Wales lost out on £155.5 million of public funding due to “poor account management” by Welsh Government

Mismanagement of public accounts by Welsh government has resulted in significant losses for essential public services, according to a report published today.

The Senedd’s Public Accounts and Public Administration Committee outlines several issues with the accounts for 2020-21, including a £155.5 million underspend and concerns about record-keeping, such as an £80,000 payment made to the former Permanent Secretary and errors in the COVID-19 business grants scheme.

The Committee found that a total of £155.5 million could have been utilised to fund essential public services in Wales – at a time when there are serious pressures on public funding.

This figure is the result of the difference between the balance of the Wales Reserve on 1 April 2021 – £505.5 million – and the Wales Reserve’s limit of £350 million.

The Welsh government failed to spend the £155.5 million by March 2021 and had to give it back to the UK government.

The Welsh Government said the Chief Secretary to the Treasury had rejected its request to carry forward funds in excess of the Wales Reserve limit.

It is equivalent to around two-thirds of the revenue raised from putting 1p on each of the Welsh rates of income tax.

The Committee found it difficult to understand why the Welsh Government waited so long to be told it could not do as it wished with the underspend, and why such a request was made retrospectively.

The Welsh Government appears to have assumed, based on previous HM Treasury decisions, that it would be granted flexibility to use the funding.

It raises questions as to whether making a request sooner may have enabled the funds to be used. The Committee said lessons must be learnt to ensure such vital funding is not lost from Wales again.

Chair of the PAPAC, Mark Isherwood MS, says;

“Our report highlights a number of serious issues within the Welsh Government’s Consolidated Accounts 2020-21, which was not only significantly delayed and signed nine months later than the timetable originally agreed, but qualified by the Auditor General on three separate issues.

“We are very concerned that significant funding was lost to Wales as a result of the underspend in 2020-21. 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.”

Arrangements surrounding current and former Permanent Secretaries

A payment made to the former Permanent Secretary, and arrangements around the current Permanent Secretary’s salary, raise a number of issues regarding the documentation of decision making and record keeping by the Welsh Government.

A payment of £80,519 was made to the former Permanent Secretary on her departure.

This included £31,843 as payment in lieu of notice, £9,553 in unused annual leave and an extra-contractual payment of £39,123.

The Committee expressed concern over inadequate record-keeping regarding the decision-making process, leading to a lack of clarity and insufficient opportunity for scrutiny regarding the payment.

Additionally, the Welsh Government failed to provide the Auditor General with sufficient contemporaneous evidence to justify the payment made on the former Permanent Secretary’s departure and to establish any changes to her working arrangements.

The report also details concerns about the process of appointing the current Permanent Secretary. In September 2021, the Welsh Government announced the appointment of Dr Andrew Goodall, who had since 2014 been seconded to the Welsh Government from the Aneurin Bevan University Health Board (ABUHB).

The post had been advertised with a salary between £162,500 and £180,000, but Dr Goodall confirmed after his appointment that he remained on the NHS chief executive pay framework – meaning his current salary exceeds the advertised salary.

This raises the question of whether the Welsh Government may have attracted different candidates had the post been advertised at a higher pay scale.

The report recommends that the Welsh Government review its reporting and record-keeping practices to ensure that internal decisions around the Permanent Secretary role, along with any other roles at Director General level or above, are clearly documented.

The 17 recommendations made in the report aims to tackle the poor recording keeping which came to light during the Committee’s inquiry.

A Welsh Government spokesperson said: “The Finance Minister has made clear that the actions of the UK Treasury on this issue were wholly unacceptable.

“We stayed within our overall control total but the UK Government refused a switch between revenue and capital budgets, a process which has been agreed many times before.

“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.

“The Treasury’s arbitrary application of its guidance in this instance was deeply regrettable and left Wales deprived of £155 million.”

The spokesperson added: “We welcome the Public Accounts and Public Administration Committee’s ongoing scrutiny of the Welsh Government’s 2020-21 annual accounts.