The latest Department of Health accounts reveals the massive ‘impairment’ on its books as a result of paying inflated prices and kit that was either ‘unsuitable’ or expired before being used. The sum is roughly equivalent to 2p on the basic rate of income tax
The extraordinary scale of pandemic losses was laid bare today as it emerged the taxpayer faces a £10billion hit on PPE deals.
The Department of Health has revealed the massive ‘impairment’ to its books as a result of paying inflated prices during the crisis and kit that was either ‘unsuitable’ or expired before being used. The sum is roughly equivalent to 2p on the basic rate of income tax.
By September 2020 the desperate efforts to stock up on PPE meant that there was too much in the country and it could not be moved out of ports quickly enough, meaning that the government had to pay £115million in fees.
Meanwhile, some £50million of medical equipment was written off last year after being deemed ‘unsuitable’, and around £350,000 worth of fruit and vegetables that had been earmarked for schools was thrown away.
The details emerged in the new DHSC accounts covering 2020-21, which government auditors have refused to give a clean bill of health because the ‘existence’ of some PPE stocks cannot be verified – as they are locked in containers and there are inadequate central records.
The department insisted it had been operating in a ‘highly competitive global market’ and its priority was to ‘save lives’. A spokesman stressed only 3 per cent of PPE was unusable, and more than 17billion items had been delivered to the frontline.
But shadow health secretary Wes Streeting said: ‘This is a shocking and inexcusable level of waste that could have been put to far better use in hospitals and care homes that are under-staffed and over-stretched.
‘Taxpayers’ money has been poured down the drain at a time when a record 6 million people are on NHS waiting lists.’
The value of the government’s ‘investment’ in PPE was written down by £8.7billion for 2020-21, according to the report.
The department said £4.7billion of that was down to ‘fluctuations in market price’ – with the products purchased now being worth much less than paid.
‘A significant diminution in value due to change in market price was acknowledged as a possibility at the point of purchase, but was necessary to secure the required supplies of these vital items during a time of global and national crisis,’ the report said.
Nearly £2.6billion of items were ‘not suitable for use in the NHS’ but could possibly be sold or donated in future.
But £673million failed ‘technical assurance’ and there was no prospect of using them elsewhere, meaning they were abandoned.
Some £750million of PPE was classed as ‘excess’ inventory, as it will expire before the government expects to use it, and can only be resold or donated.
The accounts show that DHSC faces a further £1.23billion loss due to ‘onerous contract’ provisions in advance orders.
Those PPE stocks had not been delivered by the accounts cut-off date of March 31 2021, but the government has agreed a price above market value and cannot cancel.
The department said that in September 2020 the ‘combination of an accelerated inbound supply of PPE products, with a lower than expected outbound demand, resulted in a sharp increase of PPE inventory in the UK’.
‘The PPE Programme Team secured sufficient storage capacity to hold the increased volume of PPE containers, but it was not possible to move all shipping containers from the port to the storage facility before the grace period, which was typically between 5 and 7 days, before demurrage charges were made,’ the accounts said.
‘As a consequence, the Department incurred demurrage charges of £111.5million.’
The report noted that the School Fruit and Vegetable Scheme (SFVS) was temporarily suspended when all schools were closed, except for vulnerable children and the children of key workers, in January last year.
However, the government ‘had already contracted to pay for produce to be delivered to schools, as part of the SFVS during this period’.
‘The losses incurred during the temporary suspension of the scheme, and during the remainder of the first half of the term totalled £1,247k, which comprised distribution costs of £657k and produce costs of £590k.
‘The Department donated £247k of the produce to food charities.’
A doctor in PPE at the height of the pandemic, when the government was desperately trying to secure stocks
A health worker in PPE gear during the response to coronavirus in the UK
During the Covid response ‘urgent’ medical equipment was purchased, but £50.6million worth was ‘either not suitable for use or required remedial action and were therefore written off’.
During 2020-21 laboratory equipment valued at £663,000 was scrapped after the closure of two Regional Testing Sites.
On the audit issues, the accounts stated: ‘The Comptroller and Auditor General has limited the scope of his audit opinion over the regularity of expenditure in respect of the risk of fraud losses. In combination with the Group wide fraud estimate communicated in the Strategic Intelligence Assessment (which the Department considers below the materiality threshold), this is principally a direct consequence of the Department being unable to access, at any given point in time, personal protective equipment (PPE) inventory that is stored in sealed containers, this also being the cause of the related limitation of scope in respect of inventory existence.
‘The combination of these factors, in particular we could not enable our auditors to be able to view and therefore verify the existence of a significant proportion of the Department’s PPE inventory, creates an assurance gap, and whilst management consider, on the basis of the information available, that the Department has not been subject to significant fraud, it is the C&AG’s view that having physical access to inventory is a key part of the audit assurances around fraud risk.’
A Department of Health spokesman said: ‘Our absolute priority throughout this unprecedented global pandemic has always been saving lives.
Sajid Javid is facing calls to come to Parliament to explain the PPE losses
‘In a highly competitive global market where many countries imposed export bans, we acted swiftly to obtain 30,000 ventilators by the end of June 2020 and we have delivered over 17.5billion items of PPE to the frontline, with 97 per cent of PPE we ordered being suitable for use.
‘The supply of these vital items helped keep our NHS open at a moment of national crisis to deliver a world-class service to the public. We are seeking to recover costs from suppliers wherever possible.’
The costs emerged as a World Health Organisation (WHO) study on PPE waste pointed to ‘unnecessary’ use in the UK.
It said: ‘In the first six months of the Covid-19 pandemic in the UK use of PPE in England alone added an additional 1 per cent carbon burden, compared with pre-Covid-19.
‘Between February and August 2020, three billion items of PPE were used, resulting in 591 tonnes of waste per day. The greatest contribution came from gloves. Much of this PPE use was unnecessary.’
Lib Dem Health spokeswoman Daisy Cooper said: ‘With billions of taxpayers’ money being lost to fraudsters, and now this, it’s plain to see that this Tory government cannot be trusted with our money.
‘Sajid Javid must now come before Parliament and explain how his government ended up throwing good money after bad and what he’s going to do to get his department in order.’
