Proactive and robust conflicts of interest management is critical for preventing undue influence on government decision-making, and ensuring that public resources are well allocated and spent wisely. With fraud and error estimated by the National Audit Office (NAO) to have caused losses of between £55-81 billion to the public purse in 2023/24, ensuring that weak conflicts of interest mechanisms are not exacerbating the loss of public funds is essential.
As today’s NAO report on how conflicts of interest are managed in the UK government shows, however, the situation in the UK is close to dire. Despite 71% of public bodies the NAO surveyed saying they had recently changed their systems for managing conflicts of interest since new guidance was issued in 2022, the body found that:
- Approaches to tackling conflicts of interest between departments are inconsistent with no agreed definition of what conflicts of interest are
- Only five of the 35 public bodies surveyed by the NAO required declarations from all public officials in their organisation, and only one of these five could show 100% compliance
- Just 18% of those surveyed met all the requirements of the 2022 guidance for scrutinising declarations by senior officials, and only 36% could demonstrate that departmental accounting officers personally reviewed these declarations
- 71% of public bodies surveyed had no management information about how civil servants are complying with conflict of interest rules
- Only one public body of the 35 surveyed could show that they took steps to verify whether measures to mitigate conflicts of interest were being implemented
- Only one public body surveyed had imposed any sanctions in the last 12 months, while the NAO saw no sanctions imposed despite seeing breaches of the rules in six case studies
- None of the six case studies the NAO conducted asked for declarations on political donations.
As part of its audit, the NAO carried out deep-dive case studies at six public bodies: the Cabinet Office, Environment Agency, Ministry of Defence, NHS England, Department for Culture, Media and Sport, and Defence Equipment and Support.
In those six bodies, only one had mandatory training on conflicts for staff (Defence Equipment), none of them always did checks on the completeness of disclosures (just two – the MOD and NHS – sometimes did), and only one ensured there were checks that mitigation measures on conflicts were being complied with (Department for Culture, Media and Sport.)
As a result, the NAO notes, the government is currently exposing itself to “the risk that unmanaged and unmitigated conflicts are on occasion influencing the objectivity of its operations.” That, it says, “makes it difficult for the government to be sure that it is always acting with propriety and making decisions that are in the public interest.”
These are strong conclusions from the UK’s top audit body.
Disappointing but not a surprise
The fact that the UK’s current regime for managing conflicts of interest is not fit for purpose has been known for some time. The OECD found in 2022 that the UK was implementing just two out of nine mechanisms recommended by the OECD for preventing conflicts of interest – lagging major allies and languishing at 28th out of 42 countries reviewed by the OECD on this indicator. Things hadn’t improved by 2024, when the OECD found that the UK met just 36% of the OECD’s criteria for best practice conflicts of interest management compared to an OECD average of 76%, and just over 20% for implementation compared to an OECD average of 40%.
From the COVID procurement scandals to the Greensill saga, the UK’s weak conflict of interest rules have long been highlighted as posing a major risk. In his 2021 review of the Greensill scandal, Nigel Boardman highlighted weak conflicts of interest management and recommended that the government go further to improve their management and monitoring in the civil service. In particular, he recommended that conflicts arising from declarations of special advisors, Non-Executive Directors, senior civil servants, and unregulated direct appointees should be published – something that it does now appear departments are doing.
Before that, weak conflicts of interest management was highlighted by both Boardman and the NAO in reviews into COVID procurement, with the NAO finding examples of failures to document and manage conflicts of interest. These weaknesses are likely to be raked over the coals again when the COVID-19 inquiry looks at pandemic related procurement early in 2025. Meanwhile the Government Internal Audit Agency audits since 2019 on at least 20 public bodies have found that in half of them inadequate audit trails limited the assurance it could give that conflicts of interest were being actively managed.
Not all bad news
There are some silver linings in the NAO’s report.
Firstly, procurement teams in government departments are starting to put in place stronger processes for managing conflicts of interest for public contracts in time for the implementation of the Procurement Act, which comes into force in early 2025. The NAO flags however that these processes need to be supported by effective systems of declaration and management which are currently so clearly lacking.
Secondly, public bodies are at least self-aware that the situation needs to change with 83% recognising that they could improve their systems.
And thirdly, and no doubt thanks to the NAO’s review (and possibly a few recent headlines), the Cabinet Office has updated its guidance just this month to say significant political donations must be declared.
Improving conflicts of interest management
The NAO has called on the government to:
- set a clear minimum standard for handling conflicts of interest,
- set up a temporary good practice forum, and
- encourage public bodies to commission an internal audit of implementation of the standard.
Given the scale of the problem and the lack of progress made, this seems a somewhat mild-mannered approach to encouraging the government to get its act together. At the very least one would hope that the “best practice” document published alongside the report is used as the minimum standard which would mean that all public bodies would have to have central electronic registers. The Cabinet Office is one department which currently does not have one, limiting access to information across the department.
But without constant scrutiny, and resourcing to verify declarations of interest and enforce the rules, it’s not clear how quickly the UK is going to make progress.
A more radical solution would be for central electronic registers to be made at least partially public – with interests of special advisors, NEDs and senior civil servants published (rather than just publishing relevant interests as currently happens). Departments should also be required to make annual declarations about their verification and sanctioning processes, including how many conflicts have been declared, how many mitigation measures were put in place, and how many of these were verified. And the government should be developing new guidance which clearly lays out a range of potential sanctions depending on the severity of the breach.
The UK can ill afford to pootle along in the lower half of OECD countries when it comes to managing conflicts of interest if it wants to look like a global leader on fighting corruption. A new Anti-Corruption Strategy is a major opportunity to ensure some ambitious targets are set.
