This statement is on the accounting impairment impact of equipment purchased in response to the covid pandemic
Today, we are publishing information relating to our purchasing efforts for critical supplies that have helped this country in our fight against the pandemic.
Since this unprecedented global pandemic erupted our absolute priority throughout has always been saving lives.
In a highly competitive global market, where many countries imposed export bans, we secured billions of items of PPE and have delivered over 17.5 billion items so far to protect our frontline workers. The Government acted quickly to achieve the target of obtaining 30,000 ventilators by the end of June 2020. The supply of these vital items has helped to keep the NHS open throughout the pandemic and enabled it to deliver a world-class service to the public.
The scale of the challenge we faced in sourcing these goods should not be underestimated. Globally there were significant logistical challenges in sourcing, procuring and distributing goods. The rapid rise in international infection rates during the early stages of the pandemic created unparalleled demand.
The disruption to the market, coupled with the unprecedented spike in demand, resulted in a huge inflation in price for goods and intense global competition to secure scarce supplies. For example, the average cost of a nitrile glove increased over six-fold at the height of the pandemic compared with pre-pandemic levels.
In this unique situation, we had to change our approach to procurement and our appetite for risk. The risk that contracts might not perform and that supplies were priced at a premium needed to be balanced against the risk to the health of frontline workers, the NHS and the public if we failed to get the PPE we so desperately needed. We make no apology for procuring PPE at pace and volume so that we could protect thousands of frontline healthcare workers in the NHS and social care.
The Department assessed PPE requirements at the beginning of the pandemic. However, as this was a new disease, we did not have data on actual levels of need. The Department of Health and Social Care developed a sophisticated model to assess demand. Our estimates of demand relied on reasonable worst-case scenario planning, information about the prevailing IPC guidance and the likely number of patient interactions in every healthcare setting. The Department’s approach to cover all settings for healthcare workers means that we have additional stock of £0.8 billion.
Our planning also had to take into account the likely non-performance of contracts. Our buying activities were more successful than we predicted, such that 97% of the units purchased have been assessed as adequate to provide protection for health care workers. A small proportion (3%) of items have been deemed not suitable for use, equivalent to £0.7 billion.
We are now in a position where we have high confidence that we have sufficient stock to cover all future covid-19 related demands, even in the face of the omicron variant. The PPE stocks we secured have allowed us to meet demand through 2020-21 and 2021-22. Our existing PPE stocks will continue to support us throughout 2022-23. Indeed, the high standards of protection we set for NHS workers means that we have an additional 10% of units that may not be suitable for use within the health and social care sectors but may have alternative uses than those we originally envisaged—£2.6 billion.
Within the Test and Trace and Ventilators programme the high standards we have set means that we have items of kit and other equipment that are not suitable for use—£0.3 billion.
As part of the Department’s annual reporting, we have prepared a statement outlining the diminishment in value of the Department’s covid stock holding at 31 March 2021 due to:
For stock we expect to use, changes in global prices between the point of purchase and market prices at 31 March 2021. As the world market has now stabilised and we are returning to more “business as usual” conditions, the value of some categories of goods is now much lower than the price they were purchased for. For example, we now estimate the value of aprons that we purchased is a third of what we paid during the height of the pandemic.
Stock that has failed quality testing and/or technical assurance and is considered not fit for use in any setting. In these cases we are seeking recovery of funds from suppliers wherever possible.
Stock that we do not intend to use for its original intended purpose, perhaps because it was bought as a contingency or has characteristics that prevent its use in a UK healthcare setting but could be considered for alternative use or resale; and,
Stock in excess of current forecast requirements where alternative use or resale is required to maximise the value of the stockpile and prevent wastage through future date expiry.
Our efforts to manage the stockpile effectively, and in doing so maximise its value, are ongoing. The Department has established a redistribution team to identify alternative uses and resale potential for inventory we do not intend or expect to use. For example, donating masks to both the Department for Transport and Department for Education to aid the reopening of the economy on public transport and to support schools following their reopening in March 2021. Any repurposing or resale of inventory is carefully considered as maintaining adequate supplies for frontline workers remains our priority.
Medical professionals within the Department’s quality control and assurance function and colleagues within Medical Surveillance Authorities have recognised that stock which has exceeded its manufacturers use-by date, is not necessarily unusable. The Department has begun a tender for a third-party medical laboratory to provide official testing of PPE products with a view to extending shelf life to maximise the usefulness and therefore value for money from the PPE purchased without compromising the quality of goods made available for use.
In addition, the Department is currently working through a revision to the pandemic preparedness stockpile, incorporating the learnings from this pandemic. We now have a more strategic approach to our supplier base, signing contracts with over 30 UK-based companies, reducing our reliance on established manufacturers in the far east and our carbon footprint. Environmental considerations are at the heart of the Department’s strategy for the ongoing management of the covid inventory stockpiles, including inventory disposals.
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