Select Committee on Environment, Transport and Regional Affairs Twelfth Report



1. The Environment, Transport and Regional Affairs Committee was established following the 1997 general election to examine the expenditure, administration and policy of the newly-created Department of the Environment, Transport and the Regions and its associated public bodies. This Report, on the Departmental Annual Report 1998 and Expenditure Plans 1998-99, is the first to examine the new Department. We shall continue to scrutinise the Department's progress annually.

2. We heard evidence for this inquiry on three occasions: twice in the Environment Sub-committee and once in the Transport Sub-committee. The Environment Sub-committee heard evidence on Departmental administration, countryside and wildlife and environmental protection issues and on the Health and Safety Executive at its first hearing, and on local and regional government issues, regeneration and housing at its second hearing. The Transport Sub-committee took further evidence relating to Departmental administration and on transport issues. Following the evidence hearings supplementary written evidence was requested from the Department and this is printed in this volume.

3. We were pleased to be able to discuss the progress of the merged Department with the outgoing Permanent Secretary, Sir Andrew Turnbull, KCB, CVO; and to discuss issues relating to the Health and Safety Commission and Executive (HSC/E) with its Director of Resources and Planning, Richard Hillier.[1] We are grateful to our Specialist Advisers, Peter Chapman, Rita Hale and Professor Philip Lowe for their encouragement and assistance.

Presentation of the Annual Report

4. The new Department of the Environment, Transport and the Regions (hereafter DETR) has a very large remit and one of the challenges it has faced has been the requirement to condense the Annual Reports of the two former Departments—which in 1997 had a total of 393 pages —into one document of 230 pages, without detriment either to clarity or quality of the information provided. Clear efforts have been made to explain policy objectives and organisational roles in a simple and accessible way. However, there appears to have been a partial deterioration from the standards of presentation achieved by the former Departments by the end of the last Parliament: losses which we noted especially were the explanatory Editor's note, 'How to read the report' and the use of shading behind tables to enable the better distinction of actual outcomes from estimates and indicative figures. Reproduction is in some instances poor, most notably in respect of Figure 5.k, depicting areas of England eligible for Objective 1, 2 and 5b funding.[2]

5. A primary concern is that the Annual Report gives a strong impression of being neither fully accurate nor fully up-to-date. Chapter 5 (Regeneration), for example, refers several times to events which will happen "by the end of March 1998", although the Report was not published until April of this year; the Report is accompanied by a list of corrections covering two sides of A4 paper. We discovered further discrepancies in the course of questioning.[3] On the other hand, figures which we brought to the Department's attention in the belief that they were faulty turned out to be accurate, if poorly explained.[4] We trust that these criticisms will be addressed in next year's document.

6. We were disappointed at the Department's decision, in common with the rest of Government,[5] "Exceptionally ... [to] cover only one forward year (1998-99)" in reporting its expenditure plans.[6] While we understand the difficulty occasioned by the Comprehensive Spending Review, the absence of indicative figures for future years represents a loss of transparency at a time of significant activity and policy change. Given the Government's commitment to remain within spending limits set by the previous Government,[7] and the presence in last year's Reports of indicative figures to the year 2000, we consider that it would have been helpful for those figures to be reproduced in this year's Report with a cautionary note. Without such figures it is very difficult for outside observers to discern the year-on-year trends in public expenditure which reflect the Government's success or otherwise in implementing its policy commitments.

The merger of the Departments of the Environment and Transport

7. The Department cited the Integrated Transport White Paper and the forthcoming policy document on Sustainable Development—in connection with implementing the Kyoto targets for reducing carbon dioxide emissions—as "the two leading examples of how we are seeking to demonstrate in a real way the benefits of bringing these two Departments together".[8]

8. The merger of the two departments has required both cultural and administrative changes. Sir Andrew told us that in presenting its new image the DETR has "done remarkably well";[9] although he noticed a "sensitivity ... that Transport has been taken over" and anticipated it would take some time for staff to acknowledge the Department's new identity.[10] The Department appears also to have done quite well in encouraging internal appointments which cross the boundaries of the two former Departments, achieving 23 per cent against its target of 25 per cent.[11] We were, however, slightly concerned to find little evidence, either in the Annual Report or in questioning, that the Department is giving due consideration to its remit in relation to the regions:[12] we trust that the discussion of regional issues in the Annual Report will increase in future years as the role of the Regional Development Agencies and regional chambers is developed.

9. The process of drawing the Department's administrative systems together appears to have posed more practical difficulties. We learned that after one year the constituent parts of the DETR were still functioning with separate computer systems which were only partially compatible.[13] Training for a unified system was due to be completed in September 1998 and the system was due to be in place by December 1998 at a cost of £3.6m, but the Permanent Secretary considered that the Department would have to change its system again within two years.[14] Sir Andrew was evasive in answering questions about the Department's computers, but attributed some of the difficulties over the past year to problems associated with the Department's new offices.[15]

10. In the past two years the two former Departments have moved their headquarters from 2 Marsham Street into new premises—Ashdown House, Eland House and Great Minster House—at a cost of "very nearly £100 million".[16] The move into Eland House, in particular, was marked by difficulties with the building's sophisticated environmental control systems, and by two floods.[17] Sir Andrew told us that the Department had been anxious to move into Eland House on time but that the control systems had not been "accurately tuned" when it did so.[18] His conclusion was that the Department "did move in too early": the lesson had been learned, and the move into Ashdown House was subsequently delayed.[19]

11. The Department estimated the cost of rectifying the problems with its new buildings as "close to seven figures"[20] and was contesting responsibility for the expenditure with the landlord. If the resolution of this conflict were to place any burden on the taxpayer we would expect this to be fully itemised and explained in next year's Annual Report.

12. We were eager to learn what progress was being made towards the demolition of the Department's former building, 2 Marsham Street. Sir Andrew assured us that the Department "would like to see it go tomorrow", but said that the matter rested with the Property Advisers to the Civil Estate (PACE). He envisaged that a contract for the removal of the property would be let before the end of the summer.[21]


13. The problem of the incompatibility of the two former Departments' IT systems has also caused difficulties for the DETR in beginning the transition from cash to resource accounting. Under Treasury guidelines, every Department is required to produce its first 'shadow' resource accounts for audit within this financial year. John Ballard, Principal Finance Officer, told us that the "singling-out" of the DETR as liable to miss the deadline was "unfair", given the need to merge IT and accounting systems.[22] He also assured us that the DETR had fulfilled all of the Treasury's requirements to date and was on course to produce its shadow accounts on time.[23] Richard Hillier expressed an even greater degree of confidence in the HSE's ability to meet the Treasury's requirements.[24]

14. We were further assured that the resource accounts would be comparable with the preceding cash accounts for the purposes of continuing scrutiny. The two types of account would be produced in parallel between 1999 and 2002 to facilitate this audit process. However, the Department was unable to tell us by how much the cost of producing the accounts would increase as a result.[25]

15. The remainder of our Report will be concerned with specific policy issues which arose in the course of our examination of the witnesses: we refer the House also to the Minutes of Evidence presented by the DETR and HSC/E which cover many more issues.

Integrating environmental concerns across Government

16. In its 1996 Report, the former Environment Committee expressed a wish for the Annual Report to contain a "much fuller discussion of how the Department has pursued its mission to integrate environmental concerns across Government".[26] While mindful that the Environmental Audit Committee has recently conducted an extensive inquiry into this subject,[27] we considered it important to pursue the particular question of the DETR's use of environmental appraisal of policy, and its success in persuading other Departments of the validity of this approach.

17. We were rather disappointed that, while discussion of DETR's role is fuller in this Annual Report than was the case in 1996, the information provided is not particularly useful because it does not provide specific instances where environmental considerations have influenced policy decisions.[28] The Permanent Secretary assured us that environmental considerations were increasingly taken into account in policy formulation within the Department, but neither he nor Brian Leonard of the Sustainable Development Unit was able to provide us with the number, or list, of appraisals carried out.[29]

18. We were pleased to find the officials in agreement with us that there is considerable room for improvement.[30] There is a strong case for the DETR to be more open about its use of environmental appraisal and about the various methodologies it applies, if only to convince other Departments that the discipline is not excessively demanding and can have positive direct and indirect benefits for the policy-making process. We understand that future environmental appraisals of policy within the DETR are to be reported to the Green Minister: we therefore expect that these reports will provide the basis for a more meaningful assessment of progress towards integrating environmental concerns across Government. We recommend that details of environmental appraisals carried out should be set out in future Annual Reports.[31]

Ordnance Survey

19. The amount paid as grant-in-aid by Government to the Ordnance Survey[32] has been progressively reduced since 1992-93. Recent cuts appear to have been particularly severe, from a £12m grant in 1996-97 to an estimated £6.7m grant in the last financial year.[33] The Principal Finance Officer further told us that, for practical purposes, the grant in the current financial year would be lower than was presented in the Annual Report, at £2.4m.[34] The low level of assistance was justified on the basis of Ordnance Survey's "increasing ... ability to exploit commercial opportunities": the Government hoped to move it onto a "trading fund basis", possibly within the next twelve months.[35]

20. If this move is made, the Government will pay for the services it requires from Ordnance Survey in accordance with a "National Interest Mapping Service Agreement" (NIMSA), drawn up during the conversion. The discussion of this point in oral evidence raised an apparent anomaly in that, under the agreement, the Government would pay only for the mapping which did not have a commercial value, but which was "necessary for good governance";[36] we were also told, as we have already noted, that the justification for the recent cuts in grant-in-aid was that the Survey is already gaining much of its income through its commercial activities. Yet the value of the new contract between Government and the Ordnance Survey would be "within the range of £5m to £15m".[37]

21. It is immediately apparent that any figure in this range is significantly higher than the current level of grant-in-aid. From this it may be argued either that the Government is not at present providing sufficient resources to the Ordnance Survey to cover all that is "necessary for good governance", or that the taxpayer will in future be paying a greater amount of money than is actually required for the work. The Permanent Secretary told us that the higher sum would cover services not supplied at present, such as work carried out to update existing maps.[38] This did not answer our concerns about the existing service and funding agreement. It remains unclear to us why the work carried out by Ordnance Survey in the "national interest" is expected to be worth between £5m and £15m when the conversion to a trading fund takes place next year, when it is worth only £2.4m in grant-in-aid now.

22. We are concerned that individuals purchasing Ordnance Survey maps and publications may be paying unnecessarily high prices, on top of their contributions through tax, to subsidise mapping activity required by the Government. It may be simply that the funding process is not sufficiently transparent. Full details of the Government's requirements of, and payments to, Ordnance Survey under the National Interest Mapping Service Agreement must be published in the Annual Report following finalisation of the contract. These details should be accompanied by an equivalent analysis of the Government's requirements of, and payments to, Ordnance Survey in the last three years of funding by grant-in-aid.

23. Copyright is a further issue of significance in relation to the increasingly commercial operation of Ordnance Survey. The Government holds copyright of all materials produced by Ordnance Survey.[39] If in future the Government is to consider itself solely as a commercial customer for Ordnance Survey's services we believe that it would be better for ownership of copyright to be passed to the organisation. Failing this, an additional and specific payment should be made each year under the NIMSA in recompense for potential loss of revenue through reproduction fees.

Non-domestic rating valuations

24. In the former Environment Committee's inquiry of 1996, and in our 1997 meeting with the Minister for Local Government on local government finance, questions were raised concerning appeals against the non-domestic rating valuation lists of 1990 and 1995.[40] On this occasion, officials confirmed their previous predictions that the loss on appeal of rateable value against the 1990 list had been 9 per cent.[41] The number of appeals against the 1990 list which were still outstanding on 31 May 1998 was 13,900.[42]

25. We were also told that at the same date 281,100 appeals remained outstanding against the 1995 non-domestic rating valuation list. While a final outcome therefore has still to be determined, officials estimated that there would be a loss on appeal of rateable value of 7 per cent against this list. The estimate marks an increase in estimated losses since officials last spoke to us on the subject a year ago, then giving an estimate of 5 per cent.[43] In addition, it was conceded that there was a strong probability that if a certain proportion of the value of the list were lost through over-estimation, under-estimation was also likely to have diminished the value of the list to the Exchequer.[44] We agree with the Department that "there is something wrong here", but are less confident than the officials that the situation is improving.[45]


26. The yield from the non-domestic rate is likely to exceed £12bn in 1998-99. The income from the national non-domestic rate is distributed between local authorities in proportion to the size of their populations and the range of services for which they are responsible. The income from the non-domestic rate is the second biggest source of income for local authorities.

27. It is arguable that the yield from the non-domestic rate is now much lower than it would have been if the quality of the 1990 rating list had been higher. This is because when the new valuations were introduced in 1991 an assumption was made that losses on appeals would amount to no more than 1.5 per cent. The tax rate (the 'multiplier') was set on the basis of a 1.5 per cent loss to produce a yield from the rate broadly similar to that paid by non-domestic taxpayers under the previous regime. Having been fixed, the level of the multiplier may only be increased in accordance with the growth of the Retail Price Index: it cannot be further adjusted to compensate for the higher than expected losses on appeal.

28. If further erosion of the tax yield is to be avoided it is important that the Department should ensure that the 2000 revaluation is of higher quality than those for 1990 and 1995. We understand that the Valuation Office is the subject of a financial management and policy review, but we are concerned that the Department plans to spend only £17.3m on the 2000 revaluation as compared with the £64m spent on the 1995 revaluation.

29. We were assured that the reduced cost of the 2000 revaluation was the result of efficiency gains.[46] While the results in 1990 and 1995 illustrate clearly that high levels of expenditure do not necessarily produce high quality results, we would be concerned if parsimony should undermine the Valuation Office's ability to produce a revaluation list which is fair and reliable both for the taxpayer and for Government.

30. The quality of the non-domestic rating valuation lists which came into effect in 1990 and 1995 was poor. Every effort must now be taken with the 2000 revaluation to ensure that confidence in the valuation system is restored. The Department must act swiftly to implement any changes arising from the policy review including any increase in funding of the valuation office which may be necessary to guarantee the quality of the list.

Impact of the national minimum wage on local government

31. We were interested in the potential impact of the national minimum wage upon both in-house and externally provided local government services. Owing to the single status pay agreement of July 1997, in-house services will not be affected since all workers are already guaranteed a higher minimum of £4 per hour.[47] However, Philip Wood suggested that contracted out services—particularly those which depend upon "a predominance of low-paid workers"—were likely to experience an increase in costs: his personal estimate was that the minimum wage's impact upon contracted-out personal social services, for example, might be in the region of £50m a year.[48]

32. The Department defended its inability to provide any official projection of the overall impact of the minimum wage on local authorities' costs on the grounds that it was extremely difficult to do so, and the price which local authorities were prepared to pay for services was a matter for local discretion.[49] Yet capping is still in place, many local authorities are tied into contracts and the Government has no plans to raise the level of local government funding generated locally from its current figure of 24 per cent.[50] While we were reminded that £50 m was a "tiny" sum in the context of total local government expenditure,[51] we in turn would remind the Department that this estimate was provided for only one service, and the other context in which such estimates should be considered is the spending power of the individual local authority. The DETR has been remiss in failing to investigate the impact of the national minimum wage upon local government services. We do not accept that the argument of local discretion is justifiable given the continuing high level of central prescription.

Local government reorganisation

33. We were similarly concerned that, while central expenditure has been accounted for, the DETR has made no effort to establish the total cost to local authorities of local government reorganisation. The reason presented to us repeatedly was that "the question ... is not relevant from the Government's point of view" since the Government had no plans to require further reorganisation, and the vast majority of Government funding in any case took the form of credit approvals.[52]

34. We accept that the DETR has limited resources, and must give priority to the development of new Government policy. We accept also that the Government has no plans at present to undertake a further reorganisation of local government. Nevertheless, we believe that Parliament and the general public have the right to know the total cost of the recent local government review, as well as the costs which were supported by Government borrowing approvals. The Government, too, should know what the total costs of the recent review were in case a further reorganisation should be considered at some time in the future. The DETR must therefore make efforts to establish the total cost of this policy.

The Health and Safety Commission and Executive

35. Mr Hillier confirmed that the final rate of fatalities resulting from work activities in 1996-97 had risen to 1.2 per 100,000 workers from 1.0 per 100,000 workers in 1995-96.[53] However, he added that preliminary figures for 1997-98 indicated this was an "unfortunate blip" rather than the beginning of an upward trend.[54] The Health and Safety Executive had responded to the rise—which had been identified most markedly in the agriculture and construction industries—by targeting inspections and enforcement activities in these areas of greatest perceived risk. He concluded that this had "had the result of raising the profile [of health and safety] very smartly in that sector".[55]

36. While the HSC/E produces an Annual Report and Plan of Work of its own, we would have liked to have seen more specific and relevant details of actual outturns in the DETR Annual Report. Although the matters raised in Figure 17.a (such as the introduction of legislation, number of contacts made and efficiency gains achieved) are all significant as a measure of the HSC/E's efficiency, we would prefer to have seen other measures included which reflected more directly on the Executive's effectiveness as an enforcer of health and safety standards in the workplace. The table includes a comparison of fatal injury rates for 1986-87 and 1996-97 as a "contextual indicator"; Mr Hillier reminded us that the indicators on health are also important, although not reproduced in that document.[56] In respect of the HSE's regulatory role, we would also have been interested to see an indication of the number of successful prosecutions together with the range of penalties incurred. We recommend that the Health and Safety Commission/Executive include a greater number of contextual indicators, more accurately reflecting its wide remit, in next year's Departmental Annual Report.

37. We took the opportunity of Mr Hillier's appearance before us to raise once more the question of white asbestos, and were disappointed to learn that progress towards a ban has been slow since the former Environment Committee raised the question in March 1997.[57] Mr Hillier told us that the preliminary results of research into the safety of alternatives to asbestos suggested that the alternatives were preferable: this was confirmed by the Department of Health's Committee on Carcinogenicity on 13th July.[58] Mr Hillier also told us that while it would be for the Minister to decide on the timing of a ban, he believed that it ought to be possible to introduce regulations in the autumn.[59] This possibility has now been discounted as the Health and Safety Commission has decided to consult on the effect of any further restrictions on the use of white asbestos. It expects to "be in a position to advise Ministers on the outcome ... in early January".[60] We are deeply concerned that a ban on the importation, supply and use of white asbestos continues to be delayed. The Government must ensure that the consultation proceeds according to the timetable set, and should introduce any necessary regulations as a matter of urgency.

1   QQ 140-62. Back

2   Annual Report p37, also QQ 89-92. Back

3   QQ 71-4. Back

4   QQ 93-4; see also Supplementary memorandum EST 98C. Back

5   Q 79. Back

6   Annual Report, inside front cover. Back

7   Q 7. Back

8   Q 323. Back

9   Q 5. Back

10   Q 6. Back

11   Q 325. Back

12   See Annual Report Chapter 11 (Local Government and Regional Policy); Q 108. Back

13   Q 329. Back

14   QQ 54, 329 and 335. Back

15   Q 54. Back

16   Q 56. Back

17   QQ 47-54. Back

18   Q 47. Back

19   Q 65. Back

20   Q 56; see also EST 98C. Back

21  Q 67. Back

22   Q 13. Back

23   Q 12. Back

24   Q 159. Back

25   QQ 14-15. Back

26   Environment Committee Fifth Report, DoE Estimates 1996-97 and Annual Report 1996, HC (1995-96) 382. Back

27   Environmental Audit Committee Second Report, The Greening Government Initiative, HC (1997-98) 517-I. Back

28   See Annual Report 1998 paragraphs 1.26 and 10.14-10.17. Back

29   QQ 30 and 41. Back

30   Q 44. Back

31   Q 42. Back

32   Ordnance Survey is a separate Government department, answerable to the Secretary of State for the Environment, Transport and the Regions.  Back

33   Annual Report 1998, p 143, figure 21.a. Back

34   Q 71; see also Supplementary Memorandum [EST 98C]. The DETR explains the apparent discrepancy of £1.4 m as money ring-fenced for early retirement. Back

35   Q 69. Back

36   Q 81. Back

37   Q 71. Back

38   Q 88. Back

39   Q 82. Back

40   Fifth Report HC (1995-96) 382, QQ 251-7; Local Government Finance, HC (1997-98) 224-i, QQ 53-6. Back

41   Q 168.  Back

42   EST98D. Back

43   Q 170; see also Local Government Finance, HC (1997-98) 224-i, Q 53. Back

44   Q 181. Back

45   QQ 170, 178; see also EST98D. Back

46   Q 182. Back

47   Q 186; this excludes apprentices who are in any case not covered by the national minimum wage legislation. Back

48   QQ 188-191. Back

49   Q 195; see also EST 98D.  Back

50   Q 202. Back

51   Q 194. Back

52   Q 230; see also QQ 229, 238, 242. Back

53   Q 140. Back

54   Q 142. Back

55   Q 143. Back

56   Q 156. Back

57   The work of the Health and Safety Executive, HC (1996-97) 277-i, -ii and -iii, QQ213-227 Back

58   EST 98H. Back

59   QQ 146-7. Back

60   EST 98H. Back

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