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DCMS handling of COVID loans criticised as PAC warns of rugby union accountability gap
Report finds DCMS overly optimistic in expectation that all funds will be recouped amid high uncertainty over repayments.
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- Read the report (PDF)
- Read all publications related to this inquiry, including letters to and from the Department of Culture, Media and Sport
- Public Accounts Committee
The Government’s management of culture and sports sector loans was weak from the start. In a report on the Department for Culture, Media and Sport’s (DCMS) management of COVID-19 loans, the Public Accounts Committee warns that DCMS is being overly optimistic in expecting that all funds will be recouped, with a high degree of uncertainty remaining over how much of the loan book will ever be repaid.
With lockdown requiring culture and sports organisations to close, DCMS lent £474m to 120 borrowers between 2020 and ’24. At October 2024, it had received £41m back, representing 97% of expected repayments. Nine borrowers, collectively receiving loans of £46m, had become insolvent, and over half had still to make any repayments. Loans worth over £400 million were outstanding.
The report warns that future repayment is put at risk by DCMS’ need to maintain the financial viability of the sectors to which it has given loans. The PAC’s inquiry finds that DCMS is overly optimistic in expecting all outstanding loans to be repaid, despite being unclear about what actions it would take for borrowers in financial difficulties. It also highlights that the cost of managing the loans has been significant at £17m so far, with DCMS unable to say when the cost of managing the loans in-house would start to exceed the level of repayments received.
The PAC calls on DCMS to assess long-term options for its COVID loans, including their outright sale, and to demonstrate a tough approach on behalf of taxpayers to managing those borrowers in trouble.
The inquiry scrutinised loans to top-tier, professional rugby union clubs in the Premiership Rugby League, which received 57% (£124m) of DCMS’ sports loans. DCMS insisted that these clubs were financially viable when it awarded the loans, despite public reports at the time to the contrary and the subsequent insolvency of three of the clubs by June 2023, owing Government £41.6m. The PAC’s view is that loans, which were introduced as COVID support, should not be extended to provide support for bodies which are financially unviable five years post-pandemic.
The report further warns of a gap in accountability to Parliament for the rugby union loans, due to a conflict of interest involving the Permanent Secretary’s connections with the sport. While properly declared in the register of interests, this prevented MPs questioning her directly on this topic. This gap in senior oversight and accountability for such a significant amount of public money is concerning and avoidable. The PAC finds it odd that DCMS had not taken steps to address this, such as by asking another Permanent Secretary to provide scrutiny and assurance.
Chair comment
Sir Geoffrey Clifton-Brown MP, Chair of the Committee, said:
“Cultural and sporting events came to an abrupt and shocking halt during lockdown, by law. In such circumstances, it is of course right that Government came forward with necessary support to ensure the long-term future of foundational elements of our national life. But such support was contingent on the unprecedented nature of a global crisis, not to provide a lifetime guarantee to institutions like rugby union which may be experiencing financial difficulties five years later.
“DCMS is inherently conflicted in the management of its COVID loan-book. As a lender, its priority will be to secure best value for the taxpayer from these loans. As a Department, its priority is to do everything in its power to support a sector which has become its debtor. This is before one even considers the direct conflict for DCMS’ Permanent Secretary with regard to rugby union, the sub-optimal handling of which struck this Committee as odd. DCMS has shown that while it has tried its best at acting in the role of a specialist loan provider, it should stick to what it knows. The Department should be considering all options for the long-term future of these loans, including their outright sale.”
Further information
Original article link: https://committees.parliament.uk/committee/127/public-accounts-committee/news/206243/dcms-handling-of-covid-loans-criticised-as-pac-warns-of-rugby-union-accountability-gap/
