Memorandum submitted by
1. What guidance did the Treasury give Departments
on assessing the consistency of existing subsidies, tax exemptions
and spending allocations with the Government's commitment to sustainable
The Deputy Prime Minister wrote to all his Cabinet
colleagues at the commencement of the CSR, reminding them of the
significance of sustainable development and the need for them
to bear it in mind in carrying out their spending reviews.
Standing guidance to Departments on the assessment
of spending and other policy proposals for their environmental
impacts is contained in the Treasury document Economic Appraisal
and Evaluation in Central Government (revised 1997), and in
DETR's publication Policy Appraisal and the Environment.
2. Were the impacts of all tax policies and tax
expenditures on the environment and sustainable development reviewed
within the CSR? Please describe what work has been undertaken
how it was reported and what conclusions were reached?
The CSR was a root and branch review of the
Government's spending priorities for the rest of the Parliament.
It was not directly concerned with taxation. The Government's
tax policies have been developed in its Budget and Pre-Budget
Departmental Ministers undertook thirty zero-based
reviews of their Departments' expenditure programmes to determine
how best they could contribute to the achievement of the Government's
aims and objectives, including sustainable development. The reviews
considered the impact of spending programmes on the environment
where this was significant.
Six of the reviews, including that on the countryside,
were carried out on a cross-Departmental basis to ensure that
policies and services were designed to meet the full range of
public concerns in an integrated way.
A Ministerial Committee on Public Expenditure,
chaired by the Chancellor of the Exchequer, co-ordinated the reviews
and examined the allocation of resources between Departments.
The results of the Comprehensive Spending Review
were reported in two stages. First, the Economic and Fiscal Strategy
Report, published in June, established the overall financial envelope
for the next three years. Then the CSR White Paper, Modern
Public Services for Britain described how expenditure has
been allocated between spending programmes to deliver the Government's
priorities. The White Paper summarised the conclusions of the
CSR. Departmental news releases put out in the following days
gave details of their individual spending plans.
3. What did the Chancellor mean by "unjustified
subsidies"? Did this include subsidies referred to by the
[Government] Panel [on Sustainable Development] as having adverse
Unjustified subsidies might be defined as those
subsidies whose cost to the taxpayer is not justified by their
benefits to society. A subsidy which had some adverse environmental
impacts could still be justified if its economic or social benefit
outweighed its cost, including the environmental cost. But a subsidy
whose environmental cost was greater than its economic and/or
social benefit would certainly be included in this definition.
4. Were all subsidies, tax exemptions and government
spending allocations and their impacts on the environment reviewed
within the CSR for all departments?
5. In particular did the Government review those
areas identified by the Panel: the agricultural production related
subsidies; the tax regime and financing of the energy and transport
sectors? What conclusions were reached?
6. Please list Departments and the subsidies which
they identified as unjustified within their existing spending
programmes and detail the strategies agreed for "rooting
Amongst many other factors, the reviews considered
the impact of expenditure programmes on the environment where
this was significant. Environmental impacts were looked at in
depth in the case of all the areas picked out by the Panelwith
the exception of the tax regime, which was outside the CSR's coverageas
well as in several others. The environmental implications of spending
on, for example, overseas aid, forestry, fishing, planning, the
science base, rationalisation of the defence estate, urban regeneration
and rural development were also discussed. The conclusions of
the CSR were set out in the White Paper and individual Departments'
subsequent news releases.
7. Why did the Government not set out in the CSR
document its principles for subsidies, as agreed in response to
the Panel? Will it be doing so in some other forthcoming document?
The Government's Sustainable Development Strategy,
to be published early next year, will explain how subsidies and
other policy instruments can help move society closer to sustainable
development, and will set out the guiding principles the Government
will follow in using them.
8. Modern Public Services for Britain states that
the Government is reforming the system of industrial subsidies
to businesses to ensure that the taxpayer gets value for money.
To what subsidies is this referring? What are the terms of reference
for these reforms? When are they to be implemented?
The Government will set out in the forthcoming
Competitiveness White Paper how it intends to refocus support
for business on the priorities of promoting innovation, productivity,
technology transfer and sustainable growth.
9. Why was the opportunity not taken in the CSR
to demonstrate the comprehensiveness of the Government's commitment
to sustainable development through reflecting it in all departments'
aims and objectives and to make more explicit the Treasury's term
"sustainable growth" as meaning environmentally as well
as financially sustainable growth?
In the case of the Treasury, the CSR White Paper
("Modern Public Services for Britain") did make clear
that the Government understands "sustainable growth"
to mean environmentally as well as economically sustainable growth.
The White Paper (page 25) points out that in the long-run the
two are indistinguishable, and that a healthy environment is not
only essential to our quality of life but to the sustainability
of economic growth as well.
Whether other departments' aims and objectives
should explicitly repeat the Government's overarching commitment
to sustainable development is ultimately a decision for them.
Green Ministers have, however, been invited to report to the Cabinet
Committee on the Environment on whether sustainable development
should be formally incorporated into the remit of existing departments
and NDPBs. Ministers are also considering whether to incorporate
sustainable development into the aims and objectives of all new
bodies when they are set up.
10. Why have the revised aims and objectives for
the Treasury not addressed the commitment of the Statement of
Intent on Environmental Taxation over time to reform the tax system
to increase incentives to reduce environmental damage?
The Statement of Intent on Environmental Taxation
was reaffirmed in the March 1998 Budget and in the Pre-Budget
Report of November 1998.
11. In the absence of clarification in Departments'
aims and objectives regarding their link to the Government's commitment
to sustainable development, will the forthcoming Sustainable Development
Strategy set out clearly how individual departments' activities
contribute to the Government's strategy for sustainable development?
The Strategy will set out how the Government
is working across all policy areas to guide development in a sustainable
12. Why have the Treasury and other departments
not made a commitment in their statements on how they would deliver
against their objectives to doing so in a way which addresses
their environmental impacts and implications for sustainable development,
alongside their commitments to operate efficiently and effectively
and as good employers of staff?
The Treasury notes that Green Ministers have
been invited to report on whether all Departments' aims and objectives
should make explicit reference to the Government's objective of
13. Will Public Service Agreements address departments'
management of their environmental impacts as well as their efficiency
and effectiveness? If not, why not?
All PSAs will set targets for resource efficiency
and productivity. Inefficient use of public resources runs counter
to sustainable development objectives. Where management of their
environmental impacts is a significant factor in a Department's
core activity, the Treasury would expect it also to be picked
up in the quantified key policy goals set out in the PSA.
The Treasury expects that all the PSAs will
be relevant to sustainable development, including environmental
impacts where these are judged to be significant.
14. Will there be a joint Public Service Agreement
from DETR and MAFF in respect of the joint aim of enhancing opportunity
in rural areas and strengthening countryside conservation?
This is still being considered.
15. Will the new Cabinet Committee responsible
for reviewing departmental spending and performance against their
public service agreements also consider departments' management
of their environmental impacts? If not, why not?
The Cabinet Committee's remit is to monitor
progress against public service agreements and review public expenditure
allocations. It will consider Departments' management of their
environmental impacts as part of scrutinising their resource efficiency
and elsewhere where this aspect of their work has been judged
significant enough to warrant coverage in their PSA.
16. Will the Cabinet Committee responsible for
reviewing departmental spending include the Deputy Prime Minister
to ensure that wherever possible departments have taken opportunities
to develop services and facilities consistent with the Government's
commitment to sustainable development?
Members are drawn from among non-Departmental
Ministers or Ministers in charge of Departments with relatively
small levels of public expenditure. The Deputy Prime Minister
will be invited to attend discussion of any item in which he has
a Departmental interest. There will be many other channels open
to DETR to encourage and assist other Departments as they develop
services and facilities consistent with the Government's commitment
to sustainable development. DETR Ministers chair or are members
of various other Cabinet Committees; there is also the interdepartmental
network of Green Ministers.
17. In support of the Cabinet Committee's work
will either the Treasury or the Cabinet Office Performance and
Innovation Unit have a responsibility for reviewing departmental
performance in relation to the Government's commitment to sustainable
The secretariat for the Committee will be provided
jointly by Cabinet Office and Treasury officials. It will provide
the first line of support for the Committee in its audit of Departments'
performance against their PSAs, calling in assistance from other
Departments/agencies or outside experts as necessary. In the case
of Departments' performance in relation to environmental aspects
of the Government's commitment to sustainable development, the
secretariat would expect to draw on the assistance of the DETR
Sustainable Development Unit. The Treasury expects that all the
PSAs will be relevant to sustainable development in its broadest
18. What will be the procedures for Departments
seeking funds in addition to their three year Departmental Spending
Limits? Do these procedures require submission of environmental
appraisals of additional activities or spending?
Departments will have to fund new programmes
from within their allocations.
19. What will be the timetable for the next major
review of departmental spending limits? And will there be changes
to the procedures for that review compared with those employed
for the CSR?
Annually Managed Expenditure will, as it implies,
be reviewed yearly. The next review of Departmental Expenditure
Limits will take place in 2000-01. The review will take place
on a Resource Budgeting basis; exact procedures have not yet been
20. Within the CSR process did the Treasury require
Departments to appraise the environmental and sustainable development
implications of their proposed programmes and to inform the Treasury
of the results? If not, what was the reasoning for this?
21. Did Departments submit environmental appraisals
to support policy proposals in their CSR?
22. Where the results of environmental appraisals
were not submitted did the Treasury identify whether they had
been undertaken? And, where the impacts were deemed not to be
significant, did the Treasury confirm that departments based this
conclusion on appropriate and robust initial screening?
23. Did the Treasury review departments' valuations
of environmental costs and benefits in their environmental appraisals?
24. If the Comprehensive Review Process did not
involve environmental appraisal how does Treasury explain this
against the commitment of the Government to environmental appraisal
of policies and programmes?
The Treasury did not police Departments' use
of environmental appraisal in the CSR process. Where the environmental
implications of a spending programme were judged to be significant,
Departments were expected to be able to provide data to inform
discussion. Valuations of environmental costs and benefits were
subject to discussion and scrutiny.
25. Did the Treasury draw on any additional expertise
to review the sustainable development implications of departments'
proposals? In particular, did they involve Ministers or staff
from DETR in the review of departments' proposals to consider
DETR staff were involved in or saw papers for
those other reviews whose environmental implications were most
26. In particular, what consideration was given
to the sustainable development implications (both positive and
negative) from increasing spending on school buildings and further
and higher education; investment in hospital buildings; and road
and bridge maintenance and renewal of public sector housing?
School and hospital buildings
Environmental concerns as well as economic and
social objectives helped to justify a programme that will double
capital expenditure on school buildings between 1996-97 and 2001-02.
Many school buildings are quite inefficient in their use of energy,
partly because there is a large backlog of repair and maintenance.
Many others are old: they do not make use of modern insulation
materials; and they make poor use of space.
The net effect of our plans will be positive,
with an overall reduction in energy use and CO2 emissions
and the opportunity to replace older materials with environmentally
In some cases there may be a need to rationalise
school sites, largely in response to changes in local populations.
The mix of effects will be unique to individual areas but may
include benefits and/or costs to the environmental, economic and
broader social aspects of sustainable development. For example,
improvements to the fabric of schools and better use of capacity
will contribute to increasing pupil standards; the concentration
of car and bus trips on fewer sites may benefit some localities.
Similar considerations applied in the case of
the hospital investment programme which will be funded as a result
of the CSR. The NHS Modernisation Fund will provide a 50 per cent.
increase for publicly funded capital investment to help modernise
Further and higher education
The review concentrated on the contribution
of further and higher education to the social and economic aspects
of sustainable development. If considered the global environmental
impact of FHE in terms of the total number of students, teachers,
other workers, buildings and energy and other resources used.
It did not, however, examine in any detail how far the environmental
impacts might change as the overall scale of outputs and inputs
Road and bridge maintenance
The transport spending review was conducted
in tandem with the development of the integrated transport White
Paper, which explicitly took as a central theme the importance
of sustainable development. The review of trunk roads assessed
proposals against a range of criteria, including impact on the
environment, the economy and the social dimension. The results
of the roads review were published in A New Deal for Trunk Roads
in England. Chapter 8 of that document provides an overview of
the environmental and other benefits and costs of the decisions.
Public sector housing renewal
The housing review addressed the positive and
negative implications of housing policy for social and economic
progress and, to a lesser extent, environmental protection. The
review considered environmental factors in less detail because
these were already subject to consideration in a number of parallel
reviews looking in detail at the impact of housing on the environment:
the environment CSR, which covered the Government's programmes
for promoting energy efficiency in the housing stock; the Government's
consideration of its policies for accommodating the demand for
new housing arising from the projected growth in the number of
households in England and Wales; the current review of the Building
Regulations, which is examining the scope for Regulations to deliver
improvements in the energy efficiency of new and existing buildings;
and consultation on revising the UK Sustainable Development Strategy
which is addressing action to help build sustainable communities
and to encourage sustainable construction practices.
The housing review concentrated on the major
welfare consequences of Government expenditure programmes, such
as housing benefit and capital expenditure by local authorities
on the housing stock. The overall aim of the review was to ensure
that housing policies contributed to the social dimension of sustainable
development by offering everyone the opportunity of a decent home
and so promoting social cohesion, well-being and self-dependence.
The main outcomes on public sector housing renewal were: provision
of an additional £3.9 billion over the next three years to
tackle the maintenance backlog in local authority housing, so
delivering social benefits, improving the energy efficiency of
the stock and enhancing the local environment; maximisation of
these outputs by efficiency improvements in the use of public
resources, to be driven by the introduction of Best Value, and
the establishment of a Housing Inspectorate; more localised investment
decisions so that local authorities can take a more strategic
approach to housing, taking better account of local needs and
priorities and improving the contribution that capital investment
in housing makes to social, economic and environmental progress;
and, to reduce social exclusion, greater tenant involvement in
housing management, and the development of a new strategy to address
the problems of Britain's most deprived neighbourhoods.
On housing more generally, an extra £174
million will now be targeted on an expanded and more focused energy
efficiency drive, to reduce fuel poverty and help to meet the
UK's commitment on climate change.
27. What authority does the CSR report confer?
Do all new spending proposals contained in the CSR require further
approval from Treasury based on detailed policy appraisal work?
Will Cabinet approval be required?
The spending plans in the CSR White Paper are
agreed Government policy. They are intended to set out a clear
and firm framework for the remainder of the Parliament.
28. Has provision been made for DETR to consider
the sustainable development implications of other departments'
spending proposals agreed in the CSR, prior to their further approval?
Where the details of spending proposals agreed
in the CSR do require further collective policy agreement, DETR
Ministers will have the usual opportunities to comment and suggest
29. At project approval stage for expenditure
programmes agreed within the CSR does Treasury stipulate what
documentation it requires on environmental impacts and the results
of environmental appraisal as part of its review process?
The Treasury will expect individual projects
to have been appraised in line with its guidance on economic appraisal
(Economic Appraisal and Evaluation in Central Government).
The guidance stresses the need for all identifiable costs and
benefits, including impacts on the environment, to be taken into
account in considering proposals, and offers guidance on how environmental
costs and benefits can be valued.
30. What arrangements has the Treasury made to
consider the sustainable development implications of Departmental
Investment Strategies and bids for funding from the Capital Modernisation
Fund before making allocations? Does Treasury guidance set any
prerequisites regarding sustainable development implications,
for example in terms of reducing energy use in modernised facilities
compared to the facilities replaced?
Though they will be approved by the Treasury,
Departmental Investment Strategies are not so much an instrument
of Treasury control as a management tool for Departments themselves,
to help them ensure that the funds already allocated by the CSR
for capital purposes are focused on the key objectives and priorities
of the Government. They are also designed to demonstrate that
the investment will be good value for money, by showing that appropriate
systems and incentives are in place and by paving the way for
the capital management plans to be produced under Resource Accounting
In a real sense, the whole process is designed
to ensure that Departments' capital programmes meet the test of
sustainable development by making sure that investments offer
a return which fully compensates future generations for the cost
of borrowing to finance them.
All bids for funding from the Capital Modernisation
Fund must be supported by an appraisal carried out in accordance
with Economic Appraisal and Evaluation in Central Government.
Guidance to Departments on making bids will specifically draw
attention to the need in this appraisal to make all the expected
costs and benefits transparent, including any impact on the environment.
31. Has the Treasury given guidance to DfEE, DoH
and DETR regarding how to ensure value for money for their investment
programmes in schools, hospitals and council housing? Does this
guidance address sustainable development considerations?
Please see answer to Questions 29 and 30 above.
32. Will Treasury have a role in approving the
rules or individual projects within the capital investment programmes
in education, health and local authority housing?
In the case of education and housing, Treasury
is involved in the development and approval of rules governing
the different elements of the capital investment programme. With
the exception of PFI projects, it is not normally involved in
the approval of individual projects. However, Treasury will be
involved in the approval of capital funding across Departments
under the Capital Modernisation Fund.
In the case of health, Treasury will be involved
in approving individual projects if they fall above the Department's
delegated authority, or are otherwise "novel, contentious
33. What arrangements have been put in place to
maximise the potential sustainable development impact of the Invest
to Save budget?
As with the Capital Modernisation Fund, bids
for funding from the Invest to Save Budget must be supported by
an appraisal carried out in accordance with Economic Appraisal
and Evaluation in Central Government. In order to allow decision
making to take sustainable development-type factors into account,
the guidance to Departments on making bids specifically draws
attention to the need in this appraisal to make all the expected
costs and benefits transparent, including any elements which cannot
easily be valued in monetary terms.
23 November 1998