8 December 2025
(10.29 am)
Lady Hallett: Good morning, Mr Wright.
Mr Wright: Good morning, my Lady. Can I confirm that you can both hear and see us in the hearing room?
Lady Hallett: I can, thank you.
Mr Wright: Thank you.
Yes, the first witness is Alex Skinner, if he can be sworn or take the affirmation. Thank you.
Mr Alex Skinner
MR ALEX SKINNER (affirmed).
Questions From Richard Wright KC, Lead Counsel to the Inquiry for Module 9
Mr Wright: Good morning, Mr Skinner. You were formerly the director of local government funding at the Ministry of Housing, Communities and Local Government; is that right?
Mr Alex Skinner: That’s right.
Lady Hallett: And you’ve provided a witness statement to the Inquiry, which is INQ000657743.
Now, in terms of your role as Director of Local Government Finance, just, first of all, to understand what that really involves, was it a role that arranged for funding to be provided to local authorities so that they could continue to function and perform their functions of delivering services locally?
Mr Alex Skinner: That’s correct.
Lady Hallett: And so this is separate to the regime of business grant funding that the Inquiry has heard about; is that right? That’s funds being allocated by local authorities or delivered?
Mr Alex Skinner: That is correct. So local government finance was primarily responsible for ensuring the financial sustainability of councils. Business grants was about supporting the business sector.
Lady Hallett: Okay, thank you.
Now, we will look at both of those things during the course of your evidence, but can we start by looking at that funding to local authorities so that they could provide their services locally.
And I’m going to ask, please, if the corporate statement of the department could be put up. This is INQ000652753, and paragraph 48.
And we read there:
“The Department did not have a ready-made pandemic plan with relation to local government finance.”
And I just want to pick up on that. Should we therefore understand that there was no pre-existing pandemic finance plan?
Mr Alex Skinner: So I think the best way to describe it was that we had done a significant amount of preparation for a shock to the local government finance system. We had what I would describe as the building blocks in place. We didn’t have a plan in the sense of knowing exactly which of those building blocks we would deploy and at what time, and that reflected the uncertainty of the pandemic and the uncertainty of knowing in advance of a pandemic exactly which building block it would make sense to deploy and when.
Lady Hallett: I see. And so was there an ad hoc element to how things developed as between the department and local authorities, within those parameters?
Mr Alex Skinner: So I think there were questions about timing and exactly which levers we would pull. I think we had a very good understanding of broadly which levers we would pull and how we would support local government, because in essence you would be looking at income, expenditure, financial sustainability and anybody who needed exceptional financial support. And you would also need to have a method for understanding that, which were the monitoring forms that we issued.
Lady Hallett: Yes, and we’ll come on to look at monitoring, which I think was something that was well established before the pandemic; is that right?
Mr Alex Skinner: You are right. So there is a whole plethora of monitoring which goes out to local government every year. So they are done quarterly and annually.
I think the difference between what happened prior to the pandemic and what happened in the pandemic was we moved from that statutory quarterly and annual reporting to voluntary monthly reporting, and exactly what we asked for changed. So there were questions that were in the monitoring form that wouldn’t have been in the statutory reporting.
Lady Hallett: I see. We’ll come back to monitoring as a subtopic.
Generally, the evidence that the Inquiry has received is of the broad view that the department, your department, engaged well with local government in terms of funding throughout the pandemic. Do you share that view?
Mr Alex Skinner: Yes, I do share that view.
Lady Hallett: And why in particular is that your view?
Mr Alex Skinner: So I think that we had, for a long time, significant engagement with the sector. So again, all of the elements which proved to be successful in the pandemic had been established prior to the pandemic. I think the big difference is where – one, was the intensity of the engagement. So, prior to the pandemic, we might have spoken to government, local government, maybe on a monthly or weekly basis. Under the pandemic, we were talking to them on a daily or even multiple times a day. And I think the other thing that happened was a conscious decision on both sides, I think, to create a real spirit of openness and trust which allowed us to discuss things with local government which I think we hadn’t previously been able to do.
Lady Hallett: Right. So, two key things: (1), the fact that there were these pre-existing relationships that provided the channel for communication; followed by (2), stepping up that communication and building true trust between the two partners –
Mr Alex Skinner: Yes.
Lady Hallett: – as it were, in the delivery of support. Okay.
Can you just explain to us from your perspective and experience why certainty of funding is an important thing for local authorities?
Mr Alex Skinner: So, in normal circumstances, certainly funding is important, because local authorities have a duty to obviously deliver all the services that they do, but also to do it in a way which is – represents value for money and is efficient and effective. So certainty allows them to plan ahead, for example, to engage and take out contracts with providers and plan ahead. That is important in normal circumstances.
In the pandemic, certainty of funding, I think, was more problematic, because I think there was a tension at the heart of the pandemic which was between value for money and the uncertainty about what would happen next in the pandemic. And the tension there was, for example, if we had given local government more certainty, then the risk would have been we would have given them more certainty on the basis of our understanding at the time we made the funding decisions that then turned out not to be true.
Lady Hallett: Right. Can I just ask that we slow down slightly your answers.
Mr Alex Skinner: I apologise.
Lady Hallett: Don’t worry about that. It’s just that the stenographer needs to be able to keep up, and it’s a natural thing to speak quickly. So just slow it down a little bit, thank you.
So in general times, normal times, certainty and clarity of funding you think is important, but the nature of the pandemic put stress on your ability to provide that clarity and certainty of funding; is that fair?
Mr Alex Skinner: I think that is fair. I think within the constraints that we were operating within, I think we did pretty much as much as we could have done to provide local government with certainty. So right at the beginning of the pandemic I think ministers were very clear and we as officials reflected that: that we would support local government from a financial perspective through the pandemic.
One of the first things that we did in the pandemic was we provided cash flow support. That meant that no local authority had to worry that they wouldn’t have enough money to provide the services. And then if you look at the sequence of support we then put in place, you had tranche 1 funding in March, that was 1.6 billion, and then you had tranche 2 funding in April and the fact that we put the tranche 2 funding in so soon after tranche 1, I think, reflected the fact that what we were trying to do was to say to local government, “You should get on with delivering the services, you shouldn’t be worrying about where the money would come from.”
And the other part that ministers were very clear about was to say, “We will use the monitoring form so that we can review the state of local government finance, and if there are issues, then we will look at it and review it and consider the case for more funding.”
Lady Hallett: So first of all, guaranteed cash flow. So that provides, does it, a safety net, if you like, that every local authority knows that the department is going to stand behind it if they run into cash flow problems. So they don’t need about disruption to services. Is that the point of guaranteeing cash flow?
Mr Alex Skinner: So the immediate reason for providing the cash flow support was because very early in the pandemic, before the monitoring form, we were getting reports back from local government that they were concerned that the local government funding system, the lending between local authorities, was at risk of shutting down, because local authorities were concerned about ensuring they had sufficient funding so they wouldn’t lend to each other.
Lady Hallett: I see.
Mr Alex Skinner: And over the course of a year local authorities will lend to each other, some will lend in one direction at the beginning of the year, others will lend in the other, and so the purpose of that was to ensure the liquidity of the system. There was enough cash in the system. What we did later was to ensure the sustainability and the solvency of the system which was about did they actually have enough resources longer term to be able to provide the support they need to?
Lady Hallett: And you were trying to give them numbers early; is that the point?
Mr Alex Skinner: Correct.
Lady Hallett: So that they knew what was coming and they weren’t having to delay taking action in terms of delivery of service; they knew to a general degree what was coming and the volume of funds?
Mr Alex Skinner: Absolutely. And as you got towards the end of the pandemic, if you look at tranche 5, for example, that was first announced as part of the spending review in November and that was funding for the first quarter of the year ‘21/’22, so that was four months in advance. So that was, I think, a very sensible thing to do and provided the local government with the certainty they needed.
Lady Hallett: From the tone of your answers, it appears that you think that worked well.
Looking ahead, would you do anything differently in terms of certainty and clarity and providing that certainty? Or do you think you took the measures that you were able to take and they were the sort of measures that should be taken in a future emergency?
Mr Alex Skinner: So in broad terms, I think they were right. I think what you could do is you could have been – we could, if you were looking at another pandemic situation, you could provide greater clarity, and I think David Phillips refers to this in his statement, to this idea that you could have a set of principles and an approach that you shared with local government. I think what you would need to do is you would need to ensure that when you provided that, you also were clear about the fact that the actual response would have to depend on the circumstances of the time, but I think what that would do is it would say to local government: this is how we will think about your funding under a pandemic.
And in essence, I think we did that under the pandemic, the Covid pandemic. I think if you were going forward you could perhaps provide some people with just a little bit more comfort by setting that out as a set of principles.
Lady Hallett: So set out principles that everyone can see, they’re accessible, they know the criteria by which you’re judging the situation, essentially?
Mr Alex Skinner: Yes.
Lady Hallett: All right. So can we come on to monitoring then, and monitoring by the department of local authorities. And we’re talking here, aren’t we, about local authorities in England?
Mr Alex Skinner: That’s correct.
Lady Hallett: And it’s important to draw that distinction and I’d like to pick up, during these questions, the comparison with the position in Scotland. Now, you’ve told us there was regular monitoring, quarterly, I think you said. And that changed. The frequency changed, and is it right that also what you’re asking for changed?
Mr Alex Skinner: Yes, so there is statutory monitoring which has – pre-existed the pandemic through a variety of forms. The monitoring form then was a different document, had some overlap with the statutory reporting and then was initially monthly and then later, every two months.
Lady Hallett: Okay. Now, English local authorities, therefore, were used to an element of monitoring?
Mr Alex Skinner: Correct.
Lady Hallett: To what extent did this change in frequency and the change in data you were requesting, in your view, add to the administrative burden on local authorities at a time when they were trying to deliver emergency services?
Mr Alex Skinner: So I think we were acutely aware of the impact it would have because in essence, every person you had filling out a form was not a person, as you said, who would be supporting delivery of services to the public.
I think we worked very hard with the Local Government Association and with the sector in the design and refinement of the form, and I think we were also really clear why we thought it was important to have a form. I think local government also understood the value of the form, because of the explicit link that was made between the monitoring form and the funding and the scheme, schemes that were put in place to support local government under the pandemic.
So I think, while local government would have said there was a burden, I think they would have recognised that that was a burden that was worthwhile because of the benefits that the monitoring form provided to MHCLG but also to other government departments.
Lady Hallett: So there was an inevitable trade-off in terms of increased administrative burden, but that resulted in you being able to deliver more effective support to the local authorities, so it worked both ways? Is that the point?
Mr Alex Skinner: Yes.
Lady Hallett: And was there any dialogue back and forth between you as to whether it was too burdensome or did you tend to find that you worked well in partnership with the Local Government Association and that, generally speaking, returns were made in a timely way and provided information you needed?
Mr Alex Skinner: So I think it’s been set out elsewhere that the response rate started at more or less 100%, and then even by the very end we’re still over 80%. So I think that reflects the fact that local government understood why we were asking for the information, and they were also prepared to give the information.
I don’t – I can’t over-emphasise how important the monitoring form was, and therefore, if anything, I would have liked to have seen a larger proportion even through to the end. But by the time we got to the very last monitoring forms, the pandemic essentially was winding down, and therefore I can understand why some local authorities would have said, “Actually, we’ve got other things that we need to prioritise now.”
Lady Hallett: I mean, providing data for the sake of it would be burdensome without advantage, but can you give us an example of how – you say how important it was to have this monitoring and how it assisted you in the department to assist local authorities in return.
Mr Alex Skinner: Mm.
Lady Hallett: Can you give us a worked example of that, where it made a real difference, or –
Mr Alex Skinner: Well, so, the most obvious one was it allowed to us understand broadly how much local government was spending. So, as a rule of thumb at the beginning of the pandemic, from the monitoring forms that we were getting, we thought that local government was spending broadly in the region of £500 million a month, so that allowed us to think about how much funding we should give, how frequently we should do it, and, therefore, what the combination of those would be. So that would be one example.
The other would be, at the very beginning of the pandemic, and you can see this through the development of the way the money was distributed, we had first understood the pandemic as a shock that came through the adult social care system. So the first funding that we gave was primarily aimed towards adult social care.
What we then got back from the monitoring form was actually the pressures on income. And so when you look at the second tranche of money that we gave, that was then much more weighted towards supporting people with a loss of income. And then, as the pandemic developed, we then changed from going through a purely formula-based approach to one where we had a formula-based approach for expenditure and then a claim approach for income, so tax and for sales, fees and charges.
Lady Hallett: Can I interrupt? I’m sorry to interrupt. I think you mentioned how much local government was spending, “in the region of 500 million a month”. It was recorded as [draft] “billion”. I just wanted to check you said 500 “million” per month?
Mr Alex Skinner: Yes, 500 million. And to be clear, that it was just for the un-ringfenced funding that we were providing from local government finance. Obviously other departments and other actors were providing additional funding.
Mr Wright: Yes, thank you, my Lady, I’m sure that will be corrected in the stenography. It’s “million” not “billion”.
Mr Alex Skinner: Yes, it’s definitely “million”.
Lady Hallett: Yes, thank you.
So there’s obviously a balance to be struck, as you’ve said. Do you think that, by and large, you struck it well with English local authorities, in terms of the level of monitoring that was requiring as against the benefits of that monitoring?
Mr Alex Skinner: Yes, I do. I think if I were looking to the future, one thing that I would consider would be the number of departments, the number of actors who were doing monitoring. So could we, as government, take a more joined-up approach and therefore streamline the amount of monitoring we were doing by asking – centralising it more, and then just asking one set of questions?
That would obviously be more work – the single product would be more work for local government, but my aim would be overall that it would reduce the burden on local government overall. And potentially would also then help central government, because you would have one data source telling you what was happening.
Lady Hallett: One interpretation of the data is that when you looked at the funding that was in fact provided to local authorities in England, there’s an argument they were overfunded –
Mr Alex Skinner: Yes.
Lady Hallett: – during the pandemic, and I just wonder how that sits with the proposition that the monitoring was effective and assisted you to deliver the support?
Mr Alex Skinner: So I think inevitably the difference between the statutory monitoring and the monitoring form was the monitoring form was done at pace on unverified data by local authority finance directors providing their best understanding at the time that it happened.
As you say, it then turned out there was a discrepancy with the formal reporting.
I was never particularly bothered about that because, consistent with the discussion that we had earlier about certainty of funding, actually, providing local government with more funding than it needed at any point in time was not wasted funding, because, in essence, local government funding is something that is repeated every year. So I felt more comfortable, personally, providing more money and recognising that some local authorities were overfunded than the opposite, which would have been they would have been underfunded.
And there was a judgement to be made about, if you use a formula-based approach, inevitably some local authorities will get too much and some local authorities will not get enough. And it’s about drawing that balance. And inevitably, if you’re trying to avoid one, which is local authorities not having enough, you run the risk of providing some with too many.
And we obviously had the Exceptional Financial Support scheme, which was for local authorities that didn’t have enough, but it was – the design of it was that it was exceptional. It was not to be generalised. And therefore it was important to ensure that there was enough funding in the system.
Lady Hallett: And in terms of overfunding, are you making the point that there would then be another year of funding to follow, and that overfunding would be, what, recouped or balanced out over time? Is that the point you’re making?
Mr Alex Skinner: Absolutely. So if you look at the un-ringfenced reserves that local authorities had, they rose from somewhere in the region of 25, 26 billion up to about 35 billion and have now returned to something like 30 billion. So effectively what happened was, as you say, overfunding went in and then government actually has provided significant funding after the pandemic, but has been able to reflect the funding that was provided in the pandemic in the decisions that were made subsequently about the levels of funding.
Lady Hallett: If you didn’t have the level of monitoring you did, how would you have picked up on the overfunding that subsequently transpired? Would it have been more challenging if you’d have had a lighter touch level of monitoring and returns?
Mr Alex Skinner: So you would have – eventually, you would have found the overfunding would have appeared in the official statistics. One, the official statistics are less frequent and secondly, they come with a time lag. So effectively, we would have been blind to the situation until it had come up in the official statistics. And the risk obviously then would have been not that there was overfunding but there was underfunding and then we wouldn’t have known and then we would have put delivery by local government at risk.
Lady Hallett: And we know, in contrast to the position with English local authorities, that in Scotland the Scottish Government did not collect financial monitoring returns, though COSLA did organise some of its own data collections, and the justification was that it was too onerous on local authorities, wanted them out delivering services. You’ve seen the – what happened in England and how monitoring went.
But where do you sit in terms of in a future emergency, monitoring is a good thing, or light touch, no monitoring, it can all be done by established relationships?
Mr Alex Skinner: I am very strongly of the view that monitoring was an important part of the response. That isn’t to say that the other things that you’ve described, the informal contact, the feedback from local government potentially in a more qualitative sense was not important, but I think the monitoring forms were absolutely essential.
Lady Hallett: Okay. And I just want to pick up on that point, the other thing I mentioned, because some of the local government witnesses we heard from in the Inquiry last week were keen to point out that yes, monitoring of quantitative data is important for central government to ensure engagement with local authorities, but that also there needs to be engagement with local authorities in the sense of what is actually happening on the ground. So not just looking at data, but conversation and communication.
And I just wonder, just for you to ponder on that, how would you achieve that in a situation where there are 317 local authorities in England, and it sounds like a great idea, but what’s your experience as to how that could actually translate into reality?
Mr Alex Skinner: So I agree with you, having 300-plus local authorities does make it a challenge to connect with each and every one of them. I think it’s recorded in the NOA’s report on local government finance under the pandemic that the local government finance team, and MHCLG more broadly, had contact with around a third of all local authorities. But the way that we attempted to answer that question is, from a local government finance perspective, is we set up a group who were the presidents of each of the different societies: so London treasurers, metropolitan treasurers, county council treasurers, district council treasurers, that group was a pre-existing group. It had met probably every two or three months prior to the pandemic. And then under the pandemic we met weekly or, on occasions, daily.
That was very important in terms of getting feedback from, if you like, a representative group of the sector. It’s also the case that, under the pandemic, we continued the engagement that we had with local government more broadly. So that was less – if you like, that was less systematic in the sense of we might talk to one local authority one week and another a different week.
So I think we struck the balance of having a dedicated group that we worked with intensively, and then a much broader group who we had more occasional contact with but who provided us with feedback.
I think the other thing that’s worth saying is that across the directorate, individual members of the directorate would have had connections with local government and we got an enormous amount of feedback during the pandemic about what was working and what wasn’t working.
And also, we very actively worked with local government in the design of the schemes that we were implementing. So it wasn’t just about feedback after the implementation; it was also about how – what we were intending to do and how we could make sure that we were designing it in a way that meant it worked for local government.
Lady Hallett: So as far as your department’s concerned, it seems that from your perspective, you’re getting good data through monitoring, you’re using pre-existing frameworks that tap into representatives at all different levels of local government, and you’re also having ad hoc conversations as well –
Mr Alex Skinner: Yep.
Lady Hallett: – as well as having, within the department, people who have a long experience of dealing with local authorities; is that right?
Mr Alex Skinner: Correct, and in addition to the Local Government Finance Team, who obviously would lead on finance, there were other – there were other parts of the department who, for example, led on local government engagement or resilience and emergencies, and then, as you went to the permanent secretary, the director general, there were, for example, the meetings of the regional nine. So I think, as a whole, the department had a very strong engagement with the local government sector under the pandemic. And I think that provided us with an enormous amount of feedback that we found very useful.
Lady Hallett: Okay. I want to move on to a different topic now which is, if you like, the delay that there sometimes was between the announcement of funds and the guidance then being issued that was relevant to how those funds should be used. Now, I don’t want to ask you questions about topics that aren’t within your remit, but we’ll pick this up as a general issue. You’re aware, I think, of the Covid Additional Relief Fund, CARF?
Mr Alex Skinner: Yes.
Lady Hallett: Is that right? And we understand, and I’m using this as an example, it was announced in March of 2021, but the guidance became significantly delayed, there were various iterations of the guidance, and I think the final version was dated December of 2021. So several months after the funding is or was announced.
I’m not asking you about the specifics of the scheme, but taking that as an example, what sort of challenge would that place on a local authority if they get an announcement but they don’t have the guidance at the same time?
Mr Alex Skinner: So I think they were – I think they’ve been well illustrated by the evidence that you’ve had, which is that oftentimes people who were potential recipients would say, “Well, I would really like the money so can you tell me what it is and how I claim it?” And then they would say, “Well, actually, I don’t know because I’m waiting for the guidance.”
In respect of the CARF, there was actually a very specific explanation. So I think that probably was the most delayed of all of the guidance. And the reason for that was because, at the time of the announcement of the CARF, the government said that the issuing of guidance would be dependent on the successful passage of the Rating and Directors Disqualification Bill, because essentially the CARF overlapped with the material change in circumstances that businesses were making, and so the government said: well, first of all, we need the legislation to prevent the material change of circumstances claims, and then we can issue the CARF.
So in that particular case, there were reasons why it took so long.
But your broader point, which is: were there negative impacts from a delay between announcement and guidance? Yes, I think there were impacts.
Lady Hallett: Why – I mean, that’s a specific example but in other examples there are delays –
Mr Alex Skinner: Yeah.
Lady Hallett: – between funds and guidance. Why was that happening? Was that just because of the pace at which things were moving? Was it that there wasn’t time to work up the guidance, it was more important to make the announcement? Can you just give us your perspective.
Mr Alex Skinner: I mean, if I think about the guidance that we issued, so primarily that guidance was not binding, so we were issuing non-ringfenced grants so, effectively, local government could do what it wanted. So the guidance, if you like, in those circumstances was not that material.
In the cases where the guidance was essential, I think there was a tension between making the announcement and the work that then needed to go in to work through the details. And some of that, as you say, was literally about the pace at which the work was taking place. I think some of it was also about working practices and who was able to input and work on guidance in advance of an announcement and where the announcement had to happen first, and then people could really begin to get to grips with producing the guidance.
Lady Hallett: Can I just unpick that second part of your answer. Working practices, do you mean working practices in the department or in local authorities? Just expand on what you mean, these working practices that caused that sort of problem.
Mr Alex Skinner: So in a number of cases, and I think you’ve seen this in evidence, the responsibility for the design and delivery of a grant was split. So in some cases, for example, the Treasury had responsibility for the design of the policy, BEIS had responsible for the delivery, and MHCLG provided expert input. And so in those circumstances, then if, for example, the grant was part of a budget process, then there may have been issues around who was told what and when, because of budget protocols.
Lady Hallett: And by budget process (sic) you mean the budget –
Mr Alex Skinner: Yes.
Lady Hallett: – that the Chancellor of the Exchequer –
Mr Alex Skinner: Correct.
Lady Hallett: – announces on the floor of the House of Commons. That budget –
Mr Alex Skinner: Yes.
Lady Hallett: – not local authority budgets.
Mr Alex Skinner: No.
Lady Hallett: No, okay. So that’s one example.
So where different departments were involved, one driving policy, one perhaps delivery, one as an expert adviser, that’s where you tended to see this separation, perhaps, of announcement from guidance and –
Mr Alex Skinner: Yeah.
Lady Hallett: – the scheme actually going on?
Mr Alex Skinner: So I think there are number of examples that you see in the evidence, where issues were first brought to departments, the department who would be responsible for the guidance, potentially 24, 48, 72 hours before the announcement, and so that limited the department’s ability to produce the guidance. So there was, for example, in the case of the Hardship Fund for Council Tax that we were responsible for at the beginning of the pandemic, the proposal from the Treasury came on 10 March to the department, and the announcement was on 11 March at the budget. That 24 hours made it difficult to get guidance out.
Now, under those circumstances, we did actually get guidance out within a few days after the budget, but it inevitably took us time to produce the guidance.
Lady Hallett: Now, accepting all of the reasons for that, confidentiality, speed of response, emerging situation, if you were doing all this again, what could you do to take some of those rough edges off? I mean, are there streams of responsibility that could be looked at, or aligning policy with the department that’s actually implementing? Or what would your suggestions be, having been through this?
Mr Alex Skinner: I mean, it is very hard because, you know, as you were living the pandemic, we – it literally felt that each day was bringing new issues, and so people were working at incredible pace. But my reflection would be that if – for example, as we discussed earlier, if there were another pandemic and we had done more preparation in advance, we would have a greater understanding of which levers we would use and what grants we might use, and therefore we would be able to do a lot of the work, a lot more of the work, further in advance.
I then think there is a question, which I think as government we should always ask ourselves, which is: are we applying the right level of secrecy or confidentiality? Are we being as open as we can be in the production of the policy to ensure that we can bring in people who can give us expertise and allow us to, as you say, reduce the gap between announcement and guidance?
Because if, for example, we had been brought in to some of those things earlier, that would have allowed us to have reduced the gap between when the announcement was made and when the guidance was finally produced.
Lady Hallett: I will come back to this later on in questioning, but just to pick up on some of that now, you talked earlier about you having very good levels of trust and openness –
Mr Alex Skinner: Yeah.
Lady Hallett: – with local authorities as a department, that you had pre-existing and developed even further during the pandemic.
So if that was there already with your department, was one of the difficulties really bridging the gap between your department and those other government departments? You had that relationship, but they didn’t, with local authorities?
Mr Alex Skinner: Yes, so – yes. So, ultimately, each local government department – sorry, each government department has responsibility for the policy area that it looks after. MHCLG had expertise in local government. And for the areas that we were responsible for, I think we took exactly the approach that you’ve just described.
We could then support other government departments with the expertise that we had, and with the offer of the connection to local government. And some departments had that at the beginning of the pandemic, and some took some time to develop it and developed it over the pandemic, but ultimately, that was a decision for them.
So, I think, as you’ve seen in some of the other evidence, for example on business grants, at the beginning there wasn’t such a close – one, there was a tension about how quickly the policy was developed, but, secondly, the connection between the department and local government was not as close, I think, as it was in the case of MHCLG.
Lady Hallett: I mean, generally speaking, did you tend to find that local authorities and the people you were dealing with, the representatives, these were reliable people who could be trusted? They understood confidentiality?
Mr Alex Skinner: Absolutely.
Lady Hallett: Yes. And did you ever find it frustrating that you wanted to bring them closer into the design of policy, but other departments, that perhaps didn’t have those sort of relationships or experience, were reluctant to do that?
Mr Alex Skinner: Yes. But I think I recognise why that was the case: because I think one of the advantages of the way that we had worked prior to the pandemic is we had established those relationships and that level of trust, and so that naturally flowed into the work under the pandemic. I think if you hadn’t have had that, then I think there may have been a natural caution on the part of a government department to say: well, we don’t know these actors particularly well, there are risks about being very open, there could be a leak, information could get out that was market sensitive, and so we need to be cautious about what we do.
So I think – I think part of my answer to your question would be to say there is probably only so much you can do in the heat of the moment of the pandemic. The work should be done prior to the pandemic in terms of establishing the relationship, so they are all there at the point that the pandemic happens.
Lady Hallett: That neatly brings me on to the next topic, which is essentially looking at emergency final – financial response frameworks, so how you might plan, now, to put yourself in that better position to have a framework.
The first thing I’d like to ask you is a sort of general question, picking up on the evidence we heard from Dr Leunig, who was an economic adviser at the Treasury, who favoured a sort of – to an extent, an anti-planning approach. In other words, intellectual agility is what is required, you don’t need a lot of plans and framework; you need to react to the situation.
Overarching question, are you on the agility side of the pendulum or are you on the planning side of the pendulum?
Mr Alex Skinner: I mean, I think I would – I think I would put myself somewhere in the middle.
So I think there is a very sensible amount of planning that you can do in advance. I think you can over-engineer the planning. And you’re absolutely right, you need an agility to respond. So at the beginning we talked a little bit about the component parts and the building blocks. If I were responsible now, I would want to understand the building blocks. I would want to understand the levers I was going to deploy. I would want to leave the question of which lever when, by how much, with who, open but, if you like, I would want to minimise the amount of ambiguity and uncertainty going into a pandemic, so that, if you like, I was then just left with the essential decisions which could only be answered in the pandemic.
Lady Hallett: And in fairness to Dr Leunig, I’m probably overstating his position, because I think he did go on to say and support the idea that you can plan your architecture –
Mr Alex Skinner: Right.
Lady Hallett: – you can plan your relationship frameworks and so on and so forth, but you leave the actual decisions to – reaction to what is happening on the ground. Is that where you sit, really?
Mr Alex Skinner: Yes. I think the only thing that I would add is I think processing will only ever get you so far. So I would – in addition to processes, I would also think about the culture. So what are the ways of working? How do we engage local government? What do we – what is our approach to openness? As you just described, what is our approach to risk?
So I wouldn’t just look at the “what”, I would also look at the “how”.
Lady Hallett: Right.
Now, the Inquiry understands that the department’s conducted lessons learned exercises, as you would expect, and I will come on to some of those, but do you, therefore, favour yourself having this emergency framework that can be taken off the shelf in a future emergency?
Mr Alex Skinner: Yes, I do, but consistent with the point that I just made, I don’t think it’s just about having a document.
Lady Hallett: No.
Mr Alex Skinner: It’s about how do you make that – how does that document live? So, for me, I read the – I wasn’t there, but I’ve read the documents. I think the question that it leaves for me is: okay, but what’s the engagement that you’re having with local government now in advance of the next pandemic? So that when you do pull that book off the shelf, you not only have the processes, but you also have the people and the relationships in place to make a success of the response.
Lady Hallett: Now, I suspect I know, therefore, the answer to my next question, but I’ll ask it anyway.
How important is it to have the local government association and local authorities involved at this stage, looking ahead at those issues, understanding how things might work, ensuring those relationships are there?
Mr Alex Skinner: I mean, I’m sure it’s happening, but I would say it was essential. I think that in order to prepare for the next pandemic, you have to have the key actors in the room.
Lady Hallett: Moving on slightly to central government and sort of joined-up working in central government, we’ve already touched on, in your evidence, these strong relationships you had with local authorities.
In a sense, your department is the voice of local authorities in central government; do you agree with that?
Mr Alex Skinner: I do, yeah.
Lady Hallett: You are the sponsoring department, if you like, who has this 317 local authorities. They feed in to you, and then you speak on their behalf to other central government departments.
How did you find there was – to what extent was there joined-up thinking and working between your department and the other big departments that were players here?
Mr Alex Skinner: Yeah, so the division of responsibility is that MHCLG, as you say, is the sponsor department for local government, but individual departments take responsibilities for specific policy. So I know this has been discussed before but, for example, the Department of Health and Social Care has responsibility for adult social care, the Department for Education has responsible for children’s social care, and so on and so on.
Prior to the pandemic, we had very good relationships with most departments. I would say that the strength of the relationship was proportional to the importance they played in the local government finance system. So, for example, within the Local Government Finance Directorate, we had a team that was specifically responsible for supporting DHSC and DfE on adults’ and children’s social care, and then we had nominated contacts for other government departments, for, for example, transport, waste, and so on.
So I would say that we had good links in to other government departments and good ways of working prior to the pandemic.
Lady Hallett: But if you would give yourselves marks out of 10 for how you engaged with local authorities, did you see that other departments were not receptive to engaging with local authorities? Did it vary, department to department, that some viewed them as trusted partners, others didn’t? What was your experience?
Mr Alex Skinner: I think it’s fair to say that different departments took different views about their level and the nature and engagement that they had with local government into and during the pandemic. My personal view would be to strongly encourage all government departments to develop the strongest relationships possible with local government.
Lady Hallett: Now again, that sounds like a great idea. How does it work in practice? We’re talking about central government, big machine. How structurally could you make that work, other than just saying that everybody should talk to local authorities and trust them? What could you actually do?
Mr Alex Skinner: So I don’t think I have an exact parallel but where government feels a particular thing is particularly important and worth pursuing, then they can either legislate to make it happen or they can issue guidance to government departments saying that their expectation is that it should happen. So it is not a parallel, but the family test exists, and that was a commitment from a previous government that said the family is really important, and now every government department, when you formulate policy, you need to think about the impact that it has on the family.
I’m not – I wouldn’t want to stretch that too far. That is non-legislative, it’s non-statutory. I think, in essence, it’s a “comply or explain” basis, but effectively, what it does is it pushes consideration of the family up the agenda in what can sometimes be a very crowded space.
Lady Hallett: And given your department is effectively the voice of local authorities, I suppose would that give you a bit more heft in terms of delivering their voice to other departments, if you’re able to say, “Look, you have a requirement, an obligation to think about local authorities and how” –
Mr Alex Skinner: Yes, so there are number of examples, again, they’re not parallels, but there are a number of examples where the department has exactly some leverage or some heft with other government departments. So, for example, the new burdens process, that is a responsibility that sits within MHCLG, and there is a process that needs to be gone through. It is not perfect and it doesn’t always deliver the outcomes that you might want, but in broad terms, that means that other government departments need to consider the impact of a change in policy on local government finances and their costs, and then needs them to engage in that process.
So I think what we’re talking about here, though, is something broader. Because I think again, coming back to my point, I would be nervous of just saying, “Well, there’s a new form that needs to get filled out and therefore that is the answer.” Ultimately, I think this comes down to the individuals working in the area understanding the value of engaging with local government as we did in MHCLG, I think, under the pandemic.
I think the process can be helpful, but it needs to be complemented by, if you like, the approach of the individuals concerned.
Lady Hallett: So a lot of this comes down to building relationships, changing attitudes, encouraging inclusivity with local authorities when decisions are being made?
Mr Alex Skinner: Yes.
Lady Hallett: Right. So there’s a cultural element, a government culture. Right. You’re nodding but I think it needs to be a “Yes” or a “No”.
Mr Alex Skinner: Sorry, yes, I agree with you. I think culture is important.
Lady Hallett: All right, okay.
Can we move on to playbooks that have been developed, because I think this, again, is something you’ve touched on and I want to pick up on it with you. There are two playbooks, the MHCLG pandemic playbook, and then the financial shocks playbook.
And I’m just going to ask that the part of the pandemic playbook is put up. So this is INQ000625658, pages 27 to 29, and it’s the section entitled “Local Engagement, Local Government (including Mayors).”
There we are. I’m just going to read part of this into the record:
“As demonstrated during Covid-19, local authorities played a critical role in responding to pandemics. Their local leadership, knowledge of communities, and ability to quickly adapt and design services to meet local needs puts them at the forefront of response.
“From public health protection, to economic growth, the expertise of local authorities is vast, meaning they can help tackle the full range of potential impacts on local people, places and the economy.”
Just pausing there, those are all things that your department knows very well already; do you agree?
Mr Alex Skinner: Yes.
Lady Hallett: And in terms of wider government and culture and relationships, I mean, really, that’s the message that other departments could do with understanding; is that fair?
Mr Alex Skinner: I would support that, yeah.
Lady Hallett: So that’s just not an important lesson learned for your department; it’s an important lesson learned for all government departments, how effective a partner local authorities can be?
Mr Alex Skinner: I would hope that any playbook from any government department which touched on local authorities would have similar text.
Lady Hallett: Yes, and then if we can have the next section please:
“For any future emergency response MHCLG will have a key role in emphasising to OGDs [other government departments] the importance of early engagement and co-design with local authorities, particularly where it is possible that local authorities will lead or support delivery.”
Just pausing there, again, that sounds great, but I mean, that’s saying what you should do. It doesn’t actually tell you how you would do it, does it? I mean, isn’t it the “how” that’s important?
Mr Alex Skinner: I agree the “how” is important. I think if I was being – the other thing that I would pick out is I would – this is not about the actions that are taken when the pandemic happens. I strongly believe these are actions that need to be taken in advance and considerably in advance, because culture is one of the slowest things to change, ways of working, and so what I would be suggesting – and I’m sure that it is in government now – is that I would be taking this and I would be making – I would be doing this now, so that when we got to the point of the next pandemic, all we were doing is we were just strengthening and building on relationships and ways of working and processes that we already had. We were not creating new ones at the point of the pandemic.
Lady Hallett: So these should not be aspirations for what you do once there is a crisis; this is what you should be getting on with doing now to make sure that when a crisis occurs, everything is in place?
Mr Alex Skinner: Absolutely.
Lady Hallett: Right. Can you think of any benefit to not including local authorities in the design of this playbook, and inviting them to contribute to writing a playbook like this?
Mr Alex Skinner: So there may be some sensitivities about some of the information in the playbook but I think I would return to the point that I made earlier, which is: we should really challenge ourselves. Every time we say there’s a sensitivity, we should challenge ourselves to understand whether it really is a sensitivity. My personal preference would be to be open. It may be that ultimately local government wouldn’t see all parts of every playbook, but I think your general point, which is should local government be involved, and should it understand in broad terms what the playbook is, I think the answer is yes, because I think part of the success would be to have a shared understanding going into a pandemic of what was likely to happen, and I think that’s difficult if you don’t share the playbook.
Lady Hallett: Yes. I mean, you’ve stressed earlier in your evidence how important having open and trusting relationships with local authorities are, and one view is that not engaging them in the design of a playbook for future emergencies might tend to undermine a sense of openness and trust. Do you agree with that as a general proposition?
Mr Alex Skinner: Yes, subject to my point about there may be very good reasons on occasions not to share all of the playbook because of particular sensitivities, yes, I agree with that.
Lady Hallett: And I don’t want to overstate what you are saying, but I apprehend you’re making the point that you should, as the department, challenge yourselves as to: is this really sensitive? Is there actually a need to keep this private and not involve our partners in local authorities? Is that how you would approach decision making: self-challenge, can we actually share this?
Mr Alex Skinner: I mean, I personally find it a good way of working. I think what it does is, I think sometimes we are overly cautious as a government about what we share with other people because we’re nervous about the consequences. And I’m not saying there are times when it is absolutely right to be cautious and we can’t share information, but I would encourage local – I would encourage sharing information with local government. And I think the other thing, returning to the point that we discussed earlier, is under the pandemic, we demonstrated that we could work with local government in a very open and transparent way, and they respected that confidentiality.
So under the – in the entirety of the pandemic, we did not have a single occasion in local government finance, where stuff that we had discussed with local government and asked to be kept confidential did not remain confidential. So I am confident that if you ask local government to respect that confidentiality, they would respect that confidentiality, because ultimately this is to their benefit, and they know that if they don’t respect that confidentiality, then one of the consequences will be they will not be involved in activities like this, which are crucial to them.
Lady Hallett: Thank you.
I’m going to move on from playbooks, only because I want to cover some other ground with you.
Mr Alex Skinner: Right.
Lady Hallett: I think you’ve made, if I may say so, under that playbook, the points that I was going to ask you about. So let’s move on a little to business grant schemes.
And I just want to really, through the prism of business grant schemes, pick up this point a little further about engagement, and engagement with departments other than your own.
Now, the Inquiry has heard from the Local Government Association and local authorities a more critical analysis of the way that the Treasury and the department of business engaged with them during the economic response, as compared to your department. And we’ve picked up this point that you’re the voice of local authorities in central government.
Were you doing your part to try to persuade those other departments that they really needed to engage during the emergency, or was it not really working like that because things were happening so quickly there wasn’t the time?
Mr Alex Skinner: So, where we knew about something, we would have made the point about the value of engage – well, I think there are two things.
One is, under any circumstances, we would have taken the knowledge that we had of local government and represented local government and made the points about, for example, the potential design implications of a particular proposal and whether it would or wouldn’t work in local government. So we would have done that under all circumstances.
It’s also the case that we would have, as a matter of course, encouraged another government department to engage with local government.
I think you’re right, I wasn’t personally involved in the business grants in great detail, but having read the evidence, it’s clear that there was enormous time pressure and that at some points information was shared with BEIS at a very late stage, which then made them engaging with local government more difficult than it otherwise would have been.
Lady Hallett: Is there any element here of a sort of pecking order of departments? That the Treasury is an extremely powerful department, and your department, in comparison, wasn’t as powerful, and therefore there’s a sense in which it has to be subservient to the Treasury? It isn’t, sort of, willing to stand up for itself? Is that your experience?
Mr Alex Skinner: No, no. I think where we had engagement with the Treasury, and I know that we did, and where we that concerns and where we knew about them and shared them with the Treasury – we would have shared them with the Treasury. There were circumstances where those concerns were acknowledged but were not actioned. But I think they – I think we were always effective in representing local government under the pandemic. But ultimately, the decision about the design of a scheme or the implementation of a scheme would have sat with the relevant department.
Lady Hallett: I just want to pick up a specific example of – really linked to this point. And I preface this with I don’t think you’re on this email chain, but I just want to use it to illustrate the point.
Could we have INQ000661243. And this is an extract from an email:
“My initial thinking was also that this would be easier if we gave LAs more discretion. But perhaps with some guidelines about what kind of criteria we think they should use.
“Any thoughts about how we could be more specific about what we think LAs might be able to do/achieve? Whether they would welcome the funding, or criticise us for expecting them to do the impossible? Do you know if we did anything like this in the past …”
And then, underneath, can we see there at 5.12 there’s a reply:
“… ‘I think it’s hard to call how they [local authorities] would react. I think the more cumbersome you make it and the more pressure you put on LAs to do it quickly the harder it will be. New burdens funding might grease the wheels’ …”
If you were being critical of that conversation, you might say: well, rather than wondering how they might react, or wondering how they might find it, just ask them.
And I just wonder, do you think sometimes that there wasn’t an approach whereby this rich resource of experience was tapped into? There was a sort of an assumption, “Well, we’ll make the decision and see how it lands”, rather than just asking them. Is that typical or not?
Mr Alex Skinner: I mean, if I remember rightly – so, in this specific case, as you say, this was a Treasury policy. So this would have been subject to Treasury protocols and ways of working. This was in the run-up to the budget, so it would have been covered by budget processes. We had a long-established way of working with the Treasury on that, which is effectively we provided them with, if you like, expertise but we did not – we did that on a closed list. So we were not at liberty to engage local authorities.
I think it’s also the case that 7 March 2020 was a Saturday, and this was for the budget on the following Wednesday. But your general point, which is, would injecting – so I think, remembering the other things on this list, I think what you did see is that officials from MHCLG did share what they thought the impact on local government would have been. So the first role I talked about.
Lady Hallett: Yes.
Mr Alex Skinner: The bit that I think you are saying is: well, were local government involved?
I think in this case they were not.
In principle, do I think it is good to involve local government in the development of policy? Yes.
In this specific case, would it have been possible and appropriate?
Without getting into the details of the particular case, I wouldn’t want to say, because, as I say, this was done in the run-up to a budget; I don’t know what else was being discussed and therefore how appropriate it would have been.
But I think, looking ahead, if you like, one measure of success would be that we didn’t have an email like this in the next pandemic, because we would broadly understand the systems, the levers that we would be using, and therefore we wouldn’t need to be having a discussion like this.
Lady Hallett: Putting it bluntly, I might ask you: do you think that sometimes process got in the way of common sense? The need to follow government process and procedure got in the way of the common sense of just picking up the phone and asking the question?
Mr Alex Skinner: So I would hesitate to say that. I think what I would say is my principal position is that the involvement of local government is a good thing and will improve the quality of the policies that we are making.
So, I would – in principle, I would always say that local government should be involved. Taking that circumstance by circumstance, you need to understand precisely what was happening at the time.
Lady Hallett: And presumably, Mr Skinner, you would say HMT are likely to say it wasn’t just process; there are good reasons why you have a tight circulation list when it comes to a budget and the impact on markets and the like?
Mr Alex Skinner: Yes, that’s absolutely true but, for example, prior to the pandemic, the Treasury had been considering reform of the business rate system and they had established a working group in a run-up to a fiscal event which involved certainly representatives of the sector, I can’t remember exactly which local authorities or which representatives they were, but they had established that.
So I think my point would be consistent with my point about we should challenge ourselves about exactly when and where we say it cannot be discussed, do we genuinely mean that? And sometimes there is a trade-off to be made. I am confident in them respecting the confidentiality. I think then the question is: well, what is the benefit in involving local government? And I think we’re saying they can bring a lot to the table.
Mr Wright: You mentioned earlier in your evidence a panel that already existed that representatives from different types of local authority.
Mr Alex Skinner: Yes.
Lady Hallett: I mean, accepting you can’t speak to 317 local authorities, is there a role for that sort of panel in a much more reactive way? So when a policy is being worked up, that that panel can come in and provide advice and guidance and help you in terms of how it might land?
Mr Alex Skinner: So that is exactly what we did, in the directorate that I was responsible for, that’s exactly what we did. So the monitoring form, a lot of co-production. As we thought through the tranches and the various sales, fees and charges scheme, the local tax guarantee scheme, the exceptional financial support scheme, that is exactly what we did.
I think one of the advantages for us in those circumstances was we were responsible both for the design of the policy and the implementation of the policy, so we brought those two things together. So, if you like, we internalised some of those rough edges that you talked about previously.
Lady Hallett: We’ve heard in another context that where Treasury and HMRC, for example, were responsible for policy and delivery –
Mr Alex Skinner: Yes.
Lady Hallett: – so they could bring those two things together, things tended to land much better where policy and design was brought together. So that’s what you were trying to do. Where it was in your gift to bring local authorities closely into the delivery of policy, you did. Is that the position?
Mr Alex Skinner: Absolutely.
Lady Hallett: Right. Can I move on to another topic, which is league tables. Now, this was April 2020. Data being published by central government regarding the proportion of allocated funds that had been paid out to business by local authorities. It became known to some as a league table, if you like.
Mr Jenrick, in his statement, INQ000661484, at paragraph 80, says:
“My view is that a league table was both appropriate and helpful. The grant schemes were of little use if they did not find their way quickly to the business which needed their support. As above, there was a real risk that without support, businesses would simply disappear from local communities …”
He goes on:
“That would have been disastrous for those directly involved, and if at sufficient scale for LAs as well.”
Now it may be that you agree completely with the balance of that paragraph, but do you agree with the first line of it: that league tables were appropriate and helpful in achieving that which followed? Or preventing that which followed?
Mr Alex Skinner: So I think that the way the information presented was subject to significant discussion, and a lot of that discussion was to avoid it being seen as a league table. I think – I understand why the table was produced. In fact, people who worked for me did the calling to find out the answer. I think, as I said in my statement, while the intent is entirely understandable, which is to bring transparency, to understand the performance of different local authorities, the important thing is then to match that with the understanding of why different local authorities were paying out the money at different rates.
So there were reasons that some local authorities were quicker than others. So first of all, it was based on an estimate, it depended on the proportion of businesses that you had the data for. It depended on the degree of checking that you were doing in advance. So I think my addition to this would be to say: I understand why there was a league table, I understand the benefits it could deliver. I think in having – sorry, not a league table, in having a publication of the information, the important thing is to match that with the data and the explanation of why that is the case, because otherwise I think the risk is that, for each local authority that you correctly identify has or hasn’t paid out grants, you have another one for whom there are very good reasons that they perhaps haven’t, and that explains why they are taking longer, or vice versa.
Lady Hallett: Well, we heard some evidence from Leicestershire council about the diverse nature of business in their area, the number of businesses –
Mr Alex Skinner: Yeah.
Lady Hallett: – and so on and so forth, and that it was never going to be fair to compare their delivery of support to a neighbouring council that might have a fraction of the businesses and a much more straightforward set of businesses.
So is this the danger of unintended consequences, really: it looks like a league table and people are being rated and criticised for not coming higher up the league, and that’s not necessarily going to be fair?
Mr Alex Skinner: Yes, and I think, at the time, local government was trying to do a lot of things and so, was the – I think the question is: was the benefit of the publication of this information without the explanation which then led to a criticism of local government, some of it justified, some of it not, do I think that there were costs to that? Yes. Do I think that could have been helped by taking an approach where more information was provided alongside the numbers, which explained why local authorities were doing it? Yes, I think it would have done.
Lady Hallett: I mean, the danger, presumably, is that people who really are doing their best in difficult circumstances feel demoralised and feel that their efforts are being misrepresented by the crude statistic?
Mr Alex Skinner: Yes.
Lady Hallett: Right. Which presumably isn’t a very good thing for this spirit of openness and trust that’s so important to exist between the department and those delivering?
Mr Alex Skinner: Yes, but at the same time, I would say that the value of this publication is it did allow us to then marry this information together in – within the department, and then I think that did help us, because we could talk to individual local authorities and understand what the challenges and opportunities were, whether they could get the funding out more quickly. And I think overall, the intent was to get the money out as quickly as possible, and so actually, having that understanding was helpful.
Lady Hallett: So the data was helpful, the purpose of gathering the data was helpful, but there was the unintended consequence of how it was presented, essentially?
Mr Alex Skinner: (Witness nodded)
Lady Hallett: Is that fair?
Mr Alex Skinner: I think it – I think what I would say is the – having the information was helpful, making sure that you did not just rely on the raw data, but you also understood the drivers behind the performance was important to have a full understanding of what was going on with individual local authorities.
Lady Hallett: If you looked ahead to the delivery of grants that the Department of Business and Trade was, as it now is, would be responsible for, their forward-looking lessons learned and their playbook acknowledges that local authorities are going to remain a critical delivery partner, and encourages engagement, but again, can you give us any insight as to how, it sounds great, how that should actually happen, in terms of how they should be engaged by other departments?
Mr Alex Skinner: I mean, on the specifics of pandemic preparedness, I think it would be valuable – and I know this is happening – to run exercises about a potential pandemic that involve local government, to make sure that they are involved.
But, as I say, I think processes only get you so far. It’s then building the relationships and having the relationships with local government that means that you then really understand both the world of local government, and you appreciate the value that they can add.
Lady Hallett: Right. I’m going to move on now to sort of general lessons learned and reflections for the future in the time we have available, because I want to give you an opportunity to share any particular reflections you have, and best learning, having managed these relationships, been closely involved in them.
But just picking up on that last point, I was going to ask you about the experience we’ve heard in Wales. Now, obviously there are less local authorities, but we understand that, in Wales, there is something called the Finance Sub Group of the Partnership Council for Wales, which is a regular forum for engagement on finance. It existed before the pandemic, chaired by a minister, nine council leaders sitting on the group, nominated by the Welsh Local Government Association.
And if you look at reported surveys – I’ll just ask if this is put up. INQ000653255, thank you. Paragraph – there we are.
“Almost three-quarters of English local authorities … thought that central government engaged not very or not at all well with local government in the design and implementation of business support schemes. By contrast, 86% of Welsh authorities felt that [the Welsh Government] engaged very or fairly well with them.”
Now, accepting there’s a scale difference here, significant scale difference, in terms of the numbers of local authorities, is there learning that you can draw from that experience, in terms of having a pre-existing engagement group? Or would you say, “Well, we’ve got a pre-existing engagement group but we’re just dealing with a lot more local authorities”? Or how do you bridge that gap?
Mr Alex Skinner: So I think the Partnership Council and the Finance Sub Group were ministerial, and political, so they were ministers and local politicians. We do – we do not – as far as I’m aware, we do not have or at least we did not have the same statutory equivalent in England. That does not mean that local – that local government and ministers didn’t speak frequently. They did. But I think your scale point is very important, because, in essence, you could fit the whole of Welsh local – you could have every leader of a Welsh local government – you could have a Welsh council in a large table. If you wanted to have the English equivalent, you would need to hire a conference centre. So, by definition, I think that does make it more difficult. And as we’ve described, at an official level, I think we just had to have engagement with a selection – or a sample of, rather than the population of.
But this, I’m afraid I don’t – I wouldn’t want to speculate on this, because I wasn’t involved in business grants, as you know. So I wouldn’t want to comment on the details of why these numbers were these numbers.
Lady Hallett: All right, thank you.
So, Mr Skinner, thank you. Those are the things I wanted to cover. Do you have any additional reflections or learning that you wanted to share with the Inquiry that we haven’t – (overspeaking) –
Mr Alex Skinner: I think we’ve touched on a lot of it. I think one thing that came up last week was this tension between consultation and speed of delivery, and I wanted to reflect on the fact that it comes back to a point that we have discussed, which is, yes, in a literal sense there is a tension, because if you’re having some consultation, then, however long that consultation lasts, means that you can’t do it.
But in practice, do I think that meant that consultation was not possible? I do not. I think that the key question was to design the consultation in a way that was consistent with the timescales that you were working to.
So on a number of occasions I had to have relatively brief conversations with individual representatives of the sector because it was a Sunday morning and the policy that was being discussed needed to be ready for Monday. I think that added value. And I don’t – what that meant is I couldn’t have done a full consultation as we would have done in times that were out of the pandemic, but I think it added a lot of value nevertheless.
Mr Wright: Thank you very much.
My Lady, those are my questions. I don’t think there are any other questions.
Lady Hallett: There aren’t.
Mr Skinner, you talk about consultation adding value, your evidence has added value. Thank you very much indeed. You’ve been extremely helpful and I’m very grateful to you and of course also to you and your colleagues for what you did during the pandemic. So thank you very much indeed for your help.
The Witness: Thank you.
Lady Hallett: I shall take the break now and return at midday.
Mr Wright: Thank you, my Lady.
(11.45 am)
(A short break)
(12.00 noon)
Lady Hallett: Mr Wright.
Mr Wright: My Lady, can I check again that you can see and hear us in the hearing room?
Lady Hallett: I can, thank you.
Mr Wright: Thank you. Then I call Sir Charles Roxburgh, please.
Sir Charles Roxburgh
SIR CHARLES ROXBURGH (affirmed).
Questions From Richard Wright KC, Lead Counsel to the Inquiry for Module 9
Mr Wright: Sir Charles, you are the former Second Permanent Secretary to His Majesty’s Treasury; is that right?
Sir Charles Roxburgh: Correct.
Lady Hallett: And you’ve provided a statement to the Inquiry and I’ll give the reference, INQ000659746.
We understand, Sir Charles, that you joined the Treasury as Director General of Financial Services in 2013, before becoming Second Permanent Secretary in July of 2016, a position you held until June of 2022; is that right?
Sir Charles Roxburgh: Correct.
Lady Hallett: And as Second Permanent Secretary, you were the second-most senior official in the Treasury during the pandemic; is that right?
Sir Charles Roxburgh: That is correct.
Lady Hallett: The First Permanent Secretary at the time was Sir Tom Scholar, but your obligations and duties were to oversee the department alongside Sir Tom Scholar; is that right?
Sir Charles Roxburgh: That is correct.
Lady Hallett: And you were a member of the Treasury’s Executive Management Board, sometimes abbreviated to the EMB, which set the strategic direction of the department; do you agree?
Sir Charles Roxburgh: Correct.
Lady Hallett: You had oversight of various functions within the Treasury in addition to that; is that right?
Sir Charles Roxburgh: Yes, I should clarify that my policy responsibilities focused on what are called the economics ministry functions within Treasury. That comprised five directorates, two of which were focused on financial services, and three of which were focused on the enterprise and growth agenda for the Treasury. So that was five of the 15 policy directorates were the ones that I was involved with in terms of policy development and advice to ministers.
Lady Hallett: Thank you.
And you, in your capacity as Second Permanent Secretary, worked closely with all of the Treasury’s director generals; is that fair to say?
Sir Charles Roxburgh: In management terms, yes, but not in policy terms.
Lady Hallett: Yes. Management, not policy.
And the Treasury generally, whilst it is a powerful department in government, it’s actually a relatively small department; is that right? Quite close knit?
Sir Charles Roxburgh: Correct, it’s about 1,700 people, and at all times I found it a very collaborative and inclusive group, and we were a very strong and unified senior team throughout all my time there but particularly through this difficult years of the crisis.
Lady Hallett: Indeed, you set out in your statement how, in your view, officials worked effectively and constructively as a close team?
Sir Charles Roxburgh: Absolutely.
Lady Hallett: Right.
The first topic I’d like to ask you some questions about, Sir Charles, please, is transparency and engagement. And I preface these questions by accepting, or the questions accept, that there are circumstances in which the Treasury needs to be guarded in terms of information it will share. That’s either because of market sensitivity, because there may be a budget or another fiscal event. So there are certain limitations to the ability of the Treasury to be transparent even if it wanted to be. All right? So I take that as a given.
But notwithstanding that, the Inquiry has received evidence about concerns that the Treasury did not engage as widely as it could have done at times, and sometimes was not particularly open, and the Inquiry’s expert, Dr Tetlow, in her report has described the Treasury as often being guarded in the way it shares information and intelligence with other departments and the wider world.
Now, just pausing there, did you accept that description that the Treasury is guarded in that way? And if you do, is that for the reasons that I’ve prefaced at the start of the questions, or for other reasons?
Sir Charles Roxburgh: Well, having spent most of my career outside the Treasury and now having left over three years ago, I think I can bring a degree of objectivity and detachment in my perspective on this issue. And I can talk with most conviction and with specific evidence in relation to those areas in which I had direct personal involvement. And based on that evidence, I believe that Treasury worked very well with other departments and we were not guarded and we were not secretive. We actively sought out to work collaboratively with other departments.
We reached out for expert input from across government and outside of government and I’m happy to give you multiple examples of how we worked constructively with other departments, with other arm’s-length bodies, and with our delivery partners such as the British Business Bank and the Bank of England. And I think we worked very collaboratively with all those, and I was very pleased to read in their witness statements that my colleagues in those other departments and arm’s-length bodies also said that their relationships with the Treasury were generally open and productive.
Now, inevitably, there were some times where in the urgency of a crisis, some information wasn’t shared as quickly as some of our colleagues in other departments might have wanted, but this was a crisis where things happened at rapid speed and Chancellor was making decisions very rapidly.
So there were some times when people felt that they weren’t fully in the loop, but that was never deliberate, it was never our intention, and my overall conviction is that from my experience, the Treasury worked collaboratively with all our colleagues across government and in arm’s-length bodies.
Lady Hallett: So from your perspective, if others have formed the view that the Treasury is guarded in its engagement with others, that isn’t a view that you share; if it’s an impression that’s created, it’s not one that you meant to create?
Sir Charles Roxburgh: I cannot argue about what other people may have perceived. That is their perceptions. What I would say is that I would not accept a general description of the Treasury as being secretive and guarded because in my direct personal experience that was not how I experienced and not how my colleagues elsewhere in government experienced working with me and my teams on many issues, and many of my other colleagues.
And I think there are multiple examples of really great collaboration across government and with delivery partners.
In fact, Dr Tetlow, in another report she did for the Institute for Government, called out how well the Treasury worked with delivery partners such as HMRC and the British Business Bank.
Lady Hallett: And indeed, we’ll look at some of those relationships, and the Inquiry has heard evidence that, in particular, in terms of the policy partnership that existed between HMRC and the Treasury, there was a very constructive working relationship. So please don’t proceed on the basis that we’re not picking up the good examples of close working.
Sir Charles Roxburgh: Could I just mention that the policy partnership is a very specific relationship between HMRC and the Treasury. That is not the only example of where we had really good working relationships with the Bank, with the British Business Bank, with UK Export Finance, with UK Government Investments, and with multiple government departments. So I would not accept that you need to have a policy partnership in order to have a good collaborative relationship, because we had many such good, collaborative relationships with multiple departments and multiple arm’s-length bodies.
Lady Hallett: When it comes to economic policy, do you accept the proposition that the Treasury, is, in terms of setting economic policy, closed off?
Sir Charles Roxburgh: It is a longstanding principle of the British Government dating from the days of Gladstone, that the Chancellor of the Exchequer is the key cabinet minister with responsibility for economic policy making. Now, on many specific issues around economic policy, which is a very broad topic, advice would go to the Chancellor from Treasury officials having worked very closely with colleagues in other departments. But the ultimate decision maker on the government’s overall economic policy, and this has been true throughout modern British economic history, is the Chancellor of the Exchequer working closely with the Prime Minister of the day to implement the government’s economic policy.
Lady Hallett: And really, I think you’ve answered the next question, which is that if there is a sense in which economic policy is closed off, that it sits with the Chancellor, that’s because that’s where it sits as a matter of fact? The Chancellor is responsible for setting economic policy, ultimately; is that right?
Sir Charles Roxburgh: That is how our British system of government works, yes.
Lady Hallett: Exactly. So if that’s the perception, it’s correct –
Sir Charles Roxburgh: But I wouldn’t want you to think that we developed policy in isolation of other departments. There were many major policy issues that I worked on where the advice went to the Chancellor and was included in, for instance, a budget statement, where we had developed that advice working collaboratively with the Bank of England, with the British Business Bank, or with the Department of Business or Department of Transport, depending on what the policy was. We worked very closely with other colleagues to develop the policies, although the decision maker on those economic policies was the Chancellor of the Exchequer.
Lady Hallett: Now, Sir Charles, we know that during the pandemic, and for many years, you kept a personal diary, intended to be entirely private, of course, but you have properly shared it and extracts with the Inquiry. It is a typed document. But I just want to put up one of those extracts which goes to this point because I think it makes probably the point you’ve just made.
So this is INQ000549339, page 97.
And we see there, in that paragraph – this is from 4 June 2020:
“Everyone wants to contribute to economic policy making but the reality is that [the Chancellor of the Exchequer] controls it – that’s why it’s fun to be in the Treasury and if you want to do economic policy making, that’s the only place to be.”
Sir Charles Roxburgh: Well, I’m happy to answer your question on this, but if I could just maybe go back to your opening statement about my private diary and put that in context?
Lady Hallett: Of course.
Sir Charles Roxburgh: I did keep a personal diary during this period. It was intended to be an entirely private document. I had not shared it with anyone until I started preparing my witness statement for this appearance. I had no intention of publishing my diary. It was, I had hoped, an entirely confidential document written by myself and no one else.
As I wrote in my witness statement, these entries were written late at night, often after long and stressful days. They lack perspective, distance, and balance and have never been checked or verified. They reflect my views in real time. Many of those judgements now look mistaken or poorly informed.
And when we return to future extracts from my diary, I may well return to that statement because, as I say, it’s a private document and I put in my witness statement I do not consider it a reliable source of evidence for this, but that is for the Inquiry to decide.
Now, going to this specific question, yes, this comment here reflects, I think, two things: one, it was an enormous privilege to work at the Treasury throughout my whole time there. It was incredible to be able to work with the Chancellor of the day in providing advice to shape British economic policy. It was an extraordinary privilege. And yes, if you want to do that, you should be in the Treasury. Just as if you want to advise on foreign policy, you should be in the Foreign Office. Or if you want to advise on transport policy, you should be in the Department for Transport.
So, at one level, this is a statement of the obvious: that the Chancellor of the Exchequer is the ultimate decision maker on economic policy, and if you want to advise the Chancellor, you should be in the Treasury.
Lady Hallett: Well, the reason, Sir Charles, I’m drawing attention to this entry and have asked you questions about the economic policy and the Chancellor’s function, is really to allow you to make the point that you just have: that the Chancellor is, as a matter of our constitutional settlement, responsible for setting economic policy, and therefore, as you have made clear, if there is a sense in which it’s closed off and the Treasury makes policy, that’s because that’s what it’s there to do, that’s what the Chancellor’s responsibility is. Is that the position?
Sir Charles Roxburgh: I wouldn’t accept your “closed off” point, but I would accept the point that the Chancellor is the ultimate decision maker on economic policy.
Lady Hallett: And as I’ve said, there may be very good reasons why, from time to time, the Treasury can’t share information, examples might be risks of market abuse, risks of leaks, other reasons of constitutional significance.
But do you agree that there were times when there was area for improvement in the sense that the Treasury colleagues could have communicated better the direction of travel and what the Treasury was doing, and, second part, explain from time to time why you couldn’t share information for those sorts of reasons?
Sir Charles Roxburgh: Well, if I could pick up one of your points about whether having market-sensitive information meant that we couldn’t share it with other departments, in fact that is not the case. I dealt with some extremely market-sensitive information concerning specific companies that were facing financial distress, and we worked on those very confidential cases, collaboratively with the relevant department, the Department for Transport, Department for Business, or the Ministry of Defence, and we had insider lists covering those departments with people who could have access to the information. And in those cases, most of my colleagues on EMB did not have access to that highly confidential information.
So that is an example of where we absolutely did share confidential information with colleagues across government, because they needed to know. I did not share it with colleagues in Treasury who did not need to know. So I think that illustrates that we really did work across governmental boundaries in departments when we needed to.
To your point as to are there specific areas where we could have communicated better, it is always an easy conclusion to say we could have communicated better. When I think of the loan programmes that we worked on very closely with the Department for Business and the British Business Bank, I think we communicated very well. In the early days, things were moving incredibly fast. To illustrate that, the Chancellor made the decision to launch the first loan product. He made that decision on the evening of Sunday, March 8, and it was announced in the budget of Wednesday, March 11.
I immediately confirmed to my colleagues in the British Business Bank and BEIS that the Chancellor wanted to make this announcement. So it was a very tight timetable. And maybe some people in those departments felt that we could have told them sooner, but we didn’t have a decision until Sunday evening before the budget.
So could we have done better? Possibly. I cannot think of specific instances where I felt we really dropped the ball on these programmes that I was working on.
Lady Hallett: The reason I ask the question, Sir Charles, is because you’ve dealt with it in your statement at paragraph 11.5, when you identified yourself areas for improvement, and said that senior colleagues in the Treasury could have done a better job of communicating with senior colleagues in other departments.
And also you said – and explained why there were limits in your ability to share information more widely, and you gave the example of the risk of market abuse –
Sir Charles Roxburgh: Yes.
Lady Hallett: – from sharing material price-sensitive information, or breaking confidences ahead of a major announcement.
Do you stand by that part of your statement and accept that, for what are good reasons, you could not always share information, and do you stand by that part of your statement –
Sir Charles Roxburgh: Yes, and in fact when we –
Lady Hallett: Can I just finish the question?
Sir Charles Roxburgh: Sorry.
Lady Hallett: Do you stand by that part of your statement that also says you could have done better at explaining to other departments why there might be reasons not for sharing information in those sorts of circumstances?
Sir Charles Roxburgh: Yes, I said I can – it’s always possible to communicate better. And when we talk later about the working group, the Economic and Business Strategy Review Group for permanent secretaries, that group we should not share information with, because it was not on a need-to-know basis, it was not relevant to them.
So, yes, I stand by that, and I’m sure we could always communicate better. What I found, though, with the departments that we worked really closely with: Department for Business, Department for Transport, in particular in this crisis, they fully understood those constraints, because they were working with us on a number of areas. But I think more broadly, for colleagues who weren’t working with us on these issues, that’s probably where we could have done better.
Lady Hallett: So there might be a department that had a particular interest in a particular company, to take an example. It would know about this sensitive information, you would work closely together, information would be shared. But there might be other departments that wouldn’t have that sort of close relationship and you might have, in those sort of circumstances, been able to explain better why there was sensitivity; is that fair?
Sir Charles Roxburgh: Yes. And if someone had asked me, I would have explained.
Lady Hallett: Yes.
Now, can we pick up, then, the Business Economic Response Strategy Group, which you did establish; is that right? And it consisted of permanent secretaries from other departments. Could you just explain why it was established, what its purpose was?
Sir Charles Roxburgh: I did not establish it. It was established by the Cabinet Office and it was established at the beginning of April. At that stage – and this was about – a few weeks into the crisis – the Cabinet Office set up three groups. One was a ministerial decision-making group, the Economic Business Response Implementation Group, EBRIG, and that group was supported by a group of officials who prepared the papers for that group. And separately, they created a permanent secretaries forum, which was called the Economic and Business Response Strategy Group (Permanent Secretaries), and that was set up by the Cabinet Office and they asked me to chair it.
It was intended to be a forum for permanent secretaries of – with responsibilities for different sectors of the economy, and it was the idea to meet in an informal setting to share information and intelligence about what they were seeing in the economy.
It was not a policy formulation group; it had no defined outputs; it did not make any recommendations; it did not link into the ministerial decision-making group, EBRIG as it was called; it did not review and approve advice to ministers. It was simply an opportunity for senior colleagues to share views as to what they were seeing in the economy.
Lady Hallett: And I think you say in your statement that you found it was not a particularly effective forum, and attendance petered off, really, over the summer of 2020, and the group was stood down; is that right?
Sir Charles Roxburgh: Correct.
Lady Hallett: And I am just keen to explore why it wasn’t a particularly effective forum. Is your view really that having meetings where you simply share information, just leads to meetings for the sake of meetings rather than decisions actually being made and things being progressed?
Sir Charles Roxburgh: Well, early on I think it was helpful, and I was keen to make it a success, and to make good use of my senior colleagues’ time, and I think some of the early discussions were helpful. But over time, the usefulness did decline, and I think that was because just information sharing is quite an expensive way to spend time, and there are other fora for information sharing, Wednesday Morning Colleagues, and the cabinet secretary meetings as well.
So the lessons that I drew out from that, similar to yours, were that meetings to share information have a limited usefulness and should not be duplicated, and we had multiple meetings to share information by this stage.
And secondly, if you want to get senior people together, they need to have an output: something they need to work on together and have a deliverable. This meeting did not have that.
And third, in a crisis, it’s good to set up new structures but it’s also good to shut them down when they finish their purpose. And so I do not see it as a problem that this meeting finished its usefulness and we didn’t restart it. That’s just the way things work in a crisis.
Lady Hallett: So it’s good to test whether a new structure can add value, new fora can add value, but if it doesn’t, it’s right to shut it down because it’s a drain on your time and resource, really?
Sir Charles Roxburgh: Yes, and my senior colleagues had made that decision themselves because they stopped attending in person and started to send delegates.
Lady Hallett: Yes, because they’re picking up the information that was being shared through other fora that they’re attending or have delegates attending in any event. Was that what you were finding?
Sir Charles Roxburgh: Yes, permanent secretaries are extraordinarily busy people at any time, particularly this time, and appropriately were prioritising how they spend their time.
Lady Hallett: Now, you said earlier that obviously you can’t speak for others, and their perception of how the Treasury operates. We’ve heard evidence that the perception of some others is it wasn’t particularly open and collaborative; you disagree with that strongly. There we are.
But let’s look at this the other way: it’s very easy for people to say you need to be more open and collaborative, sounds like a great idea. I’m more interested in whether you have any reflections about going forwards, whether there were other forums that could have been established, other means of communication that weren’t tried and tested, or do you think you went through different iterations of groups and setting up foras and then closing them down again, and – where do you sit with that?
Sir Charles Roxburgh: Well, I, in a long career in the public and the private sector, I have learned that what’s really effective in organisations is not the formal structures, the formal mandates to force cooperation, the documents to say department X should cooperate with department B, what really matters is personal relationships. And therefore, what I tried to do with my teamwork teams at the Treasury, and they were really good at this, was to encourage them to build broad external networks outside of the Treasury, across Whitehall, or in industry, depending on what the focus of their policy area was, and to build those personal networks of relationships which are valuable in good times, but in a crisis, are absolutely invaluable.
And so to give you an example of where I think I could have done better at building those networks was with the devolved administrations, which I know is an area that you are interested in. And that although we had some formal meetings with officials from the devolved administrations, and in fact together with the permanent secretary at BEIS, we held two briefing sessions for senior officials from the devolved administrations, and in early ‘21, I held a round table for Scottish CEOs. What I didn’t have in either the Scottish or the Welsh civil services were any senior colleagues that I knew personally that I could pick up the phone to.
I did, in Northern Ireland with Sue Gray, who was the permanent secretary of the economics ministry there. And so when Sue faced a problem, she could pick up the phone and I could link her to the right team in the Treasury to get it fixed. I never had a call like that from Scottish civil servants or from Welsh civil service. So is the answer to that more formal structures, more coordinating committees? I think not. In retrospect, I should have spent more time in building relationships with senior civil servants in Scotland and in Wales.
Lady Hallett: We heard this morning some evidence from Alex Skinner, who was at the Ministry of Housing, Communities and Local Government, about, in his view yes, it was important to have, if you like, off-the-shelf schemes and systems for a future emergency, but he also stressed that relationships are key, and that having relationships, good relationships in place are important. And that seems to be what you found; where you had a pre-existing relationship, that enabled communication. You gave the example of Sue Gray, is that –
Sir Charles Roxburgh: Correct. In Northern Ireland.
Lady Hallett: And I think you give that example in your statement: there was a particular issue that arose, Sue Gray was able to contact you directly, because you had that pre-existing working relationship, but it was the working relationship that had pre-existed that enabled that sort of interface between you; is that fair?
Sir Charles Roxburgh: Correct.
Lady Hallett: Just looking at that critically, it might be said that the danger of that is it’s so personality dependent, you know, if you’ve got somebody who’s been in a job for a long time, worked in the public and private sector as you have, has made these connections, then you’re in a good place to have those sort of relationships, but what if you don’t?
Sir Charles Roxburgh: Well, there’s a certain level of serendipity about it sometimes, yes, but you can work on it. And I can give you two examples of how we worked on it. With the Bank of England – I put this in my statement – when I joined in 2013, relationships between officials at the Bank and at the Treasury were not particularly good. The relationship between the governor and the then Chancellor were very good, but the officials had a slightly more difficult relationship. But the two senior teams, from 2013 onwards, made an explicit effort to build and strengthen those personal relationships when Governor Carney was the governor, and then later, when Andrew Bailey became the governor, Andrew Bailey – and this was during the Covid crisis – had a taskforce of Treasury officials and bank officials work on how we could strengthen it still further.
So although it did depend on the personal relationships we had at multiple levels between the Treasury and the Bank, you can work on those relationships and you can invest in them. And if they are not good, it’s the responsibility of senior management, as the Treasury leadership and the Bank leadership decided to do, to strengthen them.
So it’s not pure happenstance, you can work on it but you work on it in ways that allow people to form the personal relationships rather than just leaving them to happen to chance.
Lady Hallett: And you appear to be envisaging there relationships not just at permanent secretary, second permanent secretary level, but throughout the organisation, so that people have relationships with their relevant counterparts at whatever level they find themselves in the organisation; is that how you envisage it?
Sir Charles Roxburgh: Yes, and with our major partners, whether it’s the Bank of England or a big department like BEIS, and it be true for other colleagues who had the relationships at HMRC or with DWP. We would think about all of the relevant officials, who was their point person? Who was their opposite number in the bank or in the Department for Business? And it was part of their job to get to know them, build relationships with them, both on policy content but also to build some personal rapport with them. And that was very important.
Lady Hallett: But the direction of travel, in terms of the importance of building those relationships, has got to come from the top of the organisation, hasn’t it? It’s got to be trickled down –
Sir Charles Roxburgh: Yes.
Lady Hallett: – from the top that this is what you need to be doing?
Sir Charles Roxburgh: Yes, and you do that – the tone at the top is vitally important both ways. And when Alex Chisholm became Permanent Secretary at BEIS, which was almost at exactly the same time as I became Second Permanent Secretary, I remember going over to his office and we sat down and we said: look, these two departments have not had a great relationship under the coalition government. We need to set a new tone.
And we both agreed that we would, from the top, set a new tone, that we would not speak disparagingly of the other department, we would not, you know, deliberately say anything that was sleightful of them, but instead would try to really emphasise to our respective teams the importance of working together.
And Alex and I did that in 2016, and that stood us in good stead, because, by 2020, I think the relationship between BEIS and Treasury at multiple levels was very strong.
Lady Hallett: Looking ahead, it might sound like a recommendation that everyone should just be nice to each other and get along very well, which obviously wouldn’t actually land or be possible to enact, but is it about also seeing, when you build those relationships, the positives that can be drawn from them, and remembering that, in terms of corporate memory, that where you build these relationships, this is how it actually improves delivery –
Sir Charles Roxburgh: Yes.
Lady Hallett: – therefore that’s why they need to be maintained?
Sir Charles Roxburgh: It’s not about being just polite and nice to each other. I had some very robust policy debates with colleagues at the Bank of England. Very robust. Because we were different organisations with different objectives. But they were always respectful, always fact based, and always driven by our desire to get the right outcome against our objectives and ultimately the right outcome for the country.
And it’s actually often through those difficult discussions, where you are approaching a common problem with a different perspective, that you form a really deep trust-based relationship. So it’s not just about being nice; it’s about working constructively and positively, solving problems together.
Now, in terms of what’s the recommendation, as I say, I instinctively do not like lots of structural recommendations with committees and mandates, because that isn’t how you drive organisational change. What I tried to do in my time as a senior civil servant, and I saw other people doing this too, is it’s about coaching and encouraging the next generation of civil servants to develop that external orientation: the ability to get out of their office and go and build relationships across Whitehall, in industry, with arm’s-length bodies.
And that requires coaching, it requires you giving them feedback when they’re doing it well or not, and it becomes part of a senior civil servant’s job to be externally focused and to build these external relationships.
Lady Hallett: To what extent, in your experience, was the tone set not from the Civil Service, but from the politicians that sat above that? I don’t want to get into political issues, but if there is a difficult political relationship, did, in your experience, that put strain on the ability of officials to communicate?
Sir Charles Roxburgh: It did in respect of the Scottish Government, to be candid. And it was a difficult time, in the political history of this nation in the years following the Scottish referendum, the Scottish Government was still committed to independence, the civil servants working for the government were duty bound to serve their government, and so that did put a strain on it.
In more normal times, in Whitehall, there might well be difficult relations between two secretaries of state or between the Chancellor and another secretary of state. That happens in almost every government, to my experience. And the job of the Civil Service is to work through those difficulties, and not to let any political disagreements get in the way of effective cooperation.
Lady Hallett: You discussed sharing information with other departments, including sensitive information, and you spoke of information not being leaked. But it’s also right, isn’t it, that sometimes information was leaked, and you were concerned about that?
Sir Charles Roxburgh: Yes.
Lady Hallett: What effect did that have on the willingness of yourself and colleagues to share information going forwards?
Sir Charles Roxburgh: Well, leaks – as I put in my statement, leaks are an endemic problem in government, and it’s been true in all the governments that I’ve served in my nine and a half years at the Treasury, and I’m sure it’s still true today. And it does cause problems. Leaks undermine trust. And – but they are part of life in government, so there’s no point wishing them away.
The practical consequence of it was that we became extremely careful about how we shared information and how we managed the information protocols around it. So in my statement I talk about a process that we called Project Birch, or Special Situations, which was handling the really company-specific information. And we could not share that widely but we had to keep the Prime Minister informed of it.
So what we agreed with Number 10 is that there would be one person in Number 10, Eddie, now Lord Lister, and one official, who were in the loop, and they would brief the Prime Minister, and no one else in Number 10 could have access to that information. And like that, that meant that we really limited – equally we had exactly the same type – it wasn’t a comment on Number 10; we had exactly the same restrictions on who could know that in Treasury.
Lady Hallett: The Treasury side?
Sir Charles Roxburgh: And so the Chancellor knew, but other ministers did not know. Just because this was such sensitive information, we had to keep it on a very tight restriction.
So that’s quite easy to manage because you can, with that market sense of information, wrap it in very tight secrecy, necessarily.
The more difficult leaks are the ones where people leak information that just undermines trust. And some of those leaks happened, they were deeply regrettable, but that’s a fact of life in government and I wish they hadn’t happened.
Lady Hallett: And again, this may be one of those areas where it is easy to identify a problem, but totally impractical to come up with a solution for how you stop leaking or briefing in government, I would imagine, Sir Charles?
Sir Charles Roxburgh: I have no idea how you would solve that problem.
Lady Hallett: All right.
Can I move on to the topic of experts. And I don’t mean experts in the Inquiry, but I mean engagement with experts by the Treasury.
Now, one suggestion that Dr Tetlow has made is that the Treasury could explore more formal or establishing more formal expert networks, so that the Treasury has access to a panel of experts. But would you say that those already exist or existed, or do you accept that that could be developed?
Sir Charles Roxburgh: Well, why don’t I tell you what we did, and then I’ll tell you why I don’t think Dr Tetlow’s recommendation adds a lot of value to what we were doing.
So the teams that I were working with reached out extensively to experts elsewhere in government and outside of government. And to give you specific examples, we reached out to experts in small business lending, in the British Business Bank, in UK Finance, in the lending institutions, in the Bank of England, a whole range of external experts on small business lending.
In credit risk management, we reached out to external firms like McKinsey, who provided expert analysis on credit risk, but we also created a whole new panel of experts on credit risk called the Advisory Credit Committee, where we found the people in government who had deep expertise on credit, having served in investment and commercial banks, and formed a credit committee to advise the Chancellor on some very complex, difficult issues.
So we created that for this, we formed it in a couple of weeks, and it was extremely powerful. And then we stood it down when its time was finished.
And we reached out to other experts in other very specialised forms of finance, preferred equity, collateralised loan obligations, or speciality lines insurance for the event scheme and TV and movie production restart.
And so what we found was that we could get access to the experts we needed, when we needed them, with couple of phone calls. And if we needed them for a one-off bit of expertise, that was fine. And if we needed to create a standing committee, as we did for the Advisory Credit Committee, we could do that.
And I’ve done that throughout my career at the Treasury: I created similar panels of experts for reviews that I led on financial regulation in fixed income, on patient capital, on infrastructure finance. We created expert panels to review on those specific policy people.
So I actually don’t accept this view that the Treasury doesn’t reach out to experts, because I spent my nine and a half years doing exactly that, as did many of my colleagues.
And the reason that I don’t support Dr Tetlow’s recommendation is first, I think it’s unnecessary, because we were doing it, and did it repeatedly throughout my time at the Treasury and in this crisis, and I think it’s unhelpful. First of all, you never know the precise expertise you are going to need. I had no idea that we would need an Advisory Credit Committee, because we were taking on £100 billion of single-named credit risk. I had no idea we would ever need that.
Lady Hallett: Just pausing there, I mean, you may be underlining why you go to experts, which is there’s a particular area that is outside your everyday experience and so you bring in that expertise.
And are you saying, Sir Charles, really, that you needed to be flexible about this and to have an ad hoc approach. If a particularly complicated issue arose that needed that external expertise, you would bring it in, rather than having a sort of standing committee –
Sir Charles Roxburgh: Correct.
Lady Hallett: – that may not actually possess the skills that you needed?
Sir Charles Roxburgh: Correct, because sometimes, if you’ve got a specific policy issue, as I explained on those policy reviews, or this credit risk issue, you create what you need with the expertise you need for that issue.
What I struggle with is how we could define even one expert panel for each policy directorate. There are 15 policy directorates. You can’t define one panel for each of them, because take financial services, you’d need a different panel for banking. And within that, you’d need a different panel for retail banking versus investment banking, a different panel for wholesale insurance versus retail insurance versus life insurance. You’d end up with a plethora of panels, and each one takes work. You have to recruit people, you have to screen them, you have to clear their conflicts. And then if they don’t get used very much, they get frustrated.
So I think this is a lot of work which would have added no value in this crisis and you can solve it by identifying where you need the expertise and for how long, and creating the structures that you need for that policy problem.
Lady Hallett: And is there any need for those structures to be in any sense pre-existing? Is there any merit in having at least a pool of people identified in advance, or is it very much: see what the problem is, and go to the people who are current in the expertise at the time you need it?
Sir Charles Roxburgh: I would leave that to the policy leads for the particular area. So if one policy lead said: “Look, we have repeated need for expertise in this defined area of economics”, which is a highly variegated expertise, so there are lots of different sorts of economics, “but we need expertise on this particular bit of economics on a regular basis”, I’d have no problem with having a permanent committee of that type of expert if the policy lead said: “We need that permanently.”
In the areas for which I was responsible for, we needed a lot of external expertise, but the need changed, and we didn’t have the need for a standing committee of experts and couldn’t actually have maintained it.
Lady Hallett: No. And was there a risk, in your view, that a standing committee could become stagnant, effectively, not actually providing you with the particular advice you needed, there’d be a danger you’d go to your standing committee, and it may not actually have all of the strands of expertise that were required?
Sir Charles Roxburgh: One of the things about expertise these days is how incredibly narrow it is.
Lady Hallett: Yeah.
Sir Charles Roxburgh: So if you had – for instance, when we worked with The Department for Culture, Media and Sport on restarting the events business in the UK through an insurance scheme, you’re not looking for an insurance expert, you’re not looking for a specialty lines expert; you’re looking for the one or two people in the market who underwrite events insurance. There’s no way you’re going to have that expertise on a standing panel.
So I completely agree that the Treasury needs to be outward looking, it needs to build – senior officials need to build their networks so they can get to the experts in one or two phone calls. And there may be some areas of expertise where it’s useful to have more people involved for longer periods, but I think a very rigid structure of panels and a roster of approved experts would have been highly constraining in this crisis, and we’d have ignored it. We’d have gone round it to the people we needed to talk to.
Lady Hallett: So you accept, I think, that you need to do some thinking about this in advance, because, as you say, you don’t want to be, modern day, getting out the Yellow Pages and looking through to see who you could call, but you don’t want to have pre-existing panels, rosters, people pre-approved? It’s a balance of flexibility depending on the –
Sir Charles Roxburgh: Well, I’m not at the Treasury now so that would be a decision for the current leadership of the Treasury. All I can do is comment on my experience on when I was in the leadership of the Treasury, and it would not have been helpful to me then.
Lady Hallett: Can I move on to a new topic, which is the initial response to the pandemic, so this very early response. And I’m going to start questioning where Module 1 of the Inquiry left, with this conclusion in the Treasury’s corporate statement that:
“… [the] Treasury accepts the Inquiry’s recommendation in Module 1 around the government needing to assess a wider range of scenarios around national risks and the need to consider the economic impacts of emergencies and responses on the population.
It goes on:
“Had we prepared for a wider range of scenarios during the period 2017-2019, then we might have had a more well developed set of responses ‘on the shelf’. I hope that in a future crisis, future HMT officials will be able to draw on the full suite of interventions that now exist and which need to be kept up to date and fit for purpose.”
And sets that out as background, and it’s important, Sir Charles, to acknowledge that you and your colleagues were faced with an unprecedented situation, there were no off-the-shelf schemes of the sort talked about there, that there was no playbook, for example, of what a job retention scheme might look like, how it might be delivered, and this was an economic crisis unlike any that had been experienced before.
So we take all of that as a given in these questions.
We also, I suppose, add into that that Mr Sunak had become Chancellor of the Exchequer only on 13 February 2020, so was newly in that post, and asked for advice at that stage as to the likely or anticipated impact of the pandemic that I think was given on 26 February. And at that stage, the advice was focusing on two competing scenarios that were being postulated as potential scenarios. One was that this outbreak of Covid-19 would be largely contained in China, and so it wouldn’t really be a problem that reached the United Kingdom, or, at that stage, that we were looking at potentially a four-month long pandemic, affecting 25-50% of the workforce, in which it could be predicted that there’d be two weeks off work per worker. And that was all based on the reasonable worst-case scenario that SAGE was advocating at the time.
And therefore, at that stage, based on that advice – in fact we’ll have this put up on the screen, I think.
It’s INQ000625746. I’d like, please, paragraph 23, which is on page 5.
Yes, there we are. The sentence in bold, but after that:
“For Budget, we have resisted creating a fund for Covid-19 related activities as this sets a bad precedent, and while departments are raising risks to their spending teams, but have so far not put a figure on pressures, and, in addition, while the scenarios and any response are still very uncertain, we expect – subject to scale – situations like these would be addressed from the 2020-21 Reserve in the first instance.”
And so that was the initial position in February, and policy options were discussed in this paper, including, really, pre-existing routes of support at that time were being envisaged. So HMRC’s Time to Pay arrangements, and arrangements like that, that already existed.
These were, would you agree, based on the SAGE estimates at the time, and the predicted worst-case scenario, that these were policy options that were never going to stand up to what in fact emerged in the pandemic?
Sir Charles Roxburgh: Well, yes, that is a statement, looking back, with what I think you called in your opening statement “artificial perfect hindsight”.
I think the test is what could people be expected to be thinking at the end of February, based on the best advice we were getting from SAGE? And based on that advice, and that realistic worst-case scenario at the end of February, where there were still only 19 cases in the United Kingdom, and we were being advised by the health experts that containment would work and would be the strategy to pursue, based on that, the economic analysis was suggesting a relatively modest economic shock, where GDP would fall between 0.6 and 1.3% of GDP.
That type of economic downturn is well within the Treasury’s normal range of ability to respond to.
Now, what we did not know was that from the end of February we were about to enter the most sudden and dramatic health crisis and economic crisis which unfolded over two to three weeks, when we went into lockdown on March 23rd. That was an extraordinary period where we received, every day, more and more negative surprises on the health side and on the economic side, and yes, policy responses developed in one week were overtaken by events within days, which was why we had to respond so fast, and constantly raise our standards set by the Chancellor for ever larger interventions to respond.
Lady Hallett: And your interventions were increasing incrementally as the health conditions worsened, and as worst-case scenario got worse. So there was a constant need to reconsider and react to events that were going on around the world; is that the position?
Sir Charles Roxburgh: Yes, well, the first announcement was in the budget of March 11, which at the time seemed quite a comprehensive response, but within days was overtaken by events.
Lady Hallett: Can we just go back a little before that. You mention this in your statement, that – you put it as the Treasury “moved decisively into action” on 28 February.
Sir Charles Roxburgh: Yes.
Lady Hallett: And I’m just going to ask that – this is an entry from your diary of that date, which I think refers to a meeting you were asked to convene. So it’s 28 February 2020. There we are.
“Dan Y-S” – that’s Mr York-Smith; is that right?
Sir Charles Roxburgh: Yes.
Lady Hallett: “… asks me to convene a meeting of HMT seniors as [the Chancellor of the Exchequer] is worried that we are not reacting with enough urgency on Coronavirus. Call a meeting for 4 pm.”
We don’t need the name.
Now, “HMT Seniors”, is this people of your sort of level, permanent secretary level, director general level?
Sir Charles Roxburgh: Well, there are two of us at my level. It would have been the director generals and the directors.
Lady Hallett: Yes.
And so this is coming from the Chancellor asking you to convene this meeting really to step the response to the pandemic up –
Sir Charles Roxburgh: Yes.
Lady Hallett: – the agenda, essentially?
Sir Charles Roxburgh: Correct. I mean, to put this in context, the Chancellor had the previous afternoon, on Thursday, the 27th, he had commissioned advice from the Treasury. This request went out at 2 pm. He had commissioned advice for a comprehensive budget package to respond to the crisis covering health spending, Statutory Sick Pay, business support, and financial services. He had asked for that advice by end of day. The Treasury was working intensely to prepare that advice, which went to him the Friday afternoon. So I wouldn’t want anyone to take away from that clip from my diary any sense that we were not working at pace. The Treasury was working at intense pace in response to the Chancellor’s commission of the previous day.
Lady Hallett: But can we take from that, and from what you’ve just said, that although he’d only been in post since 13 February, on a personal level, the Chancellor quickly got to grips with the issue and was driving requirements from the Treasury as to advice, as to standing up schemes, and so on and so forth?
Sir Charles Roxburgh: Absolutely. The Chancellor was fully in the saddle, as they say. As Chancellor, the morning after his appointment, there was not a single change of pace, and he became – slipped straight into being Chancellor and the Treasury systems lined up there, and it really made no difference whatsoever to our speed of response.
What he had done was to completely clear the slate of his predecessor’s draft budget, and we went back to square one to develop a new budget for the May – March 11th, and many of the issues that we had been working on for Chancellor Javid’s budget were stood down.
Lady Hallett: And again, to put this into context, there was due to be a budget regardless of the pandemic; is that right?
Sir Charles Roxburgh: Yes, March 11th was going to have been Chancellor Javid’s first budget, but when he resigned in the reshuffle of February, the budget date was there, we had to have a budget on that date, and so the Chancellor was preparing “the budget”, but decided to include, within the budget, a coronavirus response package.
Lady Hallett: When we look at the pressures that everybody was under, the pandemic did not arrive after a budget, after that annual fiscal event had taken place. The budget was coming anyway, a lot of work to be done on that, and the pandemic alongside it?
Sir Charles Roxburgh: It –
Lady Hallett: Just so we can understand the – (overspeaking) –
Sir Charles Roxburgh: It was an extraordinarily busy time, but then this was an incredibly busy and stressful time for almost everyone in the country, and we were just having to work hard. And however hard we were working, and however much stress we were under, it was as nothing compared to frontline health workers at this time.
Lady Hallett: And I know it’s difficult to comment on other people’s reflections, but having acknowledged it’s difficult, I’m going to ask you to do it, because I just want your view about this. There was a Corporate Memory Project that the Treasury conducted and Philippa Davies, who was Director of Public Spending (sic), spoke to it – I’m going to ask for INQ000652953. She said, “In retrospect” – let me just find that. There we are:
“In retrospect, I think we were quite slow, as with the whole of government and outside of government, to recognise it was more than just an annoying health issue. I probably tried, three, four, five times, before it necessarily resonated with my Directors at the time, or DGs to get some resource in for coordinating stuff. We were getting loads of stuff through …”
It goes on.
“So in that initial stage, we should have jumped on it quicker, and across the SCS we should have listened more.”
Do you accept that observation that there perhaps wasn’t – and this isn’t a criticism of the Treasury, this is just an observation as to how quickly the pandemic was developing – there wasn’t an appreciation of the need to centrally coordinate from the outset and to move more quickly?
Sir Charles Roxburgh: I don’t feel I can comment much on Philippa’s statement. I have huge respect for Philippa, she was an incredibly valued colleague. I don’t know quite what time period she’s referring to here, whether it’s from February 28 or before February 28, but why don’t I tell you what I think on these issues? I find it hard to believe that we could have started much earlier than when we did. You know, you could argue two or three days, maybe, but that would have made no material difference, because we would still have been working towards a deadline of March 11, because that was the budget, and that would be the date that the Chancellor was going to announce anything we worked on. So we might have had two or three days more to prepare the budget package than we did, and I think that would have made no difference to the proposals and measures that were introduced in the budget.
I find it impossible to understand how we could have started work on the crisis response at the beginning of February, as I argued in my statement. That would have given us a month, but I just don’t see how we could have done that. There was no health advice that we were facing a major problem at that point.
I think, my personal view, is that from February 28 onwards, we stepped up dramatically and then we continued to step up further and further as more and more teams got brought into the work.
The work for the budget was focused on a relatively small number of interventions, of which the loan scheme was on. So for me and some of the colleagues working with me, that was an intensely busy period because we had one of the major budget announcements to work on. Other teams did not. But those other teams like the personal tax and welfare policy team, then got brought in to do what became known as furlough, and that team worked incredibly hard, incredibly productive, but they started a bit later.
So my personal view is that we responded well and geared up rapidly from February 28 onwards.
Lady Hallett: We know that the SPB effectively became the coordinating force under Dan York-Smith in the early stages, and then that developed again, but was that identified as the correct coordinating force in the Treasury, or did that just emerge organically, really, because they’d been working on the budget, that it became the natural successor to that work?
Sir Charles Roxburgh: It’s the natural place to have this type of effort run from, for two reasons: first of all, the initial response was a budget package. So it made sense to run it through this group, strategy and project directorate, SPD. But it was also the group in the Treasury that was very good at coordinating processes and project management and flexible resourcing. So it had a flexible resourcing pool within it.
Lady Hallett: Yes.
Sir Charles Roxburgh: And so – and it wasn’t a policy directorate in its own right. So it wasn’t doing its own policy. So it was both the obvious one, but it was also the right one to have as the coordinating body for this.
Now, in time, structures got built up and it became a – more of a sort of standing army on the Covid response. But SPB – and they did a very good job, they were the right people to respond and to coordinate the initial response.
Mr Wright: Thank you very much, Sir Charles. We need to take our break for lunch now, I think, my Lady.
Lady Hallett: Certainly. I shall return at 2.05. Thank you very much.
Sir Charles, I hope you were warned that we wouldn’t finish you this morning, but I promise you we will finish you this afternoon.
The Witness: No, thank you very much, I’m expecting to be here for much or all of the afternoon.
Lady Hallett: Well, I hope you’re being looked after.
The Witness: Yes, very well. Thank you.
Lady Hallett: Thank you.
(1.03 pm)
(The Short Adjournment)
(2.05 pm)
Mr Wright: Thank you, my Lady. Can I check again that you can see and hear us in the hearing room?
Lady Hallett: I can. Thank you, Mr Wright.
Mr Wright: Thank you.
Sir Charles, before we broke for lunch, we’d been – or you’d been telling us about the period leading up to the budget on 11 March. We’d just been dealing with the role of the SPB and the initial response. And I think you said in your evidence this morning that, yes, there could have been two or three days earlier that the Treasury could have moved, but ultimately, with the budget coming on 11 March, nothing would have been accelerated from that date anyway. And so, in practical terms, even if those two or three days had been utilised, it might have taken a bit of pressure off you perhaps, but it wouldn’t have changed where things landed on 11 March; is that right?
Sir Charles Roxburgh: Correct. That’s my belief.
Lady Hallett: Yes. And just to have some context about the 11 March budget, on that date the Chancellor announced a package of measures, £12 billion, rules for Statutory Sick Pay were changed, the Small Business Grant Fund was established offering support to small businesses, there was £500 million of new grant funding for local authorities in England and Wales. So that was the package of measures, a very high-level summary, on – or in that budget.
But five days after the budget, so we’re coming forward, now, to 16 March –
Sir Charles Roxburgh: Sorry, and CBILS was announced in the budget too.
Lady Hallett: Yes, sorry, and CBILS.
Five days later, the Prime Minister made an announcement that people should stop non-essential contact with others and stop all unnecessary travel. So the health position was moving rapidly. And did it feel, in the Treasury, that, five days later, the budget was already consigned to history, out of date, given the pace at which things were moving in the country generally?
Sir Charles Roxburgh: It felt exactly as you described: that the health situation was deteriorating so rapidly that it became clear that we needed further interventions, and it was actually the weekend after the budget, the weekend of March 14th and 15th, that Andrew Bailey and I started designing the Coronavirus Corporate Financing Facility, which was one of the big interventions which was announced in the next wave.
So, yes, it was clear within 24, 48 hours of the budget, that we would need to have new and larger interventions to scope with the scale of economic impact, given the rapid deterioration in the health situation.
Lady Hallett: And your candid reaction, captured in your diary, on 16 March – I won’t put it up, I’ll just read it out to you, this little part of it – was, you said, having heard the Prime Minister’s announcement about non-essential contact and unnecessary travel:
“We can expect a total meltdown in large parts of the economy.”
Was your immediate reaction to hearing that announcement, as captured in your diary.
Sir Charles Roxburgh: Yes, it was clear that the health measures, the necessary health measures, were going to have an extremely severe consequence on the economy, and that economy would both have a financial cost and a human cost, as we shut down large swathes of the economy and put people’s jobs at risk and put businesses at risk of failure. And that was what we had to prevent. We had to ensure that the necessary health measures didn’t trigger this economic meltdown which would cause lasting damage. We had to prevent that lasting damage.
Lady Hallett: Now, you’ve just told us that you and the Chancellor had met that weekend and you were discussing the CCFF; is that –
Sir Charles Roxburgh: I hadn’t met with the Chancellor.
Lady Hallett: But you were discussing it?
Sir Charles Roxburgh: I had been discussing it –
Lady Hallett: Sorry, not the Chancellor, the governor?
Sir Charles Roxburgh: Yes, the governor and I had been exchanging messages over that weekend, and I spoke with the Chancellor on the morning of the Sunday to get his permission to develop the scheme at pace, and we developed it – and Andrew texted me on Saturday morning and I spoke to the Chancellor Sunday morning, and we developed it through a series of exchanges and phone conversations during the day Monday, and we shared term sheets Monday and Tuesday, and the CCFF was announced that week, on 17 March.
Lady Hallett: Yes. That demonstrates that you certainly, and the governor, were not simply proceeding on the basis that the budget had been announced and that was the end of the work; this was other work going on before the Prime Minister’s announcement on the 16th.
But I just want to go back to the announcement. Did the announcement and the extent of it, what was being announced, non-essential contact, non-essential travel to stop, did that come as a surprise to you and colleagues in the Treasury that things were moving that quickly?
Sir Charles Roxburgh: That period was such an intense period of both work and extraordinary developments in the health situation that I honestly can’t quite pin down which hour of which day I knew what. I think we had got some indication that there was a major announcement coming from the Prime Minister but I don’t remember what we knew in advance of that. But I completely understand that our colleagues in Number 10 preparing the Prime Minister and working with the health experts, they had to get that announcement done. They didn’t have time to communicate everything to everyone in government ahead of it. I could well understand why the Prime Minister would want to preserve confidences over the announcement ahead of time.
So I didn’t feel blindsided by it. I just accepted that this was how it was in a crisis, that things got announced and we had to react.
Lady Hallett: But looking back generally, I’m not asking you to pinpoint which moment or which announcement or precisely which day, but around this time of the 15th, 16th, 17th, there is at least the impression from your diary and from events that that was the period at which it became clear that the idea of this being a three- to four-month virus, and that the – they would land the peak in the summer, and that would be the end of it, return to normal in the autumn, that that was not how this was going to develop. This was the realisation that the health response was going to be much, much more significant, therefore the economic response had to be much, much more significant; is that fair?
Sir Charles Roxburgh: Completely fair, and I think it was that week – I mean, it was an extraordinary week, the week of the 16th – which started with this announcement, but it was clear that this virus was now rapidly spiralling and the infection rate was dramatically increasing, and that we were looking at an extraordinarily dangerous and damaging situation, both in health terms and in economic terms.
Lady Hallett: And I am going to ask that this extract from 17 March is put up please, it’s page 23 to 24 from your diary. You’d been into work, there’d been a meeting at Number 11 with those who weren’t working from home. You say:
“… a lot of the seniors have come in to work on this package.”
And you describe the Chancellor in this way:
“[The Chancellor of the Exchequer] looks pretty somber. He knows he has to pull a rabbit out of the hat – and doesn’t have long to do it. We go over the possible list of options. Concentrate down on the lending options – the Bank facility now looks it will be up and running next week (Bank and EGU have done a great job at getting this underway. [Chancellor] wants it to be very big, but not clear that it will be. The Bank are talking about a few, maybe, tens of billions. We increase the Business Interruption Loan to 5 [million], accepting that this blows through State Aid rules. We’ll have to hope the Commission waves them for us …”
Is that the European Commission?
Sir Charles Roxburgh: Correct.
Lady Hallett: “… seem to have done so for everyone else … the good suggestion that [Chancellor] should take a power in the Covid bill to make loans, guarantees, equity investments in any industry without constraints (so a wider power than we have under [existing] Acts. Good suggestion. [Chancellor] likes it, shows action ‘taking a power’.”
Then:
“Long discussion about employment support. Some good options to make [Universal Credit] more generous, but we can’t do anything on employment support as our welfare systems don’t work the same way as in Europe.”
And that description of the Chancellor looking pretty sombre, knowing he has to pull a rabbit out of the hat, what were you encapsulating in that phrase, that – (overspeaking) – to be considered.
Sir Charles Roxburgh: Well, that is a sort of real-time image of what it was like at this point in the crisis. We were working in a very purposeful and determined way in the Chancellor’s rooms at Number 11. We all realised that we were facing an extremely grave situation. The Chancellor was right to look sombre. We all looked sombre. We all felt very concerned at the situation.
What the Chancellor wanted to do, and I give him enormous credit for his leadership in the crisis overall, but this was, I think, one of his most impactful interventions, was he realised that he had to make a statement to the nation that would reassure the nation that, however bad the health crisis was, the Chancellor would do whatever it takes to protect the economy.
And he and the Prime Minister decided that that needed to have a large number attached to it. And the officials, including me, couldn’t put a large number on it because, at that stage, we hadn’t designed all the packages that would end up costing, well, north of 300 billion, and so, as we thought about it bottom-up, looking at the individual packages we had at that stage – and we did not have furlough by this stage and we did not have the self-employed scheme, and we did not have Bounce Back Loans, so when we added up from the bottom, we didn’t get a very big number.
But the Chancellor correctly felt that to be credible, he needed to announce a number that would reassure the British public. So what I’m referring to there is that he needed a powerful statement that the Treasury, the government, would be there to protect the economy, and the small schemes that we had at that stage weren’t it.
Now, he resolved that dilemma, and I was not in the room with him at Number 10 when they go from having our “whatever it takes” unlimited funds into what he announced, which was 330 billion. And I assume he got there by a top-down estimate. And it turns out to have been a pretty accurate top-down estimate, because that’s not far short of what it cost. It’s about 15% of GDP. And it did signal very effectively that the Chancellor was going to put money behind his statement to do whatever it takes, and I think that was a critical point, a point of real leadership by the Chancellor to reassure the nation that he would protect the economy.
Lady Hallett: And in terms of pulling a rabbit out of the hat, I mean, at that time, as you’ve said, you were still working up schemes at speed. There was no playbook for this, there were no schemes on the shelf that could be dusted off and put into action. Is that in part what that phrase is encapsulating: that all of this is having to be developed at pace and without any precedent?
Sir Charles Roxburgh: Well, I wouldn’t over-interpret the ‘rabbit’ point. What is true, though, is that we were indeed developing the schemes and the interventions at remarkable pace. I mean, this was a week that the teams were working already on the furlough, we had a series of big announcements to come later in the week, and it was an extraordinary period of remarkably rapid policy development across the Treasury as teams developed the policies that would then become famous and very impactful. But they were all developed at high speed in this period.
Lady Hallett: And is it right that, as well as having to develop new schemes, that you were having to accept that what you had hoped would be an approach that would get you through a much shorter crisis, would have to change radically? So it required a complete recalibration as well, in terms of what was required?
Sir Charles Roxburgh: Completely, both in scale and breadth of the crisis. Because had it been a short two to three months slowdown in the economy, then the Treasury can handle that with the existing measures. And even the ones announced in the budget would have been helpful for that sort of slowdown. But what we were looking at now were whole sectors of the economy, and literally millions of businesses would be looking at zero revenues. As we saw in your very powerful impact video, the shock to a business owner to know that they’ve suddenly got to shut and they’re going to have zero revenues, that is a whole new scale of crisis.
But it wasn’t just small businesses, it was large businesses. So at this time you start seeing in my diary references to the airlines, because the airlines were suddenly looking at zero revenues too. And large manufacturing companies like Rolls-Royce, whose revenues for their critical aviation division depended on aircraft flying, they were looking at a precipitous fall in revenues.
So the lockdown not only increased the severity of the crisis; it opened up a whole new area where we were going to need to find solutions to solving the problem for small businesses and some of Britain’s largest and most iconic companies that were now facing a calamitous fall in revenues. And that’s what we had to do.
Lady Hallett: In a time of what you might call an “ordinary” economic crisis – so this was a health crisis, primarily, that had economic consequence, but in the time of an economic crisis, there might be companies that you would consider would be fine in any circumstance because they’re well run, they’ve got good liquidity, good reserves, they’ll be fine. But is it the position here that even the best run, most productive companies were all at risk because revenue was simply stopped?
Sir Charles Roxburgh: Well, it varied, and that’s what made this so difficult, because some companies did absolutely fine through this period. Professional service companies, law firms consultancies, accountancies, they switched very quickly to remote working and they traded through just fine. Retailers who were shut did not do so fine. Retailers who stayed open, they did do reasonably well.
So it’s very different. And the sectors of the economy, some of them, like the hospitality industry, a critically important source of employment, because of the shutdown that was clearly going to face incredibly difficult circumstances.
Aviation, airlines, also very difficult. Automotive, people couldn’t buy cars so car production lines stopped. So we saw precipitous falls in revenues for our car manufacturers. But it wasn’t across the board, and that’s what made the response so difficult to judge, because you had to work out where you could go across the board, as we did with small businesses, and where we had to target support for the large companies as to where it was most needed.
And so, at this point you’re talking about, March 16th, it was both an extraordinarily worrying time, but we were facing some really difficult policy challenges which we needed to find a way through. We did find a way through it, but some of the darkest days of this crisis were around this period.
Lady Hallett: Had it remained what had initially been expected, a relatively short period of restrictions and constriction of the economy, the strategy for that would have remained one of essentially loans and guarantees that would have got you through a shorter period; is that fair?
Sir Charles Roxburgh: Yes. I can’t speak for the labour market policies, because I can’t – it wasn’t my area. I don’t know what they might have done in a different scenario, short of full lockdown. But certainly on the business support areas, if it had been, for instance, like the SARS epidemic in Singapore, the banks kept on lending, airlines kept on flying. There were social restrictions and there was quarantining but Singapore did not have a full lockdown. So yes, you know, the airlines suffered a drop in revenues but they didn’t have a total fall in revenues.
So we would probably have been able to survive a much more constrained crisis with guarantees and loans on the business side, and without the scale of intervention that we ended up needing.
Lady Hallett: Okay. And as you’ve explained, over a very short period of time, you were working up significant schemes. We had the extension of CBILS initially extended on 17 March.
Sir Charles Roxburgh: Mm.
Lady Hallett: The job retention scheme announced on 20 March, changes to welfare support schemes, alongside a myriad of other measures. And these were, take them in isolation, many of them, schemes that in ordinary times would take months if not years to work up. Is that reasonable?
Sir Charles Roxburgh: Well, certainly months. I mean the Treasury is a productive department and does policy development, you know, quite productively. And you’d normally expect to take three to six months on a very major policy, including the research, the consultation, you know, all the work that goes into a major policy announcement. We were doing that in days.
Lady Hallett: And over a breadth of major policy announcements –
Sir Charles Roxburgh: Yes.
Lady Hallett: – not just one. Yeah.
And I just want to really drill down into the positives here about how it was that the Treasury was able to react in that way in the matter of days, and stand up those policies across the breadth of interventions. What enabled the Treasury to do that?
Sir Charles Roxburgh: Well, I think a few things. As I put in my witness statement, I give great credit to Rishi Sunak for his leadership of the Treasury during this period. He was, as he should have been, very demanding and set very high standards for us and made us aim high, but he provided inspirational leadership, incredible workload that he carried through, incredible detail that he took on, and so I give credit to him as the leader of this effort.
It’s also a reflection of the very high quality of staff at the Treasury. I mean, I’d worked in the private sector, I’d worked with some of the top professional services firms in the world. I was always impressed by the quality of staff that the Treasury attracted, and so we were able to mobilise teams of really able, highly motivated people to work on these policy initiatives, and they were willing to innovate and think differently to come up with these very radical policies at short notice. So I give huge credit to all levels of the Treasury who made this happen.
The Treasury has a very flat structure. It’s not hierarchical, it’s not bureaucratic. We concentrate on the outcomes, not the process and the inputs. We concentrate on impact and outcomes, and I think that culture of being innovative, entrepreneurial, flexible, non-hierarchical, and very supportive – I mean, this was a very, very demanding period and a lot of people were going through a lot stress in their personal lives, a lot of people were getting sick. It was very difficult but the Treasury held together, very strong mutual support. And again, for that I give Tom Scholar a lot of the credit for keeping the top team together and making us mutually supportive of one another through what was a very tough time.
Lady Hallett: Was there also, was it necessary to land all these schemes, to have a different attitude to risk than you would have in ordinary times? And I don’t mean that as a negative, necessarily, I mean in terms of you had to modify your approach?
Sir Charles Roxburgh: Yes, but I think it’s important to realise that the biggest risk here was not acting fast. We had compelling evidence that the business community was rapidly facing acute cash flow crisis. There’s an email, you’ll see it in my evidence, from Adam Marshall, the head of British Chambers of Commerce, and he’s saying that businesses are within weeks of running out of cash. So once the lockdown happens, we knew that businesses were facing imminent disaster.
And again, you heard that on your impact video.
So the biggest risk was not to act. Therefore, by comparison, the risks that we were prepared to take – and, of course, these were decisions by the Chancellor – officials simply make recommendations, all the decisions were the Chancellor’s. And so he decided to accept one set of risks to avoid an even bigger set of risks of causing lasting damage to the economy.
Lady Hallett: And so risk needs to be viewed in that way here: as a trade-off between – it’s the risk of doing nothing, as against the risk of launching a scheme that’s not perfect, and correcting it later, versus what would happen if you did nothing?
Sir Charles Roxburgh: Yes, and I think two points on risk. One, it’s the risk of inaction is often higher. And in a crisis the risk of inaction can be a lot higher than the risk of action.
The other point which I will come back to again is that you can’t consider risk in isolation of impact. So when people say some of these schemes were risky, that may well be true. But they also had very high impact. And you cannot judge risk without assessing the impact of the scheme.
And so yes, we were prepared to accept risk on some of these schemes, but that was because we were confident that they would have impact against the objectives that we had been set.
Lady Hallett: And so the consequence was, at times, that you had to launch schemes that had imperfections, glitches, things that would need to be ironed out? That was a necessary evil; is that fair?
Sir Charles Roxburgh: Yes. I say that in my witness statement and yes, that’s what we had to do. We had to get these schemes to market and fix them as we got real-time feedback on them.
Lady Hallett: And you give some examples in your statement of things that you launched and then fixed. So you asked the British Business Bank to upgrade its operational processes for CBILS but you needed to launch the schemes?
Sir Charles Roxburgh: Yes, well with CBILS, which was this first of the business loan programmes, what surprised us was the extraordinary surge in volumes, because CBILS was designed in that period before the budget, when the Chancellor announced a £1 billion programme, and that turned out, given the lockdown, to be completely insufficient. So we had far higher volumes than we expected.
We also learnt with CBILS that once it came into contact with real customers, we got a lot of feedback. And these were feedback on things that, even with better planning, I don’t think we would have spotted. There were some very complicated issues around who was and who was not eligible for CBILS and, put simply, whether someone who didn’t need a CBILS guarantee should get one. Because one of the principles of government loan schemes is that you don’t give them to people who don’t need them.
Well, in this crisis, it became impossible to tell whether someone did or didn’t need a loan guarantee product; could they get credit without it? That became impossible to tell. So that had to be changed once we came into contact with real customers and real feedback. But that alone increased volume demand by tenfold, is one estimate.
So, yes, the British Business Bank and the participating lenders had to really work hard to improve their operational processing speed, and it was difficult at first, and we got very negative feedback, but the British Business Bank and the banks and the non-banks who were making these loans did a fantastic job at fixing that quickly, and I give them huge credit for the way they fixed it quickly, but it was a very difficult period.
Lady Hallett: I’m just interested in the alternative. The alternative would have been to say: we’re not going to launch it until you’ve sorted out these operational issues. But presumably, by the time you’d done that, the companies that needed the money would have fallen over and there’d be no point having fixed them?
Sir Charles Roxburgh: Absolutely. And that was very much the trade-off that the Chancellor faced with the Bounce Back Loans decision, which we’ll get to, at the beginning of May.
Lady Hallett: Yes.
Sir Charles Roxburgh: That was very clearly the decision where you go with some known flaws, which you fix as fast as you can, to the extent that you can, or wait, and let hundreds of thousands of businesses fail. That was the choice. I think the Chancellor made absolutely the right choice.
Lady Hallett: Okay. Well, we will come on to look at CBILS and how it developed, and how the Bounce Back Loan Scheme came to be launched. But if there was the impression that there was this very difficult period in March, and then decisions became easy thereafter, would you agree with that, or dispel that, as a proposition? Were there difficult decisions continuing throughout 2020?
Sir Charles Roxburgh: Yes, and the nature of the decisions changed. I mean, the intense urgency of the crisis in that first wave was probably March through April and into May. And by then, most of the schemes had been launched. Different colleagues would have had different experience of what the difficult moments were.
For me, from May, June and July is when we were handling some extremely difficult and high stakes individual company discussions, of individual large iconic companies that were facing serious difficulties, and those were ones that were also very stressful and very difficult, both when we said yes, as we do in a handful of cases, but mainly when we said no.
And I’ll come later to this point. The decisions not to do things in a crisis are often as important and as difficult as the decisions to do things.
So for my workload, I had a very difficult set of those company-specific issues over the summer. It then eased up over the summer because we were out of lockdown, but then the second wave came, and that brought with it a whole series of difficult decisions. Those fell more to the labour market interventions where the Chancellor had to face decisions over whether, when and how to extend the furlough, which is not my area.
On the loan programmes, he did make decisions to extend them, but those are actually quite straightforward because you just keep the closing date, you move the closing date. We didn’t have to change the loan schemes in substance, because they were working very well by then.
Lady Hallett: And I know it’s not your area, the labour market interventions, but I just want to pick up on that briefly, if I can at this stage, because you’ve touched on it.
Did the difficult decisions for the Chancellor, from your perspective, really shift from – initially it was “What does he do?” And then it became a question of, “Should he withdraw the support when he had originally planned to withdraw it?”
In other words, a lot of this support was due to end in the autumn, and it became a challenge as to whether it should end as planned or be extended?
Sir Charles Roxburgh: Well, these were excruciatingly difficult decisions, and they were difficult both on the balance of were the – what was the health situation? How much would extend? Would the second wave go on? How bad would it be? So there’s a difficult health context. But also the fiscal cost was mounting and also the economic cost of having businesses shut down and people sitting at home not at work – on furlough, but not in the workforce.
And so those decisions got harder and harder for the Chancellor, as this crisis went on. I wasn’t involved in them, I wasn’t in the room with him. I have enormous sympathy for the difficulties that he had, as he had to trade off the case for extending them versus the growing fiscal costs of them. And that’s a difficult trade-off, and I wouldn’t presume to have a view as to how to make it.
Lady Hallett: But that second part of the trade-off, in terms of whether to extend, does that, in a sense, become more like the Chancellor doing not the job he does in normal times, which is looking after the public finances and the business of usual – of assessing the cost of these interventions, the fiscal costs that are racking up?
Sir Charles Roxburgh: Well, it – I don’t think this period was like being Chancellor in normal times at any point, but Mr Sunak will no doubt have a better perspective on that than me.
Early on in the crisis, in the sort of first set of interventions, the mindset was very clearly, “Whatever it takes”. And that was absolutely the right signal to send early on to reassure the country that we would protect the economy.
Later on, it becomes a more difficult trade-off as to – not just on the fiscal cost, but the economic cost of people not being in the workforce, of businesses being shut. The risk of permanent scarring goes up the longer people stay out of the workforce. So it wasn’t just the fiscal costs; it was the fact that the economy was being shut down, and the longer it shut down, the more risk of permanent damage there is to it, both in terms of businesses and the workforce.
Lady Hallett: And Sir Charles, did you have a sense that the Chancellor was also having to balance political pressures with support for some sectors? And I give an example, the Self-Employment Income Support Scheme. There was quite a vocal sector – I think you reference that in one of your diary entries – in favour of support for that sector, and there were decisions therefore that weren’t purely economic, but also had a political element to them that the Chancellor was having to take?
Sir Charles Roxburgh: Well, we – the Chancellor would be better placed to answer that than me. We did get a lot of incoming lobbying from all sorts of angles. Frankly, in my experience, in this crisis, it was all perfectly reasonable. And the fact that the airlines were calling me and saying, “We’ve got a problem, can the government help?”, was a perfectly proper thing for them to do. And I think the Chancellor had to weigh up all sorts of different demands on him.
I felt his decision making was rational, economic, objective, but I’ll leave him to talk about some of the trade-offs he faced.
Lady Hallett: All right. Can we then move on from that initial period and some of the pressures on decision making that you’ve described, to look at the CBILS scheme in particular, please.
So this was the first Covid-19 loan guarantee product, the Coronavirus Business Interruption Loan Scheme, CBILS, as it became known. Now, that was, as you’ve corrected me, that was announced at the budget on 11 March. So this was one of the early schemes that stayed the course, as it were.
What was the primary objective of the schemes, from your perspective?
Sir Charles Roxburgh: Well, the origins of this had lain in our preparation for a no-deal Brexit, ie, leaving the European Union without a trade deal, where we thought that businesses might face a sudden drop in demand caused by some of the economic supply constraints that we’d face in that scenario. And that scenario actually mapped quite well on to what we thought we might experience here with a drop-off in demand. Different causes, obviously, but we thought that businesses would face a temporary shortfall in revenues, and therefore face cash flow problems, but that they would bounce back after the restrictions, and so, in effect, bridging finance to give them a loan and to give them more working capital to get through two to three months of slow trading would enable them to weather the storm, and then when they came out on the other side they’d be able to pay back the loan over a period of six years or so, five years in many cases, to weather the storm.
And we thought that would be a useful support for businesses.
Lady Hallett: And this was a guaranteed product, in the sense that the government stood behind a proportion of the lending. Why was a guaranteed product chosen?
Sir Charles Roxburgh: Well, guarantees are very effective in a number of ways, and one of the lessons learned from this was just how effective guarantees proved, whether it was a £50,000 CBILS loan, or a £3 billion UK export guarantee loan, which we also did in Covid. They prove very effective.
Guarantees provide support to the banking industry but they keep the banking industry very much focused on the risk because the banks have got, as you’ll have read in Mr Sunak’s statement, they’ve still got skin in the game. So they’re going to make sure that the credit is good, even though they’ve only got 20% of it you run the normal credit processes, the normal checks and verifications, so you maintain those types of lending disciplines whilst the government takes 80% of the risk, which makes it easier for the banks to lend, and it also means the government can provide the support without having to actually borrow the money on the gilts markets unless the loan goes wrong. So the guarantees are very – they don’t put any strain on the government financing needs.
Now, other programmes were putting a big strain on the financing needs, because that was real money out of the door that the government had to borrow from the gilts market. The guarantees didn’t require any funding upfront, so only when the loan goes bad – if it goes bad that it requires funding person pun.
So guarantees are a very effective tool in a crisis like this.
Lady Hallett: But you acknowledge in your statement that nonetheless the launch of this scheme was, in your words, very difficult. And I’ll come back to why that was and we’ll explore the difficulties that you faced, but just to move forward and look ahead and understand what then happened, is this fair: that the reason that ultimately the Bounce Back Loan Scheme was launched, which offered 100% guarantee, so it took the commercial bank’s skin out of the game, the reason that that scheme had to be stood up and launched was because of the difficulty in getting the lending moving through CBILS, in part?
Sir Charles Roxburgh: I think that’s part of the reason. I think one of the things that we learnt is that, in a crisis like this, you need a full suite of product guarantee – loan guarantee products. And the CBILS, we learned, was actually a really effective product for larger small businesses and small mid-sized businesses. The average loan size was about 250,000 on a CBILS loan, whereas the average loan size on a Bounce Back Loan was around 30,000.
So CBILS actually proved to be an incredibly powerful product, but for larger small businesses and smaller mid ones.
Just to bring into focus – because we’ll talk about the difficulties, but we should do that in the context of how successful it proved. It extended 25 billion of loan support to these larger small businesses, 100,000 businesses benefited. It’s had much lower loan losses than expected. And contrary to what some people say, it’s had very low fraud experience.
Fraud is currently running at less than one quarter of 1% on CBILS. So the CBILS product, for that target market, has been extremely successful.
What it was not effective at was getting money very quickly with simple application forms to much smaller businesses. And that’s why we realised, the Chancellor realised, by mid-April, that we had a gap and we had a serious gap to fill at the businesses that were too small for CBILS. Even though CBILS was also quite difficult and slow, we had a bigger gap at the smaller – smaller end.
Lady Hallett: I appreciate, Sir Charles, it can seem that we’re focusing on the negative all the time. But that’s because we’re trying to identify where things, if they did go wrong, how things could be changed for the future. So I appreciate all of those points that you’ve made quite properly.
But concentrating on why CBILS did what you said it did very well, but didn’t do those other things as well.
Sir Charles Roxburgh: Yeah, yeah.
Lady Hallett: I think, is it right that CBILS was essentially built on a pre-existing platform, if you like, the Enterprise Finance Guarantee scheme platform?
Sir Charles Roxburgh: Correct.
Lady Hallett: So that was a pre-existing platform operated by the British Business Bank since 2009?
Sir Charles Roxburgh: Correct, correct.
Lady Hallett: And the reason you took that existing architecture and built on it was because, putting it bluntly, there was not time to build the thing from scratch. Is that fair?
Sir Charles Roxburgh: There wasn’t time to build something from scratch, but also, other than this issue of the volumes –
Lady Hallett: Yes.
Sir Charles Roxburgh: – it’s an effective product, and we also had input from the banking industry, who understood it. Forty people were already accredited for this product. So the banking industry, through UK Finance, who I know you’ll be hearing from, the input they gave to us was that this would be a good product to use because they understood it, they had the processes, and my view is it was the right product to use.
Lady Hallett: Yes, it existed, it worked, it was tested –
Sir Charles Roxburgh: Yeah.
Lady Hallett: – and lenders were in place and registered and –
Sir Charles Roxburgh: Correct.
Lady Hallett: – so on and so forth. But, and you’ve referred to it as the volume problem, it faced or ran up against the volume problem which, is this right, the sheer volume of applications was such –
Sir Charles Roxburgh: Yes.
Lady Hallett: – that it could – the existing architecture could not – (overspeaking) –
Sir Charles Roxburgh: There were a number of problems. One was that sheer surge in volumes. Secondly, the British Business Bank had 40 accredited lenders, but in order to expand access and make sure that every person who wanted a Bounce Back Loan could get one through their current bank or non-bank lender, they expanded entry to over 100, and it just takes time to onboard new lenders – and it should take time, it’s a complicated process to check their processes, check they’ve got the capabilities, bring them on board.
And so people who didn’t bank with one of the 40 lenders were frustrated that their lender wasn’t yet accredited. That was another problem.
Lady Hallett: Sorry, can I just jump in there just to pick up on that. Why would it matter who lent you the money? If you’ve got 40 lenders, and they’ve got enough cash to lend, why would it matter that you can only go to 40, and why would you want to expand it?
Sir Charles Roxburgh: Well, because it’s quite complicated opening a new business bank account. And that takes time. If you have opened a business bank account recently, it can take a bit of time to go through the verification – I mean, banks have, appropriately, to do a lot of checks. And you have to prove who you are, you have to get your utility bills, and all those – it’s different now, but back in 2020 you had to prove all those things. So telling people, “You can only get it but from one of these lenders” would have meant further delay whilst they tried to open a new bank account and not all those banks were open to new business accounts because they were having –
Lady Hallett: No – precisely. If these are obvious questions to you, I’m asking them so that everybody watching your evidence can follow these problems.
Sir Charles Roxburgh: Yes.
Lady Hallett: So it’s not as simple as just saying: well, you can apply to Barclays if you bank with Lloyds. It’s more a question of if you don’t have an existing relationship, you don’t have an account, that bank would need to make checks, that would take time –
Sir Charles Roxburgh: Yeah.
Lady Hallett: – and by the time all that’s been done, your business might have failed?
Sir Charles Roxburgh: Yeah, and in the end, we had over 100 lenders, British Business Bank did an outstanding job at accrediting a very, very wide range of bank and non-bank lenders, traditional lenders and new challenger banks and new innovative business models. So CBILS was the most widely available of all the loan schemes.
Lady Hallett: Again, why is it important that there should be a range of lenders from the perspective of the banks? So leaving aside the customers, if they’re not a customer of that particular bank, they need to open an account, that takes time. But from a banking sector perspective, is there an importance in having different lenders having access to this marketplace –
Sir Charles Roxburgh: Well, we had a very clear policy objective, which long pre-dated Covid. It had been part of the Treasury’s policy objectives under successive chancellors since I joined in 2013, which was to increase banking competition.
So it was a very clear objective of this Chancellor, as previous chancellors, to make sure that small businesses had a choice of who their bank was and that they weren’t constrained to a small number of banks. That was one factor.
The other factor was we wanted to make sure that these loans could be distributed throughout the United Kingdom. I know some banks that, like Danske Bank, only operates in Northern Ireland. So we wanted to make sure that there was very broad access and that we weren’t constraining bank competition.
Lady Hallett: Yes. In terms of the British Business Bank accrediting lenders who wanted to lend thorough this facility, that was an operational challenge for the British Business Bank, was it, as far as you were concerned?
Sir Charles Roxburgh: Well, your witnesses from the British Business Bank would be better placed to judge it, but it just takes time to onboard a new banking relationship. They have to go through checks, and all the processes have to be validated to make sure that they have the skills and capabilities to issue these guarantees.
The British Business Bank redesigned their processes at speed to accelerate that process. And they did that promptly, and that was one of the things that then helped speed up this process. So the British Business Bank and the participating lenders deserve huge credit for how they responded to these challenges, because we did get these problems fixed, and then, by the summer, these loans were taking five to six weeks, which is an appropriate amount for a product of this complexity and scale, and once we got these problems fixed, CBILS, the noise dropped away and it became a very successful product.
Lady Hallett: Was it appreciated, when you decided to, effectively, build this product on the Enterprise Finance Guarantee scheme, that these problems would rise?
So was anybody thinking about this at the outset and saying, “Well, if we use this platform we’re going to run into a volume problem. We’re going to run into an operational processing problem at the BBB, we’re going to run into the problem of there only being 40 lenders”, or did that emerge as learning from standing it up on that platform?
Sir Charles Roxburgh: Well, the – when we were talking about launching it, because we didn’t know we were going to have lockdown and this sudden surge, I can’t sit here and say we had thought about the volume problem at the time of the budget. Once it hit us, it was a very intense period. As you may even remember, the operational processes on CBILS was a regular feature every morning on the Today Business Programme segment, and the press were very active on it. So we were getting very real-life feedback on the problems around this launch.
And so our intense focus, and where the British Business Bank and the lenders did a great job was on fixing the problems once they became apparent.
Lady Hallett: So to remind ourselves, this was announced 11 March. So before the lockdown was announced, before the no non-essential travel, no non-essential social contacts announcement on the 16th.
Sir Charles Roxburgh: Correct.
Lady Hallett: So the decision to use the existing infrastructure of the Enterprise Finance Guarantee scheme had been taken before those developments in the health picture?
Sir Charles Roxburgh: Correct.
Lady Hallett: So therefore at that time you weren’t thinking about those developments –
Sir Charles Roxburgh: We weren’t thinking about the scale that we would face.
Lady Hallett: Do you think, looking back, that there was – you’ve talked about this featuring on the Today Programme, and the government was getting a lot of political pressure about this, do you think there was a gap between people’s expectations of what the scheme could deliver and reality, and that was a communication problem about what the scheme could or couldn’t do?
Sir Charles Roxburgh: Well, one of the things I’ve learned from multiple crises is that when you look back at them, you always reflect that you could have communicated better. And at the start of a new crisis, you think: we’re really going to work hard on communications because we’ll have to do it really well. And in the end you say: oh, we did work hard, but we didn’t do as well as we should.
It’s one of the things I’ve learned over the years.
This crisis was no different. CBILS was actually a very complicated product. I mean, these are big loans, up to 5 million. They have conditions, they’re complicated, they require underwriting. And in a crisis, political leaders need to give simple messages clearly, without lots of conditions and subclauses and small print. They need to give a simple, clear message. And therefore, it would have been impossible to convey some of the complex conditions that did apply to CBILS appropriately in a simple statement in the House of Commons or in, you know, the evening news announcements from Number 10.
So people may have got unrealistic expectations about how easy it would be to get this product, and I think a lot of the negative feedback we got were because small businesspeople understandably were frustrated that these products were taking time to be accessible.
That did influence the design of the Bounce Back Loans, where the Chancellor was very clear that this had to be very simple, very easy to apply for, and very quick to disburse the funds.
And as you heard from Matthew in the video, that’s exactly how that product felt to its target market in a way that CBILS did not.
Lady Hallett: And I don’t mean that this was done deliberately, but was there a sense in which, therefore, people might have felt that the CBILS had been oversold to them? The way it was announced, simply, they found that it didn’t actually enable them to access the money as easily as they thought they’d be able to?
Sir Charles Roxburgh: Well, I think I used the word “oversold” in my diary. I regret using that word and I don’t think it was oversold; I just think it was a very complex product. And at a time when people were understandably and appropriately looking to the government to deliver support quickly, this product was not moving fast enough.
Now, that – it wasn’t doing nothing. I mean, in the first six weeks, 11,000 loans or so were disbursed and 3 billion of valuers agreed. But against a market of 1.5 million small business that we, in the end, ended up having to help, this was a small intervention. And that is why it became essential to develop a new intervention to target the much broader market that CBILS wasn’t reaching.
Lady Hallett: I’m going to put up – ask for another entry from your diary to be put up.
25 March 2020, please, pages 34-35.
And I’m going to put this on the screen and really ask you whether – ask you about communication with the public, but also whether there were some internal communication issues about how CBILS should operate.
So this is 25 March 2020, and you say:
“Very difficult call with the [Chancellor] on the CBILS product. He is getting lots of incoming about personal guarantees. He said no personal guarantees. The team – and me – interpreted that as no personal guarantees on personal homes, which is the really toxic type of personal guarantee. When someone’s business goes bust, the bank then also takes their home. The team had said No Personal Guarantees on homes. In the rush there wasn’t enough clarity on our advice, and we were silent on personal guarantees on things other than your home. The [Chancellor] is furious (though mainly at the banks, not us….). Demands that we get it fixed. Then we discuss the rest of the problem of the gap. [Chancellor] wants us to do a CBILS Plus for bigger loans, and he is interested in some platform idea for preferred equity. And we’ll have a lot of special situations. He tells us to fix the guarantee problem within hours.
“Call the team, and do a download. They get the message and head off to sort out the problem. Hope they can fix it.”
Can you just expand on that?
Sir Charles Roxburgh: Sure, well, this, as you say, March 25th, this is the second day of the lockdown, and this is policy making in the thick of a crisis. The Chancellor had been very clear: he said no personal guarantees. And I and the team thought he meant no personal guarantees on principal private residences, which was a feature of the loan of the EFG. And what we hadn’t realised – in retrospect maybe we should, but we hadn’t realised he meant no personal guarantees on any other form of security.
And as you can see from some of the witness statements from the British Business Bank, those other forms of security were an important risk mitigant for these loans, because banks often take personal guarantees on things other than your principal home. You might have a second home, you might have a large art collection, you might have a yacht, you might have a large financial portfolio of assets. And the banks, not unreasonably, thought those they might be things they could secure the loan on.
So – but we – it was just a miscommunication, a misunderstanding, which is what happens in the thick of a crisis.
The Chancellor was very clear, and we got it fixed. And we had to work with the British Business Bank and the lenders. This confusion over personal guarantees was another one of the problems we had in the market, because some banks interpreted it differently. And so there was confusion in the market. But in the end, the resolution was to, in effect, draw the line at £250,000 loan, and, below that, no personal guarantees on anything. And then on, the bigger loans, the banks could negotiate some security on those loans.
Lady Hallett: I’m going to ask in a moment a couple more of your entries are put up relating to this, to CBILS. But before I put them up to illustrate the point, do you agree that Chancellor was frustrated with the banks, and the Chancellor felt that the banks were not taking their share of the risk, and not processing applications quickly enough?
Sir Charles Roxburgh: I’d like to put that in broader context. That’s what some of my diary entries say. The Chancellor –
Lady Hallett: Well, in fairness to you, I’ll put them up on the screen.
Sir Charles Roxburgh: Okay, fine.
Lady Hallett: Then you can explain rather than –
Sir Charles Roxburgh: Yep, yep.
Lady Hallett: Let’s have 30 March 2020, first of all, page 39.
“Frustrating day. Calls on the CBILS SME loan which is in bad shape. The [Chancellor] is totally bent out of shape on this – lashing out at the banks (better than lashing out at us officials). We are conceding on the issue of guarantees and will have to concede on the issue of ‘reverse discrimination’. CBILS was intended for SMEs who could not get credit but it is so attractively priced that businesses who can get credit want it too. The position is just not sustainable. We are going to have to concede, but it will be expensive.”
Just pausing there, that point about “businesses who can get credit want it too”, is this really a competition point? The businesses –
Sir Charles Roxburgh: No, this is the – it’s this phrase “reverse discrimination”. The basic principle behind any government-guaranteed product up until this point had been that if the business could get credit without a government guarantee, ie, it didn’t need a government guarantee, then it shouldn’t get a government guarantee. A perfectly sensible policy. And it meant that government guarantees, up to and including this first variant of CBILS, was intended to support those businesses who couldn’t otherwise get credit. Otherwise you get what’s called deadweight of handing out government guarantees to people who don’t need it.
The problem here was that, in this crisis, it was extremely difficult to determine whether a business was or wasn’t viable, with or without a credit, and whether they could or couldn’t have got one on their own merits outside of this crisis.
It just became an incredibly difficult thing for the banks to judge, so we had to lift that, but that resulted in a huge increase in demand from businesses who may not have needed one of these CBILS loans but now wanted to get one because they were more attractively priced than regular credit.
Lady Hallett: Yes.
Sir Charles Roxburgh: Can I just make a point on the Chancellor? I mean, I should put this in two points of context. First of all, throughout this crisis, Rishi Sunak was unfailingly polite and courteous and respectful of teams, incredibly appreciative of the work that officials were doing. He never lost his temper with us once. He was an extremely courteous man, as you all know from having seen him in public life. And I have absolutely no complaints about how he treated us. In fact, I think it was remarkable how calm and courteous he was, given the enormous load he was carrying.
I also know that he was deeply appreciative of the incredible work that the banks and non-bank lenders did in delivering these products, and both he and John Glen, the Economic Secretary, went out of their way to thank the banks for the work and their staff did for the work they did and their staff in delivering these products. Now, if I have recorded some, you know, in-the-moments comments where he was expressing frustration, I really would not take that out of context. I know he was deeply grateful to the banking industry for how they stepped up and delivered these products.
Lady Hallett: Thank you for that clarification, Sir Charles, and so you understand, I’m not going to these entries because of how you describe individuals or a conversation you’ve had with them, but really because they’re making the point that was live at the time.
Sir Charles Roxburgh: Yes, okay.
Lady Hallett: So let’s just pick this up on the 14 April, page 58, please. 14 April.
Sir Charles Roxburgh: Yep.
Lady Hallett: There we are:
“CBILS getting terrible press again …”
And pausing there, Sir Charles, taking your last point on board:
“… [Chancellor] on [the] war path. My view is that the banks are getting the flak (partly fairly, partly unfairly), but let’s leave it there for now. Only the banks can get us out of this mess by processing more loan applications.”
So explain, “partly fairly, partly unfairly”, why the banks were getting the flak and what part of that was fair and what part of that was unfair?
Sir Charles Roxburgh: Well, now we’re just starting – we’re just after the Easter break and we’re starting the second three weeks of the lockdown, any hope of an Easter re-set has faded. We’re now settling in for a long and difficult period, and frankly, by this stage, everyone was pretty tired and I, for one, hadn’t had a day off since the beginning of this crisis. So I really wouldn’t pay much attention to my somewhat short-tempered comments here.
I don’t blame the Chancellor for being demanding on us fixing these problems. They needed to be fixed. The banks were working incredibly hard to upgrade their operational processes, and rather selfishly, it was, you know – they were getting the flak rather than us Treasury officials but the flak could have been perfectly fairly shared around. What mattered was to get the problem fixed and, as I say, by this stage of the crisis people were already tired and certainly, in my case, we were a little bit frazzled at the edges so I really wouldn’t place much emphasis on this.
What mattered was to get this problem fixed – which it soon was. In fact, this was a turning point and the processing started to pick up from this point onwards.
Lady Hallett: I’m going to push you a little bit on this, because I just am interested in what part of this criticism is fair on the banks.
I’m going to 13 April, page 57, please.
It’s just that last part there:
“It’s the banks who are going slow.”
Sir Charles Roxburgh: I think I didn’t appreciate just how –
Lady Hallett: Sorry, let me just deal within the question.
“It’s the banks who are going slow. And the BBB is taking ages to authorise new participants.”
Now, there are two points there.
Sir Charles Roxburgh: Yes.
Lady Hallett: The BBB taking ages to authorise new participants, this is the additional lenders, is it?
Sir Charles Roxburgh: Yes.
Lady Hallett: Right. “Banks who are going slow”. In the context of the other entries I’ve taken you to, were the banks slow to get the money out of the door, really, is what I am – or did you think they were at the time?
Sir Charles Roxburgh: I would place very low weight on my perspective, because I didn’t have the full story as to – I’d been sitting at home by myself working on 12-hour Teams meetings through this period, so I didn’t have the full facts as to what was causing the delays in the – getting the loans out.
What I did know was that we were getting a lot of negative feedback that these loans were slow to be processed and that new lenders were being slow to be authorised. My judgement as to where that blame lies is wholly unreliable and I would not place much emphasis assist on it.
Lady Hallett: But if you’re the Treasury, if it’s not the banks and the British Business Bank, and there is a delay in lending, I mean you must have known where that delay was in the pipeline, surely?
Sir Charles Roxburgh: Well, it’s a case of are we looking to assign blame, or are we looking to fix the problem?
Lady Hallett: That’s why I’m asking these questions, Sir Charles, to find out: if something was going wrong, what was it?
Sir Charles Roxburgh: The problems, as I understand it, were twofold. One, that the processes for the EFG had been largely manual and worked fine at low volumes but didn’t work fine at high volumes, and therefore both the BBB and the lending institutions needed to be reengineering their processes to get them to operate at higher volume. And that just takes time.
Secondly, on authorising new participants, which was normally a process which would appropriately take – and the BBB will have these numbers – you know, two or three months, but not have the exact numbers, they were having to redesign that process to do it much faster.
Sitting where I was sitting, with a poor perspective on those operational challenges, I didn’t see how much was happening to fix the problem. But the problem was being fixed, and from this day onwards things really started to accelerate.
I think over the next ten days, 11,000 loans were approved. So things really started to accelerate over this. It was just that the first three weeks had been slow.
Lady Hallett: And the scheme in fact had been modified on 3 April, I think, and had been widened; is that right?
Sir Charles Roxburgh: Yes.
Lady Hallett: So there had been changes – it was an iterative process –
Sir Charles Roxburgh: Yes.
Lady Hallett: – in terms of this scheme, as it went.
But without looking at whether anybody was to blame, or, if there was blame, where it lies, if we were here again, CBILS you’ve described as a product that, for those who it was really designed to help, worked very well.
Sir Charles Roxburgh: Mm.
Lady Hallett: But it had these issues with launch, that then necessitated the need to bring in the Bounce Back Loan Scheme. We’ll come on to that.
Sir Charles Roxburgh: Mm.
Lady Hallett: If we were back in this position again, what is the learning here? Presumably you’d have a wider pool of lenders at the outset, would you?
Sir Charles Roxburgh: Well, the learnings, I would say, first of all – and my understanding is that this is now in place. I mean, before I left the Treasury, three and a half years ago, we were working on lessons learned on all these loan schemes. I know the British Business Bank has done a lot of work with this. And because I haven’t been there for three and half years, I’m not the best person to say where it stands now, but I believe that this is – where – what exists now, is that you would want to have a scheme like this. In fact in my witness statement you’d want to have a suite of products covering small businesses to the very large businesses, where you are confident that you’ve got scalable operational infrastructure that can handle a very unpredictable level of volume, and can do that in line with the latest fraud checks and the latest financial payments infrastructure, so that it’s ready to go.
You can’t leave it on the shelf and let dust accumulate, because IT systems need to be kept constantly up to date. And you’d want to have that package on the shelf and ready to go to work at multiple levels. And I believe that is the case.
In terms of the optimal number of participating lenders, that’s an interesting question. Is it as many as 100? Is it 40? I think that’s something that you would think about as you go into this crisis. I’ll leave it to others to judge what the optimal number is to have on the shelf. It was very useful to have 40 ready to go on this product.
With Bounce Back Loans, because it didn’t exist, there was nobody to begin with, and then there were 23 lenders at launch, I think, or maybe 20 at launch, and then a few more, and that proved the right number for that product launch. So it was different for the different products.
And then for CLBILS, which was the most complicated £200 million loan, you only had four lenders because you needed to have extra credit skills and extra validation of your credit models to lend that amount of money. So the right number would depend on the level of the loan guarantee.
Lady Hallett: I see. So it’s not just a question of just get as many people as you can registered on the platform, it all depends on what the platform is doing –
Sir Charles Roxburgh: Well, we very explicitly limited CLBILS, the upper tier, the 50-200 million tier. Because we were so concerned about the credit risk there, we explicitly limited that to those banks that had had their credit risk models approved by the PRA, which was a very narrow set of lenders, and that was a good proxy for us to convince us that they had the credit skills to lend that amount of money with a government guarantee on it.
Lady Hallett: Because you’re talking about very large sums of money and the government’s skin in the game in those loans is increasing and increasing –
Sir Charles Roxburgh: Well, £180 million, on a big CLBILS loan.
Lady Hallett: Yes. And as you have said, although you are not having to raise the money in advance, if it’s defaulted upon, then there is a need to raise the money.
Sir Charles Roxburgh: Yes.
Mr Wright: My Lady, it’s a little before the break but I’m going to move on to a new topic so I’m entirely in your hands. It may be an appropriate time to take the break now.
Lady Hallett: Certainly. You made me drop my pen, Mr Wright. I shall return at 3.30.
Mr Wright: Thank you, my Lady.
(3.14 pm)
(A short break)
(3.30 pm)
Lady Hallett: Mr Wright.
Mr Wright: Thank you, my Lady.
Can I check, please, that you can see and hear us again?
Lady Hallett: I can. Thank you.
Mr Wright: Thank you very much.
Sir Charles, can we move, then, to Bounce Back Loans. And accepting that this was not your area of policy, but of course you remained a member of the Executive Management Board –
Sir Charles Roxburgh: Yes.
Lady Hallett: – and had oversight, and so it’s in that spirit that I’m asking these questions.
Advice was given to the Chancellor, we understand, on 21 April 2020. And the Bounce Back Loan Scheme, as it came to be known, was a 100% guarantee scheme which was intended to see a rapid dispersal of loans within 24 hours of application.
I don’t think you were involved in giving that advice yourself to the Chancellor; is that right?
Sir Charles Roxburgh: Correct, but I did see it and I’ve studied it since then, while I was preparing for this Inquiry.
Lady Hallett: Yes. You’ve talked about improvements that were made to CBILS and things got better over time. First question, really, if things were improving in CBILS, and the number of lenders, for example, was increased, why would you need a Bounce Back Loan Scheme at all?
Sir Charles Roxburgh: Well, I think for two reasons. One, it was not effective for smaller loans. And particularly loans below £25,000 had additional checks that needed to be performed under the Consumer Credit Act, which the lending institutions couldn’t not do, it was the law that they had to do them, and so CBILS was never going to be effective for the smaller, below 25,000 loan area.
And then for larger loans, above 25,000 to 50,000, the sheer demand of, as we found out, the number of small businesses who needed them was far in excess of the capacity of CBILS. I mean, CBILS at the end, when it was all operating smoothly and very efficiently, made 100,000 loans. We had 1.5 million loans to small businesses under Bounce Back Loans.
So CBILS was not reaching the market where there was acute need, and it was clear by mid-April we were having this input from all the small business lobbies, the Federation of Small Businesses, the Chambers of Commerce, and others, that hundreds of thousands of small businesses were facing acute cash flow problems and we needed to act, and act fast.
And the Chancellor was determined to have a product that would be easy to apply for, swift to distribute the funds, and would reach that large target market, and CBILS could never do that.
Lady Hallett: Right. So far as the Consumer Credit Act requirements were concerned, it would have been feasible, presumably, to pass an act or regulation to remove those requirements?
Sir Charles Roxburgh: Well, that’s what we ended up doing for the Bounce Back Loans. But even so, the CBILS loan was a complicated product. It required underwriting and checks. And so it was always going to take five to six weeks to approve it. So that complicated underwritten product was never going to meet the Chancellor’s need, and a very clear message from the small business community, that they needed something that was easy to apply for and quick to disburse.
CBILS was quite complicated to apply for, it was a large loan, whereas Bounce Back Loans, as you heard from Matthew in the impact video, was very easy to apply for, and that was a key part of its success.
Lady Hallett: Why was it necessary to make it 100% guaranteed, given that that, we’ll come on to, was one of the biggest risks in the scheme? Why do that? Why not just make it quick but still 80%?
Sir Charles Roxburgh: Well, because the banks wouldn’t have taken on that risk on a loan that they didn’t have any control over underwriting.
Lady Hallett: So, ultimately, even the Treasury can only do so much, and the banks, as commercial institutions, can still insist on doing their checks and assessing risk. You can’t force them to take a risk?
Sir Charles Roxburgh: No, they’re – you know, they’re free market institutions, and they were incredibly responsible in this crisis and they really stepped up and did a very valuable job in processing the CBILS loans, where they did have credit risk, but also the operational challenges of Bounce Back Loans and the fraud collection responsibilities that they continued to have. The banks had to do a lot to make Bounce Back Loans a success, but it was unreasonable to expect them to take credit risk on a loan that they could not underwrite.
Lady Hallett: Now, we know that the Bounce Back Loan Scheme was stood up very quickly, under pressure. You talked about the lobbying that was going on of government by CBI, other organisations. But there were significant risks that went with action, weren’t there, in terms of fraud and error?
Sir Charles Roxburgh: Well, the Bounce Back Loan Scheme is a high-risk scheme, but it’s a high-impact scheme, and it’s always important to lay those against each other.
I would absolutely want to clarify that the risks were known in advance. They were not as a result of developing this product at speed. These risks were very well documented and identified and the Chancellor received very good advice.
I’ve read the Treasury advice which reflected input from the British Business Bank and UK Finance and BEIS. It’s very good advice that does what excellent Civil Service advice should do: it takes the objective the Chancellor has set, sets out the options for delivering it, the risks and the costs, and then makes a recommendation. That advice stands up very well five years later.
And the estimates of the cost actually are pretty much spot on in that early advice. So I think it was really impressive that the Treasury team, with support from the British Business Bank experts, gave the Chancellor the advice he needed to understand the costs of this scheme, which he appropriately balanced against the very high impact of this scheme.
Lady Hallett: Just to put that into context, so far as costs were concerned, CBILS, 9.51% of guarantees were paid out, and, as you said, 0.25% flagged as suspected fraud. Bounce Back Loan Scheme, 25.77% of guarantees paid out, and 4% flagged to –
Sir Charles Roxburgh: Yes, I believe that 4% is part of that first number.
Lady Hallett: Yes.
Sir Charles Roxburgh: And the advice to the Chancellor that went up said that this scheme would cost between 30-50% of the face value, and I think the figure is 14 billion over six years.
Now, I would also put that in context by thinking about the impact, and there are two ways to think about the impact. The first is a very rigorous and analytically robust analysis done for the British Business Bank by London Economics, and they have identified the value added of this scheme in economic terms, which is £15-£36 billion of value added. So that needs to be set against the cost.
They also estimated the number of businesses who would have failed if we had not done Bounce Back Loans. And in rather precise numbers they say 153-642,000 businesses. So let’s just say hundreds of thousands of businesses would have failed. That’s one way to think about it.
The other way to think about it is to go back to Matthew in your impact statement about how he explained this was easy to apply for, he got the monies quickly, and it gave him security and a safety net, and peace of mind. And so multiply Matthew by 1.5 million small business owners across the UK, that gives you the impact of this scheme.
So yes, it was high risk, but it was very high impact.
Lady Hallett: No one wants businesses to fail, Sir Charles, I’m sure. Equally, I wouldn’t have thought any right-thinking person would want public money to be wasted by going to fraudsters or being given out erroneously. And so really, what I’m interested to explore with you is whether there was a way, or in a future emergency would be a better way, of ensuring that businesses didn’t fail, so having a high-volume, easy-access scheme that, at the same time, did not have such high levels of fraud and error.
Sir Charles Roxburgh: Yes.
Lady Hallett: And I just want to pick up on some of the things. I think some of them you’ve touched on yourself, and the first is that there was a gap that was known about at the time of this scheme that could have been closed previously by government, wasn’t there, in terms of a vulnerability and the lack of verification processes at Companies House at the time?
Sir Charles Roxburgh: Well – well, yes, there was a gap that was known about, and yes, it was a gap that colleagues and I in the Treasury and the Home Office, working together collaboratively on a joint effort on economic crime, with expert input from outside experts on economic crime, we had put together the Economic Crime Plan of 2019 which had identified – it was well known but we brought this as a formal recommendation to fix that vulnerability.
Now, unfortunately, fixing that vulnerability required primary legislation. And to get that primary legislation passed, from the time we made that recommendation in 2019, you may remember there was certain political turbulence in 2019, and then a general election at the end of 2019, and then the Covid crisis. So there was no way that that legislation could have been passed in time. The legislation was eventually passed in 2023, and it is only now that Companies House is putting in place those checks.
So yes, that vulnerability was known about. We had flagged it in 2019. But there was no way possible to pass a legislation and close the gap during the lifetime of this scheme.
Lady Hallett: No, but as I say, looking ahead, legislation has now been passed.
Sir Charles Roxburgh: Yes.
Lady Hallett: Therefore, that gap, one would hope, has been plugged –
Sir Charles Roxburgh: Yes, and I’d put the gaps into three categories. The first category is those vulnerabilities that are just unavoidable given the nature of this scheme. There will always be some irreducible level of fraud in a scheme that is built on self-certification. That is just an unfortunate fact of life, and that any future Chancellor who launches a scheme with some element of self-certification will have to judge that cost against the benefit.
There’s a second category of vulnerabilities that in this time, were unavoidable, like Companies House, but are now being fixed and should be fixed ahead of any future scheme. So we won’t get those ones again.
And the third type, the vulnerabilities that we knew about at launch, and the British Business Bank fixed very quickly or as quickly as possible after launch. And a good example of that is the duplicate loans issue, where they built a system from scratch to connect the 20-something lenders together to make sure that they exchanged information, and they did that in eight weeks. And anybody who knows anything about developing IT systems in financial services would recognise that eight weeks for a complex system to connect multiple financial institutions is a very impressive achievement.
So they did that, in my view, as fast as you could reasonably expect.
Going forwards, as I put in my witness statement, I am confident that a Bounce Back Loan Scheme could be implemented with much higher fraud protections, partly because of all the things that have been fixed now, like Companies House, like the level of financial crime protection in the banks, like this duplicate loan scheme, but also, future advances in AI and all those other modern techniques for fraud detection have moved on dramatically in the last five years.
So I would expect, if there was a similar 100% loan guarantee scheme in a future crisis, this fraud issue would be much reduced but it would not be eliminated.
Lady Hallett: But a 100% loan guarantee scheme generally, do you view that as a scheme of last resort, in true emergency? It’s suboptimal in all circumstances?
Sir Charles Roxburgh: Yes, and that’s what I called it in my witness statement. I think it should be in our toolkit for a crisis response. It has huge benefits of speed of distribution and speed of ease of access. But it will always have high costs, particularly – putting aside the fraud risk, which is four points of this cost, 20 points at the moment, and likely to go higher, is from loan losses. Unsecured lending to small businesses over six years, or in some cases ten years, this is an inherently risky form of lending.
So any future Chancellor who takes on 100% of the credit risk, even if you’ve eliminated the fraud risk down to a very small irreducible level, they will still be looking at probably 25, maybe more, per cent of loan losses on these. Because small businesses just fail. That’s the natural part of a healthy economy, that businesses form and fail.
So this will always be a very expensive intervention.
Lady Hallett: Right. And ultimately, would you say it’s all a question of assessing the nature of the shock that you’re facing, the extent of the crisis, and it’s going to be a very expensive intervention, you need to go into it with your eyes open to that, but you say that there are certain circumstances where it may still be appropriate?
Sir Charles Roxburgh: Absolutely. That will be for the Chancellor of the day to judge. And looking back at this, I think Rishi Sunak actually made the right call. It was a high-risk intervention, it was a high-impact intervention, and the people who say he should have delayed it for two months to fix these problems, they would have to answer for the hundreds of thousands of small businesses who failed. I think the Chancellor made exactly the right prioritisation to protect those hundreds of thousands of small businesses.
When you think about the impact of our collective interventions in preventing avoidable firm failure, the rate of firm failure during 2020, the deepest, economic crisis we had ever failed (sic), was the same as it was in 2019. That demonstrates how effective these interventions were.
Lady Hallett: Can I pick up one other issue, and you’ve touched on part of it. This was a policy being driven very much from the Treasury?
Sir Charles Roxburgh: Correct, the Chancellor.
Lady Hallett: Yes, the –
Sir Charles Roxburgh: The Chancellor is the decision maker. We advise. But yes, the Chancellor.
Lady Hallett: Yes. Who sits in the Treasury, but yes.
Sir Charles Roxburgh: Yes.
Lady Hallett: The Chancellor is driving policy. British Business Bank’s dealing with delivery?
Sir Charles Roxburgh: Mm.
Lady Hallett: BEIS is the accounting officer – or the accounting officer for the British Business Bank sits in BEIS?
Sir Charles Roxburgh: Yes.
Lady Hallett: That was suboptimal, wasn’t it, in terms of the organisation there, that policy’s coming from one area, the accounting officer is in a different department, implementations being done by the British Business Bank?
Sir Charles Roxburgh: I am – put in my witness statement that I felt a lot of sympathy for my colleagues, and there were three at this time: Alex Chisholm, and then Sam Beckett interim, and then Sarah Munby, as the new permanent secretary at BEIS. I did feel sympathy for them having to take personal accountability to Parliament.
Being an accounting officer is a serious obligation. You take personal accountability for the propriety, regularity, feasibility, and value for money for a policy decision, and I felt this put them in a difficult position, where they were having to take that personal accountability for decisions that had been taken in another department on advice from another set of officials.
That said, it didn’t make a lot of difference. The policies were implemented, the policies were effective. They would not have been different in any way had, for instance, I been the accounting officer for these policies.
Now, we had done another policy two years earlier, where all the decisions had been taken by the Chancellor of the day based by advice from the Treasury, a policy initiative that I led called the British Patient Capital review, a policy driven entirely by the Chancellor and the Treasury, implemented by the British Business Bank. And that worked fine. We had more time, it’s been a very successful policy, and – that worked fine.
So, my personal view is that, in a crisis, we should have the flexibility to be able to adjust where the accounting officer responsibility sits. I would have been happy to take that on for the design decisions here. Once we moved into delivery, then I think that falls more naturally to BEIS.
And I would not – going back to your opening statement, I would not look at structural change to address this issue. Structural change in government, as in the private sector, is often overused as a tool to effect organisational change. There is a long history of machinery of government changes, as they are known in government, which have been implemented with much higher costs, much more delay, much more disruption than expected, and far fewer benefits.
So I would not recommend a machinery of government change for the British Business Bank. It has to work well with both the Treasury and with BEIS, and it does. And if we need a small fix to adjust the accounting officer responsibilities to where the decision making is, I’ll leave it to today’s leadership with the Civil Service to work out how to do that. But that’s a much simpler fix than moving responsibility for the British Business Bank.
Lady Hallett: Accepting all of that, you wouldn’t have been against a proposition that temporarily, accounting officer responsibility could have shifted to the Treasury for this scheme?
Sir Charles Roxburgh: Not at all.
Lady Hallett: No. So that could be done on an ad hoc basis, if required. From a Parliamentary democracy perspective it gives accountability where it lies, doesn’t it, in terms of policy?
Sir Charles Roxburgh: Yes, although on these issues, as I’m now no longer a civil servant, that would be for, actually, the permanent secretary of the Treasury and the chair of the Public Accounts Committee would probably need to agree that sort of change, but in my view as now a private citizen, that would be a lot simpler than moving responsibility for the British Business Bank.
Lady Hallett: Yes, in ordinary, steady-state times.
Sir Charles Roxburgh: Yes.
Lady Hallett: But can I just pick up a second part of what you said and that’s about delivery, because if the policy is being driven by the Chancellor, doesn’t the fact that the British Business Bank is sitting in a different department separate policy from delivery, whereas if the bank had been supervised by the Treasury, they would have had that easier access to the Chancellor, direct lines of communication, and you would be putting together delivery with policy?
Sir Charles Roxburgh: I don’t think it makes any difference. We worked very closely with the British Business Bank on delivering these loans, and on delivering British Patient Capital. I had a very close relationship with Keith Morgan, the chief executive and his successor, Catherine Lewis La Torre. We talked to them ahead of our advice to the Chancellor. I don’t think there was a problem there. And where there were challenges of delivery, as we talked about at length, with CBILS, those were not because Keith Morgan or one of his top team had not been in the room with the Chancellor. They were because there were difficult issues that, faced with the extraordinary crisis, emerged.
So I don’t think that separation is an issue.
Lady Hallett: All right. Can I move on, then, to the Covid Corporate Financing Facility, CCFF, and I just want to pick this up reasonably briefly. This was a facility for the large firms, provided via the Bank of England. It’s what you, I think, were discussing with the governor on the weekend of the 15th, is that, of March; is that right?
Sir Charles Roxburgh: March 14, 15, yes.
Lady Hallett: It provided almost £38 billion of support to more than 100 of the United Kingdom’s largest firms and employers, no losses on the programme, we understand. It may therefore be unsurprising that you consider that to have been a very successful scheme. Can you just briefly explain why you view it as being such a successful scheme and what it did?
Sir Charles Roxburgh: The scheme started out, and it was very successful against its objective, it started out to prevent what we were deeply concerned about in mid-March, which was a drain of liquidity from the banking system. We were getting intelligence that large companies were perfectly appropriately and rationally contacting their banks to draw down on their multi-billion-pound credit facilities. Those companies were seeing this crisis coming and wanted to build their cash reserves. So it made sense individually for them to do that.
However, if all large companies simultaneously draw on their large credit facilities at the bank, we could have had a very unhelpful drain of liquidity out of the banking system. So the purpose of this was a monetary policy intervention to prevent that drain of liquidity and provide an alternative source for large companies that might need liquidity.
So the actual value of this scheme came from both the money that was drawn, but also the undrawn facilities. So there was 100 billion in total, of which only 38 was drawn. And this scheme worked extremely effectively in preventing that drain of liquidity out of the banking system when it was introduced.
Now, that concern passed because the financial markets settled down as we moved into April and May. So that immediate concern had passed. And then the scheme evolved into something slightly different, which was a source of credit to large companies that needed support to trade through.
And as that need evolved, we also faced growing public pressure on transparency and conditionality. Who was borrowing this money, and what conditions were we imposing on them? And the Chancellor felt that strongly, and he felt it was appropriate, at this point, to introduce new conditions on the scheme so that we were transparent about who was using it, but also some members of the scheme wanted to be transparent, because they wanted to reassure their other lenders that they had access to liquidity.
And so we changed the scheme under the direction of the Chancellor with the agreement of the governor and the Monetary Policy Committee to introduce transparency and introduce restrictions on dividends and introduce restrictions on executive pay. We’d changed the rules of the scheme halfway through. Therefore, it was only fair – in fact it was probably only legal – to give people a chance to repay their money and leave the scheme if they didn’t want to participate on the new rules, which some lenders did.
But if I could just illustrate the value of this scheme, with a couple of confidential unnamed examples. There was one really important retailer, employing 10,000 people. Their auditors would not sign their going concern statement. They had already drawn 600 million from this facility, and the auditors would still not sign their going concern statement. We had to advise the Chancellor on whether to extend another 200 million of credit to help this important retailer, employing 10,000 people, to trade through what would have been a very serious threat to their financial stability.
So the Advisory Credit Committee made that recommendation to the Chancellor, and this was extending 800 million to a retailer that was not currently trading. So this was a bold credit decision. Made the decision, the company traded to, very successful, the money was entirely paid back. Those 10,000 jobs were not threatened.
So this was a really important scheme.
We also used it to provide support to some of our largest iconic companies, and it was a very important support of continuing credit and backstop facilities through the rest of the crisis.
Lady Hallett: Okay, thank you.
Can I just ask you about one issue just to get you reflection on this. This comes from the governor. Mr Bailey has suggested in his statement, and so I ask you for your view, given you worked closely with him to develop the scheme, whether, for a future scheme, if there was a future scheme, consideration should be given to public disclosure of usage from the outset? He supports that.
Sir Charles Roxburgh: Yes, well, what I put in my witness statement is I think next time the Chancellor of the day should think about the two variants of this scheme. This scheme started, as I explained, as a monetary policy intervention, funded with central bank reserves, which means that we didn’t even have to borrow the money on the gilts market, because it was intended to prevent a drain on liquidity. And as the governor also says in his statement, it’s a tenet of central bank interventions that they are anonymous.
So that’s one version of the scheme.
Another version of the scheme might be one that is transparent and with conditionality, and all the disclosure requirements that the Chancellor of the day wants to put on it. But that might not qualify as a monetary policy scheme and might need to be funded with public money. So I think that’s the sort of choice that people should go through, and it would not be for me to say to a future Chancellor what they should choose to do, but my personal view is they should think about both, because both types of scheme could have a role. They are different.
We started with one and we evolved to the other, and I think that shows flexibility and nimbleness in a crisis. But next time, if you wanted to disclose the names upfront, the Monetary Policy Committee of the day and the governor of the day would need to be comfortable about doing that with a monetary policy intervention.
Lady Hallett: Okay, thank you.
Sir Charles, then can I finally, in terms of my questions, come on to your reflections. And accepting all of the caveats you’ve put in place about your diary, and accepting that I’m sure it must be slightly uncomfortable to hear thoughts captured late at night repeated in the hearing room, you have made it clear in your diary in a number of entries how well you felt the Treasury was being led by the Chancellor, describing him as smart, engaged, quick, courteous and appreciative in one entry, for example.
Sir Charles Roxburgh: Mm.
Lady Hallett: And you’ve also made it clear in your evidence today that you were impressed – hugely impressed, is how you put it – with the leadership shown by the Chancellor. So you’ve given your reflections on leadership in the Treasury. And also, we’ve picked up on how hard everybody worked to stand all these schemes up under intense pressure, short period of time, very quickly.
But looking ahead, so acknowledging all those things that went well, and that people stood up to the challenge, what would be your reflections, having lived through this in the Treasury as number 2, as to how we could be better prepared for a future economic response?
Sir Charles Roxburgh: Well, I think it’s important to put the lessons learned into three categories. And I think the first is to learn lessons from what worked well. And I know the British obsession is always with what didn’t work so well, but there were a lot of very successful schemes – yes, including furlough, but not only furlough – many of which we haven’t talked about today at all, that were very successful, and which saved large businesses: the Culture Recovery Fund we haven’t talked about; the events insurance scheme to restart the creative industries we haven’t talked about; CLBILS, very successful scheme. There’s a long list of very successful schemes which delivered impact.
So I think we can learn lessons from those schemes and make sure they are ready for use again, because they were very successful.
We should also learn lessons from what we did not do. And again, we haven’t talked today about what we did not do. Some of the most difficult decisions were decisions not to provide support.
And I’ll give you one example of that without naming names, you’ll have seen it in my diary, I had to call the chief executive of one of our most iconic companies, and tell him that we were turning down his multi-billion pound request for loan support. It was a difficult call. It was the right call, because we knew they actually didn’t need it and would survive without billions of pounds of government support. And why did we know that? We knew that because we had a really rigorous process called Project Birch, which we haven’t talked about, which I commend to the Inquiry.
This was a process involving colleagues across Whitehall to evaluate all the requests we got from large companies for government support. It was analytically rigorous, objective, evidence based, free of any political interference, and allowed us to turn down billions of pounds of requests of support from companies that, in the end, didn’t need it.
That was a real success and we can learn from what we did not do.
As an aside, we did one loan of that which saved a Welsh steelmaker which employed 1,800 people. So that was a success there.
And then the third area that we can learn lessons from is, as we’ve discussed today, is what didn’t go so well. So, absolutely, we should learn lessons from that. I tried in my witness statement to be very candid about what didn’t go so well, and I’m highly confident that in the now nearly four years since this crisis began to wind down, the Treasury has done a lot of work on that.
It started before I left, and so yes, we should have a full suite of loan guarantee products on the shelf ready to go with appropriate controls and appropriate fraud protections in place. I’m confident that the Treasury and the British Business Bank and BEIS have that in place.
Yes, I think we could work on the communications around those products, because they’re complicated to announce in a crisis.
Where I am less convinced of changes is to focus on some of the minutiae of Whitehall process. And I think the thing I’d like to leave the Inquiry with is that what really matters in a crisis is to focus on outcomes and impact. It’s not always a pretty process, working in a crisis. We didn’t get everything right. It was not perfect. But perfection is not a relevant standard in a crisis. Impact is. And so, as you think about what would make a material difference to a future crisis, my view is it will be a few, small big things. These big schemes, either those that worked well, that stopped us doing things that we didn’t need to do, or that had impact and could be better next time. A few big things focused on impact and outcomes and not the minutiae of Whitehall process.
And I think if that’s where we get to, I think a lot of that has already been done by the Treasury, but then I’m confident that my successors – I hope they never that have to live through something like this, but if they do, I’m confident they will handle it extremely well. Thank you for the time today.
Mr Wright: Thank you very much, Sir Charles. Those are my questions.
There are, I think, my Lady, some Rule 10 questions.
Lady Hallett: There are. Thank you.
Ms Beattie.
Ms Beattie will just be to your right.
Questions From Ms Beattie
Ms Beattie: Thank you, my Lady.
I ask questions on behalf of National Disabled People’s Organisations.
You said at the outset of your evidence, Sir Charles, that you’re a member of the Executive Management Board –
Sir Charles Roxburgh: Yes.
Ms Beattie: – which set the strategic direction of the Treasury, and you tell us in your statement that that considered issues of equalities and vulnerable people.
Sir Charles Roxburgh: Mm.
Ms Beattie: What sources of information and data were made available to the Executive Management Board and did the board in fact refer to and assess in its discussions about equalities and vulnerable people and in particular the impact of the pandemic on disabled people?
Sir Charles Roxburgh: Well, I think it’s important to remember that EMB was a management board. We didn’t do policy formulation. So our responsibility was to ensure that our colleagues across the Treasury had the capabilities, skills and training in order to formulate policy and deliver against our collective obligation, to consider equalities under the Public Sector Equality Duty.
And so our job, which we took seriously, was to make sure that we had the processes and training in place for those pieces of advice. And ordinarily, any piece of advice going to the Chancellor would have considered the impact on individual groups.
So we had different toolkits to support them doing that. We had different checklists. We provided tools for them to make sure that our teams had the skills to do that. And on the Covid Response Board, we had a subcommittee of that which looked at the impact on vulnerable people.
EMB did not look across the board across all these policy areas, because not all of them were evaluated by the Treasury. So the loan schemes which we’ve been talking about today, those evaluations, those equality impact assessments were done by the department of business. They did those evaluations, we can talk about those in a minute.
So EMB’s responsibilities were managerial, to make sure that the teams had the responsibilities to fulfil their duty and give the Chancellor or the relevant minister the advice that included the appropriate equalities assessment.
Ms Beattie: Right, just to be clear, so when you say were a particularly encouraged in your – that the EMB discussions of the Covid crisis considered those issues, it was about, as you say, making sure that the team had those tools –
Sir Charles Roxburgh: Yes.
Ms Beattie: – rather than any discussion by the board itself; is that correct?
Sir Charles Roxburgh: Well, what we did, we didn’t get into – EMB never sat down and, as it were, critiqued the furlough policy or critiqued the loan policy. But we were keen to make sure that these policies – we wanted updates on the policies, and so in those discussions, for instance I remember, you know, it was reassuring to know that the loan programmes had been equally distributed around the whole of the geographic regions of the UK and that 6% of the businesses were in Scotland and they got 6% of loans. But I don’t remember the formal management information system that would have reported the impact on different segments of people. That would have been looked at more by other parts of the Treasury in terms of thinking about the impact of specific policies.
Ms Beattie: And dealing with those business support schemes, in your statement you say that the department did take significant care to ensure that socially and economically vulnerable groups, including those with protected characteristics, were accounted for and protected during the pandemic, but that your work on those business support schemes saw less targeted consideration of vulnerable and protected groups. Why did that work on business support schemes see less targeted consideration of protected groups in, in particular disabled people?
Sir Charles Roxburgh: Well, we were focused on the schemes I’ve been talking about today on preventing avoidable business failure. And our thinking there, in respect of disabled and vulnerable people, was that it’s a very sad truth that if a disabled person becomes unemployed, it’s much harder for them to re-enter the workforce. And therefore by preventing avoidable business failure and
preventing unnecessary job losses for those disabled and
vulnerable people in employment, we were doing, through
these loan schemes, the best possible thing we could do
for those disabled people in work, which was to keep
their business afloat and to keep their job safe.
And that meant that for these loan schemes, by doing
that, we were avoiding the terrible scourge of
unemployment, which is awful for everybody, but the cost
of which falls particularly harshly on disabled and
vulnerable people who find it harder to re-enter the
workforce. So that’s why we focused on protecting the
companies and through that, we, I think, protected
disabled people in work.
Ms Beattie: So it was through that general approach rather than
a targeted consideration or intervention, specifically
directed, for example, at disabled people who faced that
greater risk of economic scarring that you mentioned?
Sir Charles Roxburgh: Well, because we were – these schemes – and this is
only part of what the Treasury were doing. Other
colleagues were working on other interventions that were
more focused on the labour market and they’ll be better
placed to talk about those interventions, but the
firm-specific interventions, we could not provide
a different loan to a business that did or didn’t employ
more disabled people because we didn’t have that information, and it was important to provide support to the businesses quickly and efficiently.
But because disabled people in the workforce – and almost one in seven people in the workforce have a disability, we were saving hundreds of thousands of jobs, and therefore tens of thousands of disabled and vulnerable people benefited from that. But we weren’t targeting it to one type of business versus another due to the proportion of disabled or vulnerable people in that business.
Ms Beattie: Thank you, my Lady.
Lady Hallett: Thank you very much, Ms Beattie.
That completes our questions for you, Sir Charles. I’m really grateful.
Obviously it was a really tough time for you and your colleagues and you’ve obviously given a great deal of thought not only to what you were doing at the time but also to helping this Inquiry, so I’m very grateful. And obviously if any former colleagues of yours have helped in preparing your witness statement.
You’ve mentioned a number of times that we haven’t covered something. Please rest assured that just because we haven’t dealt with it in oral evidence does not mean the Inquiry will ignore it. We take into account the whole mass of evidence that we’ve gathered.
So I’m really grateful to you and I’m sorry it’s
been such a long day for you.
The Witness: No, I’m very happy to have been of help.
Thank you for the opportunity.
Lady Hallett: Not at all.
Very well, I think that completes today’s hearing,
I think, Mr Wright?
Mr Wright: It does, my Lady. That completes the evidence
for today.
Lady Hallett: Thank you very much.
10.00 tomorrow, please.
(4.12 pm)
(The hearing adjourned until 10.00 am the following day)