皇冠体育app

Purpose of the paper

This paper gives an overview of the UK Health Security Agency鈥檚 (UKHSA) finances and the in-year position as at Month 4 financial year 2022 to 2023 (the end of July 2022).

At the time of submitting, the Month 5 (end August) figures were being finalised.

Recommendation

皇冠体育app Advisory Board is asked to note UKHSA鈥檚 financial position.

Overview and context

UKHSA is an agency of the Department of Health and Social Care (DHSC), so our budgets are allocated from and consolidated into the wider health funding settlement.

UKHSA鈥檚 funding is in 3 parts:

• a ring-fenced budget for COVID-19 response
• the core agency budget
• a ring-fenced budget for vaccines and countermeasures which is managed by DHSC

UKHSA budgets for financial year 2022 to 2023 were only agreed in March and were formally confirmed for one year. We are working with DHSC to secure committed future funding for both the core agency and the future COVID-19 strategy. As in other areas of public spending, high inflation will be a challenge.

Following the Month 4 forecast submission, DHSC formally requested 拢285 million to be deducted from the UKHSA COVID-19 budget to offset wider departmental pressures (in addition to 拢90 million already transferred for flu camaign). As the 拢285 million is in line with Month 4 forecast underspend, UKHSA have agreed, though have highlighted potential risks.

皇冠体育app COVID-19 budget covers NHS Test and Trace activity, which transferred from DHSC when UKHSA took on its full functions in October 2021. COVID-19 funding has been reduced from an original 拢15 billion budget last year to 拢2.4 billion this year, in line with the 鈥�Living with COVID-19鈥� strategy published in February. That strategy included cessation of free universal testing, and targeted testing, linked to epidemiology, for groups at higher risk, particularly in adult social care and the NHS.

皇冠体育app strategy also provided funding to continue the large-scale Office for National Statistics (ONS) surveillance survey; to keep lab capacity available (mainly in the Rosalind Franklin 鈥榤ega-lab鈥�), so that polymerase chain reaction (PCR) testing can be scaled up quickly to respond to a new COVID-19 variant; and to maintain some essential operations such as the technology systems that support testing. 皇冠体育appre are few precedents for a budget reducing from one financial year to the next on this scale (85%); delivering it safely is a major financial priority for UKHSA this year.

皇冠体育app core budget provides funding for the ongoing functions of the agency 鈥� though recognising that UKHSA is a new organisation, with a science and national security remit still under definition. 皇冠体育app 2022 to 2023 resource budget, for day-to-day spending, is 拢456 million. We also rely on generating an additional 拢150 million of external income.

皇冠体育app capital budget is 拢135 million. Core UKHSA funding was only confirmed at the end of March, so we carried out a business planning process from April to July to decide how to allocate funding to priorities, alongside developing UKHSA鈥檚 3-year strategy.

Our aim has been to preserve key capabilities that were built up during the pandemic, including expanded health protection operation teams, greater expertise on data, analysis and technology, and a stronger commercial function; as well as strengthening UKHSA鈥檚 scientific and clinical functions. For capital, the priorities are to invest in the maintenance and development of UKHSA鈥檚 specialist laboratory sites, and in modernising data and technology systems.

皇冠体育app ring-fenced budget for vaccines and countermeasures^{[footnote 1]} is currently forecast to spend 拢0.9 billion this year. For non-COVID vaccines and countermeasures, UKHSA accounts for the purchase costs and is responsible for managing the supply chain and distributing vaccines to the NHS. However, funding decisions are made by DHSC, which adjusts the budget to match the expenditure.

For COVID-19 vaccines, UKHSA is responsible for the costs of supply and distribution in the same way, but the purchasing is currently done by the Vaccines Taskforce. From October that responsibility and budget will transfer to UKHSA. A memorandum of understanding is being developed with DHSC to set out roles and responsibilities, including on financial decisions. An update on the transfer will be sent early next month to the Audit and Risk Committee.

皇冠体育app table above shows resource and capital departmental expenditure limits (RDEL and CDEL), split by the 3 parts of core agency, COVID-19, and vaccines and countermeasures. It shows year-to-date budget and spending for April to July, and budget and forecast outturn for the full year.

COVID-19 budget

COVID-19 spending to July in resource DEL was 拢178 million lower than plan, with a 拢285 million forecast underspend for the year. Rapid demobilisation of testing sites and operations, driven by effective UKHSA oversight, has contributed to this, by taking out cost faster than expected; but a significant driver is that lateral flow device testing in the NHS has been lower than predicted.

皇冠体育app forecast is likely to vary as testing demand fluctuates over the year. On COVID-19 capital, the forecast is for a credit (negative spend) of 拢157 million, as testing supplies that were purchased last year are used this year. (Under budgeting rules set by HM Treasury, test supplies are treated as capital when purchased; but, when they are consumed, the cost is reversed from capital and shown as a resource expense instead.)

Besides the inherent volatility of testing demand, there are pressures, risks and opportunities around the forecast. But on current trends, actual spend, driven by epidemiological reality, is on a lower trajectory than the allocated budget. Forecast financial headroom in UKHSA can help offset COVID-related and other pressures in the wider health group, and we are working closely with DHSC on this, while maintaining constant focus on changes in pandemic requirements.

Core budget

皇冠体育app year-to-date figures show a slight overspend on resource DEL, some of which relates to COVID-19 expenditure being incorrectly charged to core budgets. 皇冠体育app current full-year forecast is to spend to budget. 皇冠体育app overall direction on resource spend is more likely to be a trajectory towards underspend than a pressure, especially given that UKHSA restructuring (see below) and wider Civil Service recruitment controls may slow our ability to spend. 皇冠体育app core budget is shown net of external income; currently the agency is on track to hit its income assumptions.

Capital core

皇冠体育app delays in setting budgets have contributed to slow progress in capital spend so far, with only 拢20 million spent in the first 4 months. 皇冠体育appre is a significant risk of underspend. We are working to accelerate delivery of capital projects and to identify additional opportunities for investment, including priority maintenance work on our estates.

As outlined in the People Strategy paper, UKHSA is reducing its workforce from around 11,000 full-time equivalent staff (FTE) in March 2022 to around 6,700 FTE by end-March 2023 as part of our COVID-19 ramp down. This primarily involves rolling off agency staff and contractors, and the natural expiry of fixed term contracts. Each UKHSA group has developed plans to achieve these reductions, and we are on track to achieve the end-year position.

At the same time as implementing our overall reduction, UKHSA needs to recruit skilled roles into science, laboratory, clinical and medical vacancies in order to provide our front-line delivery services and build an enduring organisation.

This autumn, around 85 staff will join UKHSA from the Department for Business, Energy and Industrial Strategy, as part of the transfer of the Vaccines Taskforce.

Other financial issues

Accounts 2021 to 2022

皇冠体育app first annual report and accounts for UKHSA is due to be published at the end of 2022. Normally, accounts would be produced in the summer, but the complexities of COVID-related spending mean that the timetable is later than usual. 皇冠体育app audit of 2021 to 2022 is currently under way, but it is virtually certain that the first UKHSA account will have a modified audit opinion from the National Audit Office (NAO), in particular relating to Test and Trace inventory.

At the height of the pandemic, the Test and Trace programme (then part of the central DHSC) rapidly created a supply chain capable of storing and distributing billions of pounds worth of inventory, including PCR test kits and lateral flow tests.

Working at unprecedented speed and scale, it was not possible to implement gold- standard inventory systems that integrated with DHSC finance systems. As a result, while the department was successful in securing test kits sufficient to supply the UK, it was left with incomplete records of what had been used and the location, condition and quality of the remaining items at the year end.

This led to the NAO limiting the scope of its audit opinion on the inventory balances and inventory transactions in the DHSC 2020 to 2021 account. It is almost certain that the NAO will apply the same limitation to the inventory transferred to UKHSA in October 2021. 皇冠体育appre may also be a limitation relating to vaccines and other stock transferred to UKHSA from Public Health England (PHE), as it was not possible to undertake full stock-takes at the end of September 2021 in some warehouses without endangering public health.

Losses and special payments

皇冠体育app annual report will show that, in 2021 to 2022, UKHSA recognised over 拢100 million of losses and special payments on Test and Trace activity: for example, through disposal of assets and materials that were no longer required for the COVID-19 response, or settlements with suppliers.

皇冠体育appse nearly all relate to contracts that pre-dated UKHSA鈥檚 formation, intended to mitigate the risk of not having sufficient resources and goods to respond to the developing pandemic. 皇冠体育appy should be seen in the context of the unprecedented circumstances of the pandemic and over 拢25 billion expenditure on Test and Trace across 2020 to 2021 and 2021 to 2022. 皇冠体育app annual report will provide further details.

皇冠体育appre can be a timing difference between when an arrangement is entered into and when a loss crystalises in the accounts. So it is likely that further losses will be recorded in 2022 to 2023 and beyond, following the ramp-down of testing activity under Living with COVID-19.

Porton Biopharma Limited (PBL). PBL is a company and subsidiary of UKHSA, which was spun out of PHE in 2015 as a separate legal entity. PBL鈥檚 main product is Erwinaise, a specialist childhood leukaemia drug which it produces and sells on a commercial basis.

It also produces the strategic Anthrax Vaccine which is sold to the Ministry of Defence. 皇冠体育appre is currently a strategic review of the company following material changes to the US market. As such, the valuation of PBL is a significant item in UKHSA鈥檚 accounts