PLANNING
AND
BUDGETING
(a) Estimates of Eligible Land
21. The Ministry have experienced difficulty in establishing
how much land is eligible for the Scheme within each designated
area. Errors arose from a variety of causes such as the difficulties
of distinguishing between different types of land.[27]
The Ministry did not have a complete and accurate record of eligible
land before the Scheme was launched in each area. For example
the eligible area for arable and ley grassland in Dartmoor had
been calculated as 2,000 hectares, whereas take-up amounted to
3,000 hectares.[28] We
put it to the Ministry that accurate information on eligible land
areas is important for establishing take-up targets, for financial
forecasting and for monitoring the Scheme's effectiveness.[29]
22. The Ministry assured the Committee that these
shortcomings did not mean they were paying farmers who did not
qualify.[30] The initial
estimates of the land which would qualify had been based on the
best available maps at the time. However these did not distinguish
between types of land within the area.[31]
The Ministry said that, if they were to map qualifying areas very
precisely before each phase of the Scheme was launched, the cost
would be enormous and would not be the best way of using their
resources.[32]
23. The Committee asked whether using local knowledge
and aerial photography could improve accuracy. The Ministry told
us that they did use these methods. However aerial photography
cannot distinguish between different types of grasses, for example.[33]
Their new computerised mapping system will improve the quality
of information once it has been collected; but will not address
the problem with accuracy of original data. The Ministry said
that targets set as a proportion of other figures which were estimates
should be avoided if possible.[34]
(b) Financial Forecasts
24. The Ministry have repeatedly over-estimated the
net cost of the Environmentally Sensitive Areas Scheme. For example,
in 1995-96 the grants to farmers, net of recoveries from the European
Union, amounted to £16 million compared with an estimate
of £37 million.[35]
We therefore challenged the Ministry on their budgeting record.
The Ministry told us that the significant underspend was due to
three factors: an over estimate of the level of take-up; the delayed
launch of Stages III and IV of the Scheme because of budget pressures
elsewhere in the Ministry; and a very cautious approach in deciding
when an increase in European Union funding from 25 per cent to
50 per cent would take place.[36]
25. Agri-environment schemes became eligible for
the highest level of reimbursement from the European Union on
30 July 1992. However, the regulations required that the existing
stages of the Scheme be submitted for approval by the European
Committee before claims for reimbursement at the new rate could
be approved. The Ministry did not believe that the increased rate
of reimbursement would be backdated; but it was, thus reducing
their net expenditure. Because of problems within the European
Union agriculture budget at the end of 1993, there had been a
risk that reimbursement would be reduced to 25 per cent in 1994-95
onwards. The Ministry therefore continued to budget for receipts
at less than 50 per cent up to 1996-97.[37]
26. The Ministry assured us that estimated expenditure
would match outturn more accurately in the future. However, they
said they could never be precise in this sort of scheme, particularly
as there had been a dramatic change in the profitability of farming
over the past year or so. That might affect take up but the Ministry
could not be sure about this.[38]
27. The Committee asked the Ministry what rate of
European Union reimbursement other agri-environment schemes attracted
and whether the Ministry took the differences into account when
deciding which scheme to use to achieve a particular environmental
objective. The Ministry could not provide the information on differing
rates but agreed that they ought to take these on board in the
way suggested by the Committee.[39]
The Ministry have told us that, in general, all agri-environmental
schemes adopted are eligible for 50 per cent European Union funding.[40]
28. The Committee asked the Treasury what impact
such underspending had on the public expenditure survey process
and whether over budgeting worked to a department's advantage.
The Treasury said that the impact would not be great in this case,
given the total size of the Ministry's budget. However, the Treasury
would not ignore consistent underspending or indeed some of the
other elements mentioned in the Comptroller and Auditor General's
Report, such as the ratio of administrative expenditure to grants
paid.[41]
(c) Conclusions
29. We are surprised that the Ministry did not have
accurate records of the eligible land before launching the Scheme.
As a result, the take-up in relation to eligible grassland in
Dartmoor amounted to 50 per cent more hectares than the Ministry
had thought would be eligible.
30. We note the Ministry's reservations about the
cost-effectiveness of compiling a complete and accurate record
of eligible land from the start of the Environmentally Sensitive
Areas Scheme; and their assurances that accurate payments to farmers
have been soundly based. However, we consider that the Ministry's
planning for this Scheme was inadequate. Financial and management
control would have been enhanced if payments had been set against
a well-founded estimate of the area of land eligible for support
by the taxpayer. We look to the Ministry's computerised mapping
system to play an effective part in this process.
31. It is unsatisfactory that the Ministry have consistently
overestimated the net cost of the Environmentally Sensitive Areas
Scheme. And in 1995-96 alone the amount paid out to farmers was
£16 million compared with the Supply Estimate put to Parliament
of £37 million.
32. The Committee do not expect departments to need
to be reminded of the importance of accurate planning and forecasting
when presenting Estimates to Parliament, for the purposes of controlling
public expenditure, and for monitoring the achievement of their
objectives. In doing so they need to take a realistic view on
the degree to which European Union financial support will be forthcoming.
It is clear to us that the Ministry have been unduly cautious
on this issue.
27 C&AG's report (HC 120 of Session 1997-98), para
2.9 Back
28
Q 27 Back
29
Q 76 Back
30
Qs 27, 35 Back
31
Qs 52, 67 Back
32
Qs 27, 75, 99 Back
33
Qs 69-70 Back
34
Qs 67, 71, 76 Back
35
C&AG's report (HC 120 of Session 1997-98), para 4.14, Figure
25 Back
36
Q16 Back
37
Evidence, Appendix 1, p20,
paras 29-32 Back
38 Q
20 Back
39 Qs
25-26 Back
40 Evidence,
Appendix 1, p19, paras 19-20 Back
41 Qs
145-147 Back
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