Welsh government failed to spend £155m at Covid height

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The Welsh government failed to spend all of its Covid cash, according to a report

By David Deans
BBC Wales political reporter

Mismanagement of public accounts cost Wales £155.5m at the height of Covid, according to a Senedd committee.

The Welsh government failed to spend the extra cash by March 2021 and had to give it back to the UK government.

It is part of a damning report which raised concerns about Welsh government spending and senior staff management.

The Welsh government said a decision by the Treasury not to let the cash stay in Wales was "unacceptable", but the UK government defended its decision.

The Treasury said funding arrangements had been applied in the "usual way".

Meanwhile, Welsh government estimates put the amount of fraud and error in a Covid business grant scheme between £700,000 and £37m in 2020-21.

The report said not enough was being done to identify the problem.

There were concerns about the record-keeping of an £80,000 exit payment to Wales' former top civil servant, ex-Permanent Secretary Dame Shan Morgan.

It also said that her successor's salary is higher than the advertised amount.

The conclusions are part of the Senedd's Public Accounts and Public Administration Committee report on the Welsh government's accounts for 2020-21.

A probe by Auditor General Adrian Crompton into the payment to Dame Shan found some of the money was paid in a way she was not entitled to her under contract.

What happened to the money?

The Welsh government's budget - roughly £20bn a year - is spent on healthcare, councils and other services run from Cardiff.

The report said the Welsh government failed to spend £155.5m in funding available to it in 2020/21.

It was the result of a difference between the amount of cash the Welsh government had in its reserves that year - £505.5m - and the limit of £350m.

It asked the UK government if it could keep the cash, but the request was rejected.

In November 2021, Treasury officials told the Welsh government it could not use the money to account for an overspend on its capital budget used for infrastructure - something the Welsh government said has happened before.

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The Welsh government is responsible for health services in Wales

Committee chairman Mark Isherwood said: "This money could have been used to fund essential services and it is especially frustrating now when there are such pressures on public funding.

"It is one of many examples where poor record-keeping and mismanagement of public accounts has cost the people of Wales."

The Welsh government called the Treasury's actions "wholly unacceptable".

It added: "Our underspends during the exceptional 2020-21 financial year were very significantly below those of UK government departments and our focus on achieving value for money meant we didn't have the scandals of PPE contracts as we saw in England".

A Treasury spokesperson said funding arrangements "were applied in the usual way in relation to the Welsh government underspend."

Fraud

During the pandemic the Welsh government handed out support for businesses in the form of grants. At least £893m was provided through local authorities.

The Welsh government estimated that fraud or error in the grants in 2020-21 may have amounted to between 0.08% (£700,000) and 4.17% (£37.2m).

Public spending watchdog Audit Wales found some councils had not identified any cases of fraud and error.

It was noted how unlikely that was. One authority using additional checks found £570,000.

The committee said it was "surprised" the Welsh government did not do more to encourage councils to do further checks.

The Welsh government said: "Current evidence, as set out in the report, suggests very low levels of fraud and error in our grants to businesses as a result of the approach taken in Wales".

Shan Morgan

Much of the report focuses on Dame Shan's decision to go part-time and partially retire in April 2018.

Members of the Senedd [MSs] expressed concern over the approval by a "subordinate" member of staff approving changes to working arrangements of a superior.

Changes to how much leave she was given for working extra days were approved by the director of human resources.

Dame Shan Morgan was permanent secretary until October 2021

Dame Shan was paid £80,519 after the first minister asked her to leave earlier than expected in October 2021, including £39,123 for working 148 extra days while she was part-time.

The report said there was an absence of records to substantiate those days.

The Senedd committee said it was concerned the government did not give the auditor general enough evidence to justify the money.

Explaining the payment, the Welsh government said: "A monetary alternative was offered as it had not been possible for the former permanent secretary to take the time off she was entitled to."

Mr Crompton said in a statement the payment to Dame Shan had "lacked transparency and did not comply with good governance principles".

Dame Shan was asked to comment.

Andrew Goodall replaced Dame Shan Morgan as permanent secretary

Secondment

The current permanent secretary is Andrew Goodall, who took over from Dame Shan in November 2021.

Because he is still seconded from a previous role in the NHS, the report suggested if Mr Goodall was to finish working as permanent secretary, he would need to be paid his current salary without having a job to move back to.

The report said he was paid more than the £162,500-£180,000 salary advertised, because he had been kept on the pay system for chief executives in the NHS.

According to the 2020-21 accounts, his pay band was £205,000 to £210,000.

Judith Paget took Mr Goodall's previous job as chief executive of the Welsh NHS.

The report said it was suggested to the committee there had been no competitive recruitment exercise for the post.

The 17 recommendations made in the report aim to tackle poor record-keeping that came to light during the inquiry.

Plaid Cymru's Llŷr Gruffydd called for the Welsh government to apologise and said: "Lack of transparency and poor record keeping in the transition from one permanent secretary to another will only fuel accusations of a cosy club that sees itself as being above scrutiny".

Mabon ap Gwynfor, Plaid Cymru MS for Dwyfor Meirionnydd and a member of the committee, said the underspend was a "shock".

"It wasn't at all clear why they did this, and why they felt there were no worthy projects to spend the money on here," he said.

Conservative Peter Fox added: "There are still many questions to be answered around the backroom dealings in the Labour government and why they don't believe the Welsh people deserve honesty and transparency."

The Welsh government said it welcomed the report and will respond to the recommendations in due course.

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