LGS0001

 

Written evidence submitted by Local Government Association

 

The Local Government Association (LGA), as the national voice of local government, welcomes the opportunity to submit evidence to your Committee’s inquiry on local authority administered COVID grant schemes.

As the National Audit Office (NAO) Report on COVID-19 grant schemes states, over the two years beginning in March 2020, local authorities distributed £22.6 billion via 4.5 million payments to businesses.  This was a considerable achievement.

To summarise, the key issues which councils raised with the LGA throughout the delivery of the schemes were:

We believe that the NAO has captured the issues with the administration of COVID-19 grants schemes well.  We agree with the NAO report that the then Department for Business, Energy & Industrial Strategy (BEIS) prioritised speed over assurance, particularly for the early schemes at the start of the pandemic.  From the outset, there was pressure from Ministers for fast distribution of grants to businesses, even if that meant not carrying out pre-distribution fraud checks.  This was particularly the case for the first cohort of grants in 2020.  The NAO suggests that more than 80 per cent of local authorities had disbursed more than two-thirds of the money due to eligible local businesses by 10 May 2020.

As can be seen from the report, 90 per cent of the estimated £1.1 billion fraud and error occurred in the first cohort of schemes in 2020. The level of fraud and error went down from 8.4 per cent (central estimate) for the first cohort of schemes to 0.5 to 1.6 per cent for schemes in the second and third cohort, respectively.  BEIS/ the Department for Business and Trade’s (DBT) best estimate of the split between fraud and error is that 17 per cent by value was fraud and 83 per cent was error.

We agree that BEIS prioritised delivery of the schemes as opposed to assurance and recovery.  For example, the guidance on assurance and debt recovery was only published in November 2021, 18 months after the initial cohort of schemes.  We also heard that the procedure for assigning uncollectable debts was unnecessarily bureaucratic, for example councils had to sign a Debt Assignment Agreement.

As the NAO report says, for most of the grants the Treasury determined the high-level eligibility criteria, the quantum of support and made the initial announcement for each grant.  There was little or no involvement of local government in this.  The Treasury then passed the responsibility for the operation of the grant to BEIS.  BEIS did involve local government, more informally to begin with and then more formally after 2021 when a Programme Board for the grants programme was established.  However, this meant that local government had little or no input into the criteria, which were decided centrally for 90 per cent of grants by value.

BEIS involved the LGA and some councils informally in commenting on drafts of guidance but local government did not have an input into deciding criteria. At times, the LGA received feedback from leading members who felt the criteria meant that councils were compelled to distribute grants to some sectors who they felt were not in the most need; this was the case, for example, for the Omicron Hospitality and Leisure Grant.

Two of the grants were discretionary (although also subject to guidance); these were the Local Authority Discretionary Grant Fund and the Additional Restrictions Grant.  97 per cent of these grants were paid out, compared with an average of 83 per cent for those grants where the criteria were decided centrally (Please see the table annexed to this letter – derived from Figure 4 of the NAO report).

From May 2020 onwards, BEIS regularly published figures by authority for distribution of the various grants. This could be misleading as the initial grant distributions were based on estimates which in some cases were later adjusted although the adjustments were not shown in the published tables.

In some cases, councils did not have information to identify businesses initially as their normal role does not include the payment of grants to businesses because it is focused on delivery of their statutory functions to collect business rates and council tax. Therefore, councils did not necessarily have, at least initially, the information which BEIS and the Treasury thought they had.  This was particularly likely to be the case, for example, where businesses received 100 per cent small business rate relief.

Guidance for the schemes was frequently published with a delay of 10-15 days after grants were announced, this was particularly the case for the second cohort of schemes which were more targeted to particular areas.  Local authorities found themselves under pressure from businesses and Ministers to pay out grants and they could not do this until the guidance was published.  In addition, guidance documents frequently had to be revised and supplemented by ‘frequently asked questions’ documents.  This also added to the difficulties of administration for councils.

Most of the delivery of grants was carried out by revenues teams in councils whose main job is to collect council tax and business rates.  This was a considerable administrative burden for them which lasted the two years that the grants were in effect.  BEIS paid £142 million New Burdens money to councils for the costs of delivery of the grants in recognition of this.


 

 

 

Table of grants

 

 

 

 

 

 

 

 

 

 

 

Name of grant (see key below)

SBGF and RHL

LADGF

LRSG O

LRSG C

ARG

CSP

RG

OHLG

Central

Discretionary

% central

Central (C) or Discretionary (L)

C

L

C

C

L

C

C

C

 

 

 

Date Announced

11th March / 17th March 2020

1st May 2020

22nd October 2020

9th September 2020

22nd October 2020

1st December 2020

3rd March 2021

21st December 2021

 

 

 

Date of first publication of guidance

24th March 2020

13th May 2020

3rd November 2020

24th September 2020

3rd November 2020

9th December 2020

17th March 2021

30th December 2021

 

 

 

Number of different versions of guidance

6

3

30 (1)

30 (1)

9

2

2

3

 

 

 

Initial allocation (£m)

                  12,334

           581

               261

            7,530

                2,130

                25

        3,381

                   635

     24,166

          2,711

90%

Paid out (£m)

                  11,117

           563

               205

            5,099

                2,068

                23

        3,048

                   456

     19,948

          2,631

88%

% paid out

90%

97%

79%

68%

97%

92%

90%

72%

83%

97%

 

SBGF RHL

Small Business Grant Fund and Retail Hospitality and Leisure Fund

 

 

 

 

 

 

LADGF

Local Authority Discretionary Grant Fund

 

 

 

 

 

 

 

 

LRSG O

Local Restrictions Support Grant (Open)

 

 

 

 

 

 

 

 

LRSG C

Local Restrictions Support Grant (Closed)

 

 

 

 

 

 

 

 

ARG

Additional Restrictions Grant

 

 

 

 

 

 

 

 

CSP

Christmas Support Payment for Pubs

 

 

 

 

 

 

 

 

RG

Restart Grant

 

 

 

 

 

 

 

 

 

 

OHLG

Omicron Hospitality and Leisure Grant

 

 

 

 

 

 

 

 

(1)  This number covers all the version of the Local Restrictions Support Grant

 

 

 

 

 

 

 

 

 

May 2023