Espionage Service”, “War Lord”, “Weapons System and Tuba (Latin)”, “Secondary Deity and Tubist” and “Militarized Tuba (Latin) of Moroni”.

The full extent of false names and addresses is not known. Fictitious details impede any possibility of recovering fraudulent sums.

The above is the tip of an iceberg and the write-offs will vastly increase. The cost of government failures is borne by the people facing rising cost of living, never-ending austerity and failing living standards. The government has hiked up the national insurance contributions by 1.25 percentage points to raise £12bn, suspended the triple-lock of the state pension to deprive pensioners of £5.4bn and cut Universal Credit by £4bn to deprive the poorest families of £1,040 a year. Meanwhile, frauds and waste continues unchecked.

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