THIRD REPORT
The Environmental Audit Committee has agreed to
the following Report:
COMPREHENSIVE
SPENDING REVIEW: GOVERNMENT RESPONSE AND FOLLOW-UP
Introduction
1. The Environmental Audit Committee published a
report on the Comprehensive Spending Review and Public Service
Agreements in February 1999.[1]
In May 1999 the Treasury submitted the Government's response to
the Committee. This was reported to the House and made publicly
available in October 1999 and is appended to this report.[2]
2. The second Comprehensive Spending Review (CSR
2000) was announced in the November 1999 Pre-Budget Report. We
decided to publish a short report to follow-up on our original
findings and recommendations in the light of the Government's
response and subsequent announcements by HM Treasury.[3]
We were grateful for evidence submitted by the Council for the
Protection of Rural England (CPRE) on these matters.[4]
The Committee's report
3. The Committee identified a number of shortcomings
in the first CSR with regard to the implementation of Government
commitments on putting the environment at the heart of policy-making:
- important Government's commitments to sustainable
development and environmental protection did not appear to be
reflected in the CSR's overall terms of reference and it was left
to the Deputy Prime Minister to 'remind' Cabinet colleagues by
letter during the process of the significance of sustainable development
and the need to bear it in mind;[5]
- the Treasury was unwilling to monitor the consideration
given by other departments to sustainable development and environmental
protection in undertaking their reviews and there was confusion
over the role of the Department of the Environment, Transport
and the Regions in this regard;[6]
- no documentation was made routinely available
on whether spending programmes reviewed were subject to environmental
appraisal, or even screening, and so neither this Committee, nor
any other external body, was in a position to assess the extent
of compliance with the Government's commitment to 'putting the
environment at the heart of government';[7]
- the Government had not used the last CSR formally
to tackle environmentally adverse subsidies identified by the
Government Panel on Sustainable Development;[8]
- departmental aims and objectives coming out of
the process, collectively did not reflect the Government's stated
overall commitment to sustainable developmentthere were
significant gaps and inconsistencies;[9]
and
- the omission of commitments to 'greening government'
from the Public Service Agreements, a central mechanism for holding
departments to account, suggests a lack of real concern on the
part of the Government for that process.[10]
The Government's response
4. The Government's response was welcoming in tone
but rather short on substance. It rightly points to a number of
spending decisions that will improve the resources available to
environmental protection and we accept that such resources have
been significantly increased.
5. We remain concerned, however, that departments'
efforts to meet the challenge of integrating economic, environmental
and social considerations cannot be verified on the basis of the
information produced. The response merely repeats assertions made
in evidence to the original inquiry that, where significant, sustainable
development and environmental implications were considered.[11]
We are therefore unable to 'sign off' the CSR process with regard
to its consideration of environmental impacts, nor the wider issues
of sustainable development.
6. The Government has accepted the need "to
bear the Committee's views in mind when preparing for the next
review of public spending" and "to consider how the
procedural weaknesses which the Committee has identified can be
remedied".[12]
We consider below whether these commitments have been implemented
on the evidence available so far.
Spending Review 2000
Government announcements
7. In the Pre-Budget Report 1999 the aims of the
next CSR were set out in the following terms:
"To determine how best
departments' programmes can contribute to the achievement of the
Government's objectives, including in particular its aims of:
opportunity for everyone to fulfill their potential through education
and employment; a fair and inclusive society in which communities
are healthy and secure; and higher productivity, sustainable growth
and effective cooperation with our European and international
partners."[13]
The process will include thirteen cross-cutting reviews
on: Welfare to Work and ONE (the single work-focussed gateway);
Sure Start and services for the under fives; young people at risk;
support for older people; the criminal justice system; anti-drugs
initiatives; crime reduction; local government finance; government
intervention in deprived areas; rural and countryside programmes;
publicly-funded science and research; conflict prevention in Sub-Saharan
Africa; and nuclear safety in the former Soviet Union.[14]
We welcome the strong emphasis on social issues evident in this
programme of work. However, we were surprised not to see more
explicit reference to the environment for complete coverage of
the sustainable development trinity, not least in the light of
growing recognition that "environmental problems are a component
of social exclusion and an issue of social justice".[15]
Overall aims
8. We hope that detailed guidance on the conduct
of the review will emphasise the need to integrate environmental
considerations into work on this programme with particular reference
to: healthy and secure communities, higher productivity (which
should include higher productivity from the use of natural resources);
and sustainable growth (which should include the aim of environmentally
sustainable growth).
Cross-cutting reviews
9. With respect to the cross-cutting reviews: work
on rural and countryside programmes, as well as nuclear safety,
clearly will involve important environmental issues. However,
we would also expect to see the implications and opportunities
for promoting sustainable development and environmental protection
feature particularly in the reviews of:
- local government finance (looking forward to
the implementation of the new powers for English local government
contained in the 1999-2000 Local Government Bill on economic,
social and environmental well-being);
- publicly-funded science and research (for which
the current rather limited aim is to ensure that "science
which is supported from public funds in England is being properly
conducted and exploited to the benefit of the economy at large");[16]
and
- Government intervention in deprived areas (to
take account of the fact that people living in poverty suffer
the worst environments and usually have the least redress or escape;
and build into regeneration initiatives relevant environmental
themes such as improving domestic energy efficiency, public transport
services and air quality).[17]
Sustainable Development Strategy
10. Since the last CSR, the Government has published
its own Sustainable Development Strategy for the UK, A better
quality of life and a full set of sustainable development
indicators which include a 'headline' set of 15.[18]
The Government's response describes the strategy as providing
"a framework for future policy making" and the headline
indicator set as "an essential tool" to prevent policy-makers
from simply paying lip service to sustainable development. The
Government commits itself to using "the principles and indicators
of sustainable development to inform its policy decisions".[19]
In the light of these statements we find it astonishing that the
announcements set out above contain no reference to this framework
or indicators. We look to the Government to establish a clear
link between the sustainable development strategy and indicators
and the rationale and criteria for putting together, and deciding,
departmental bids as part of the current CSR.
11. In our original report we recommended that guidance
should spell out clearly that departments should take into account
their contribution to sustainable development in their spending
reviews and they should report their overall approach in the resulting
documents. The Government replied that "it would be happy
to tell the Committee in due course what the review guidance will
say on this point". We assume that this material is available
now that the review is underway and would like to receive it to
assure ourselves and Parliament that it is adequate and has been
promulgated in a timely fashion. We would expect that such guidance
reflects our original recommendations and the points made above.
12. We regard the absence of a specific cross-departmental
CSR on making progress towards sustainable development, in support
of the new strategy, as a missed opportunity. This seems particularly
to be the case given the Government's own analysis that "sustainable
development is the cross-cutting issue most affected by overt
policy conflicts of policy and interest ... the problem is primarily
one of policy conflicts which are inadequately resolved, and where
the institutional framework for doing so is not up to the job."[20]
The role of the Treasury
13. In the Government's reply to our report great
emphasis is placed on the importance of sustainable development
being "integral to departments' own appraisal of their programmes"
and not an "externally imposed obligation". Indeed the
Government goes so far as to suggest that Treasury's 'policing'
of departments' performance in this regard "could even be
counterproductive".[21]
We cannot help but feel that this betrays a disappointing immaturity
in the system. We cannot take seriously the proposition that monitoring
and assessment by Treasury of an important part of how Government
allocates expenditure runs a risk of producing a backlash from
piqued departments. We have no doubt that this is not the case
with regard to financial and economic impacts of policies. We
do agree, of course, that sustainable development should be integral
to departments' own assessments of their expenditure needs and
hence bids. But we feel that some mainstream assessment of performance
is merited by Treasury just as it will presumably be monitoring
departmental submissions for other impacts. Perhaps lessons from
the Cabinet Office/DETR review of the quality of environmental
appraisals accompanying Cabinet papers[22]
could be applied here.
14. To encourage the 'voluntary' integration of sustainable
development into departments' own appraisals the Government suggests
building in a "requirement on Departments to involve their
Green Ministers fully in the preparation and conduct of the review,
and also to recommend the Sustainable Development Unit (SDU) to
departments as a source of expertise on environmental issues".[23]
We whole-heartedly welcome with this but would ask what on earth
Green Ministers and the SDU were doing during the last CSR? When
we asked the Deputy Prime Minister in January 1998 how sustainable
development was to going to be taken into account in CSR decisions
across the board he replied "that is precisely what the Green
Ministers should be doing." In the light of this reply, taken
together with the original mission of the SDU to provide support
and policy advice on environmental integration for all departments,
we can hardly welcome the Government's response on this point
as an innovation.[24]
15. We believe that the Government must commit itself
to a centralised monitoring system. We feel strongly that
the Treasury should accept responsibility, with support from the
DETR, for facilitating and monitoring departments' integration
of environmental and social impacts into their CSR bids. For the
Treasury specifically to take a lead on this would represent the
sort of 'mainstreaming' that would bring sustainable development
and environmental integration out of the ghetto. We would not
regard this as a "policing" function but rather the
provision of vital clarity and encouragement on objectives as
well as feedback on effective practice.
Addressing environmentally damaging subsidies
16. We welcome the Government's commitment that it
"will continue to look for opportunities to tackle unjustified
subsidies."[25]
However the reply goes on to define again what would constitute
such a subsidy rather than set out any plan for addressing them.
In our report on the 1997 Pre-Budget Report we noted that the
total value of environmentally damaging subsidies may be in excess
of £20 billion per annum and we expressed some concern that
there was no evidence of a strategic approach to address this
issue in line with the Statement of Intent.[26]
The Government Panel on Sustainable Development has similar reservations
which are summarised in an annex to this Report.[27]
We consider that the Government should review and report on what
it has done so far to tackle this issue, and should set out in
an action plan with relevant deadlines and targets how it intends
to identify and reduce the environmentally damaging subsidies
which remain. The Committee has previously recommended the establishment
of a Green Tax Commission. Were this to be created as perhaps
a 'Green Budget Commission' it might be well placed to perform
such a strategic review.
Environmental appraisal and spending programmes
17. We were disappointed that the Government did
not respond to our comments on the balance of spending between
roads and rail. Our report discussed in some detail the figure
of £1.1 billion and how it related to overall budgets over
the period of the review, and we concluded that the balance of
spending between roads and rail did not appear to have been addressed.
The Government's response merely repeats the figure of £1.1
billion and takes no account of our analysis.[28]
18. We were concerned that the Government's response
cites expenditure which may be primarily directed at economic
and social objectives, such as the £5 billion on housing,
while failing to quantify adequately the environmental costs and
benefits of such programmes; and that some of this expenditure
may be addressing symptoms rather than causes. In our report on
Energy Efficiency, for example, we pointed out that the amount
spent on subsidising the fuel poor was some £3.6 billion
over the next three yearsthree times the amount of resources
estimated to be directed to energy efficiency property improvement
schemes in the same period.[29]
This perhaps is just the sort of area where a further cross-cutting
review might yield benefits for the exchequer, the environment
and people in genuine need.
19. The Committee has already questioned the extent
to which environmental appraisals are being incorporated into
departmental policies in its 1999 report on Greening Government
and concluded, in the CSR report, that the Government has not
been meeting its commitments in this regard.[30]
The Government's response refers to the Deputy Prime Minister's
letter (see above), standing Treasury and DETR guidance on policy
appraisal and the Cabinet Office requirement for significant environmental
costs and benefits to be identified in Cabinet submissions.[31]
20. Nothing in the Government's response on this
subject allays our concerns about environmental appraisal within
the context of CSR work. We note that in its response to our first
Greening Government report, the Government promised to introduce
new arrangements for the reporting of significant environmental
costs and benefits in Cabinet papers and (as referred to above)
to review the impact of that guidance by the end of 1999.[32]
We await with interest for the conclusions and lessons of that
review to be published and taken on board. We will be revisiting
Government's progress with policy appraisal and the environment
in a review of the Green Ministers' First Annual Report to be
published shortly.
Departmental objectives and Public Service Agreements
21. Given the overarching nature of sustainable development
and the fact that it should provide the framework in which all
policy formulation is carried out, we are surprised to find that
the Government is having to consider formally whether to incorporate
sustainable development into the remit of all departments and
NDPBs. We note the Government's satisfaction that 8 departments
have set performance targets in their PSAs related to sustainable
development aims (including Treasury's reference to development
of the tax system to underpin sustainable development and deliver
environmental objectives).[33]
This emphasis does not really address the criticism that seven
main departments do not refer to sustainable development and,
of those that do, two have no related performance targets.
22. In addition, as the CPRE point out, there are
significant differences in priorities between sustainable development
and other issues revealed by comparisons between PSAs. While the
PSA for the DETR contains the objective of integrating "the
environment with other policies across government..." there
is no specifically related performance targets. The Sustainable
Development Unit has responsibility for this initiative but, in
contrast to the cross-departmental units in the Cabinet Office,
no performance target is set in the DETR's PSA covering the SDU's
work. In addition, while the DTI's PSA included a performance
target in relation to expected competitiveness indicators, there
was no equivalent target set for the sustainable development indicators[34]
despite Government hopes for their profile and statements about
their significance.[35]
23. Moreover, the Committee remains very concerned
at the absence of a clear linkage between the revised Sustainable
Development Strategy, departmental aims and objectives as reflected
in their annual reports, and the objectives and targets contained
in their PSAs. If PSAs are to be the main mechanism by which Departments
are to be held to account, then we would also expect to see more
comprehensive environmental objectives and targets contained in
them, to balance the social and economic objectives of sustainable
development which are generally better reflected. We repeat our
concern that departmental PSAs are particularly lacking in targets
reflecting the greening of departments' operations despite a section
dealing with the provision of services by each department.[36]
We welcome the Government's readiness to cooperate but consider
that it is not only a question of providing the Committee with
more information.[37]
Rather, it is up to the Government to provide as a matter of course
a clear structure of objectives, aims, programmes, and targets
against which both budget allocations and progress towards sustainable
development can be assessed.
Conclusions and lessons for Spending Review 2000
24. As we have said above we are pleased that the
Government response acknowledges the weaknesses identified in
our report of February 1999 and welcomes the Committee's contribution
to the debate. However, on the evidence currently available it
seems to be putting few of its words into action in the second
CSR. For instance: the sustainable development strategy is not
mentioned; there is no action plan proposed for reducing unjustified
and unsustainable subsidies, undertakings on the monitoring and
provision of environmental appraisals are thin, and we have received
no reassurance with regard to departmental aims and objectives
and PSAs which are woefully short of environmental targets.
25. For the Spending Review now launched the Government
must ensure that:
- sustainable development is firmly built into
the objectives, process and guidance for the review from the start:
the Deputy Prime Minister should not have to remind departments
about the importance of sustainable development and the environment
this time around;
- there should be a clearly auditable framework
linking the principles, priorities and indicators in the sustainable
development strategy to departmental programmes and spending allocations;
- Green Ministers in all departments, supported
by the Sustainable Development Unit in the DETR, must be able
to demonstrate their integral involvement in shaping policy priorities
and departmental bids and ensuring that adequate work is undertaken
on contributions to sustainable development and environmental
impacts;
- the Treasury should ensure that bids include
environmental appraisals of the impact of policies, and should
ensure that these are made available to this Committee (including
screening statements concluding that full environmental appraisal
is unnecessary);
- the Government should draw up an action plan
with targets for identifying and reducing environmentally damaging
subsidies and should ensure that new expenditure is addressing
causes rather than symptoms;
- departments should all include sustainable
development as an explicit and consistent high level objective
and PSA targets should reflect the greening government agenda
including operations; and
- while the Government placed the tax regime
outside the scope of the original CSR we believe there is a case
for taking a broader look at tax and spending proposals together
given the number of areas where this divide is bridged particularly
with regard to environmental taxes and hypothecation and ring-fencing
(i.e. the Landfill Tax, the Climate Change Levy and proposals
for the fuel duty escalator). In addition there is the hazy line
between subsidies resulting from straightforward public expenditure
and those arising from taxation foregone.
1 Third Report from the Environmental Audit Committee,
1998-99, The Comprehensive Spending Review and Public Service
Agreements, HC-92. Hereafter 'the Committee's report'
or the 'CSR report'. Back
2
Appendix 1. Back
3
See the Pre-Budget Report 1999, Cm 4479 and HM Treasury press
release 24 November 1999. Under the heading of Public Expenditure
the Treasury Select Committee will also be looking at the process
for conducting the 2000 Comprehensive Spending Review, the methods
used and the accountability for the various cross-departmental
studies see TSC Press Notice 3, 21/12/1999. Back
4
Appendix 2. Back
5
The Committee's report, rec. (a) from paragraph 16 (and see paragraph
11); and rec. (o) from paragraph 60. Back
6
Ibid, rec. (b) from paragraph 17 and rec. (p) from paragraph
61. Back
7
Ibid, rec. (g) from paragraph 38 and paragraphs 28 and
37. Back
8
Ibid, rec. (d) from paragraph 23 and see Annex. Back
9
Ibid, rec. (h) from paragraph 41 and figure 1 on page xvi. Back
10
Ibid, rec. (j) from paragraph 49; and rec. (q) from paragraph
62. Back
11
Appendix 1, paragraph 2. Back
12
Appendix 1, paragraph 3. Back
13
Pre-Budget Report, Cm 4479, p15 Back
14
HM Treasury news release, 214/99, 21 December 1999. Back
15
Equity and the Environment, Guidelines for green and
socially just government, Catalyst and Friends of the Earth,
September 1999. Back
16
HM Treasury news release, 214/99, 21 December 1999. Back
17
See Environment and Information, p4, Environment Agency,
October 1999, and Equity and the Environment, Catalyst
and Friends of the Earth, September 1999, Foreword by the Environment
Minister. Back
18
Cm 4345, May 1999. Back
19
Appendix 1, paragraphs 4 and 6. Back
20
Appendix 3, paragraph 9, Council for the Protection of Rural England
(CPRE), quoting Cross-cutting Issues in Public Policy and Public
Service, DETR, 1999. Back
21
Appendix 1, paragraph 3. Back
22
Government has undertaken to introduce "a formal requirement
for Departments to seek DETR's views in preparing Cabinet papers
where there are significant environmental implications. Cabinet
Office, with assistance from DETR as required, will actively encourage
Departments to meet both the existing and this new requirement
and will review the effectiveness of the system at the end of
1999." Government response to the Committee's Second Report,
1997-98, The Greening Government Initiative, HC-517, published
as Cm 4108, November 1998, p5. Back
23
Appendix 1, paragraph 26. Back
24
Evidence to the EAC from the Deputy Prime Minister, 28 January
1998, Session 1997-98, HC517-i, Q34; and DETR Press Release, 31
July 1997. Back
25
Appendix 1, paragraph 7. Back
26
First Report, 1997-98, Pre-Budget Report, HC-547, paragraph
28. Back
27
P. xiii Back
28
Appendix 1, paragraph 8. Back
29
Seventh Report, 1998-99, Energy Efficiency, HC-159, paragraphs
40-42. Back
30
Sixth Report, 1998-99, HC-426, recs. (k) to (p); and Third Report,
1998-99, HC-92, rec. (g). Back
31
Appendix 1, paragraphs 13-16. Back
32
Government response to the Committee's Second Report, 1997-98,
The Greening Government Initiative, HC-517, published as
Cm 4108, November 1998, p5. Back
33
The Committee's report, Figure 1 on p.xvi, did not credit the
Treasury for this PSA target shared with Inland Revenue and Customs
& Excise. Back
34
Appendix 2, paragraphs 30 and 37. Back
35
Launching the headline sustainable development indicators the
Deputy Prime Minister said "We are used to judging the economy's
performance on the basis of GDP, inflation and employment figures.
I want these headline indicators over time to become just as useful
and familiar, reported regularly on TV, radio and in the newspapers."
DETR: 991, 23 November 1998 and see Cm 4345, p. 13-2. Back
36
Exceptionally the DETR includes "advancing the "green"
procurement agenda" under services. Back
37
Appendix 1, paragraph 18. Back
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