Select Committee on Environmental Audit Third Report



APPENDIX 1

GOVERNMENT RESPONSE TO THE COMMITTEE'S THIRD REPORT OF 1998-99, HC 92: THE COMPREHENSIVE SPENDING REVIEW AND PUBLIC SERVICE AGREEMENTS

The Government is grateful for the views of the Committee, as set out in the third report. The Government will bear the Committee's views in mind when preparing for the next review of public spending. The Government's responses to the Committee's specific conclusions and recommendations are set out below.

(a) We remain concerned that the Comprehensive Spending Review White Paper and the formal processes for preparing it did not put enough weight on the Government's commitment to sustainable development.

1. The Government believes that the resources announced in the Comprehensive Spending Review will deliver real benefits across all three of the pillars of sustainable development: the environment, the economy and social progress. Spending on environmental programmes has been increased. And spending on programmes with big environmental impacts like transport and agriculture has been refocused more directly towards sustainable development objectives. Fairness and access to opportunity will be strengthened and deepened. New investment in health and education will improve the quality and resource productivity of public services.

2. In undertaking the Review, the Government believes that it did take account of environmental and sustainable development aspects, as the Committee have acknowledged. 'Sustainable growth' and 'fairness and opportunity' were key objectives of the CSR. Environmental impacts were looked at in depth in all the areas picked out by the Government Panel on Sustainable Development—with the exception of the tax regime, which was outside the CSR's coverage—as well as in several others. As the Treasury said in its evidence to the Committee, the sustainable development implications of spending on other areas including overseas aid, forestry, fishing, planning, the science base, rationalisation of the defence estate, urban regeneration and rural development were also considered.

(b) We believe that in the Comprehensive Spending Review departments should have been provided with guidance and assistance. They should not have been relied upon to take account of sustainable development with neither the Treasury nor the Department of the Environment, Transport and the Regions having a clear responsibility to check that they had done so.

3. The Government will consider how the procedural weaknesses which the Committee has identified can be remedied in the next spending review. The Government's view remains that the Treasury is not best placed to police the extent to which departments have taken sustainable development into account in preparing their submissions to the Review. To the extent that this would make it an externally imposed obligation rather than something which is integral to departments' own appraisals of their programmes, the Government believes this could even be counterproductive. We suggest below that one way of addressing this issue, on which we would be grateful for the Committee's comments, would be to build 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 to departments as a source of expertise on environmental considerations.

(c) We stress the importance of reflecting the Government's commitment to sustainable development in the words of its key reports. We believe that to turn the ship of Government onto a sustainable course still requires some changes in hearts and minds and that the summarising of the proposed actions in published documents reinforces the message.

4. The Government has made clear its commitment to sustainable development, and reiterated this in the recently published Sustainable Development Strategy. This sets out the policies already being developed to address sustainable development across Government, and will also provide a framework for future policy making.

5. The Government will continue to highlight in its reports the implications for sustainable development where it is appropriate. For example, in the recent Building a Stronger Economic Future for BritainEconomic and Fiscal Strategy Report and Financial Statement and Budget Report, March 1999 (HC298) the Government summarised its vision of sustainable development and also detailed how the Budget included measures to promote each of the four broad objectives of sustainable development.

6. It is important that policy makers do not simply pay lip service to sustainable development but that decisions are taken with a view to maximising the sustainability of policies pursued. This is why the development of an effective set of headline indicators of sustainable development will be an essential tool. The Government will use the principles and indicators of sustainable development to inform its policy decisions. The headline indicators will help everyone to understand what sustainable development means and is committed to reporting progress against those indicators.

(d) We conclude that although the Government did not formally use the Comprehensive Spending Review to tackle subsidies which have an adverse environmental impact it is none-the-less considering action to address many of them. We welcome this and look forward to being able to see real progress on removing these distortions.

7. The Government is grateful for the Committee's support on this issue and will continue to look for opportunities to tackle unjustified subsidies. The key underlying principle is that the cost of any subsidy must be outweighed by benefits to society, including environmental costs and benefits. If a subsidy is doing more environmental harm than it is bringing benefit to society, then the Government believes that it is clear that it should be scrapped.

(e) The balance of spending between roads and rail does not appear to have been addressed in the Comprehensive Spending Review.

8. The transport review took a comprehensive look across all modes before deciding how to allocate the additional £1.1 billion to integrated transport quoted in the Chief Secretary's evidence—some of which will go directly on improving rail services and some on investment in better links between other modes and rail. This overall increase for transport excluded support for rail franchises, London Transport and the Channel Tunnel Rail Link, where an increasing share of funding will come from the private sector. The Government carefully considered the balance of funding between road and rail taking into account public and private sector inputs.

(f) On balance we would say that whilst the increases in funding for environmental protection programmes should be welcomed, they are marginal by comparison to what could be achieved through integration of environmental considerations into the Government's more mainstream programmes for health, education, competitiveness etc.

(g) Overall we have found that some consideration has been given to environmental impacts in the Comprehensive Spending Review. However, we have been disappointed by the answers to our questions on the environmental appraisal of policies and we conclude that the Government has not been meeting its commitments in this regard.

9. The Government believes that the increases for its environmental protection programmes agreed as part of the Comprehensive Spending Review can only be described as significant.

10. Energy efficiency programmes are set to rise over 3 years from £109m in 1998-99 to £223m by 2001-02. Expenditure on the Environment Agency will be increased by £12 million over the same three years, and expenditure on the contaminated land work by local authorities will be increased by £50 million over that period. Total spending on DETR's environmental programmes is set to rise from £354 million in 1998-99 to £499 million by 2001-02. This expenditure covers only those programmes which are directly identified as environmental protection.

11. Other expenditure which also has beneficial effects on the environment far exceeds this; for instance the £1.1 billion extra to modernise local and public transport and the extra £5 billion to improve housing and regenerate deprived areas.

12. Environmental considerations were considered in the CSR. In the early stages of the CSR process, the Deputy Prime Minister wrote to all his Cabinet Colleagues reminding them of the significance of sustainable development and the need to bear it in mind in carrying out their spending reviews.

13. Standing guidance to departments, which they are required to follow, on appraisal and evaluation of spending and other policy proposals is contained in the Treasury Document Appraisal and Evaluation in Central Government (Revised 1997) and in DETR's publication Policy Appraisal and the Environment: Policy Guidance (1998). This makes clear that environmental impacts need to be considered alongside other effects when appraising projects for government support. There is also the Cabinet Office requirement to include significant environmental costs and benefits in Cabinet papers. Each department should be expected to account for the environmental appraisal that supports its policies.

14. The Government's commitment to put the environment at the heart of decision making applies to all departments. This commitment is shown by the appointment of Green Ministers in each department who ensure that the work of each department takes full account of the environment. The forthcoming Green Ministers first published report in Summer 1999 will set out the progress made across departments in integrating environmental appraisal into policy decisions.

(h) The Committee urges the Government to persist until all departments explicitly adopt the Government's policy on sustainable development in their aims and objectives.

15. Progress on this will be set out in the forthcoming published report from Green Ministers.

(i) The Chief Secretary challenged the Committee to hold departments to account on their impacts on the environment and sustainable development. We consider the Public Service Agreements do not provide a strong foundation for this.

(j) We consider that the omission of commitments for greening government operations from the Public Service Agreements demonstrates the Government's lack of real concern for that agenda. This is the central mechanism for holding departments to account and the only one which has the force of being linked to consideration of departments' future budgets.

16. The Government is disappointed that the Committee did not feel that the Public Service Agreements properly reflect the Government's commitment to sustainable development. Ten out of the seventeen main departments looked at by the Committee specifically refer to it in their aims and objectives, as do others which the Committee did not examine. Of these 10 departments, eight, including the Treasury, have set specific related performance targets in their Agreements against which progress can be judged.

17. However, as the Chief Secretary said in his evidence, the Government will be looking to refine and improve the Agreements over time, and will bear the Committee's points in mind when the Agreements next come to be reviewed. Green Ministers are already looking at the issue of whether sustainable development should be formally incorporated into the remit of existing departments and Non-Departmental Public Bodies.

18. The Public Service Agreements are one accountability mechanism but they are not the only mechanism. Nor are they the only information that will be taken into account in considering departments' future budgets. The Government accepts that the Public Service Agreements do not by themselves contain all the information needed to hold departments effectively to account on detailed issues. Departments will also therefore continue to provide information on the environmental impact of their programmes, and on greening their operations, in their departmental reports— this is a Treasury requirement. And Green Ministers will publish a dedicated stand-alone report on departments' sustainable development and environmental performance later this year. The Government would be happy to provide specially whatever other information can be released which the Committee needs to do its job. Departments are already helping the Committee by providing information for its second inquiry into the Greening Government initiative.

(k) We welcome the Treasury's decision to incorporate consideration of environmental impacts in their consideration of bids for capital funding. We urge them to take this further opportunity to ensure that in their Departmental Investment Strategies departments sign up to and have plans to deliver targets for energy efficiency and dealing with contaminated land.

19. The recently published guidance for the second Invest to Save Budget bidding round made clear that all bids other than for seedcorn funding must be supported by an economic appraisal of the project carried out in accordance with Economic Appraisal and Evaluation in Central Government (the "Green Book"). This guidance stresses the need for all indentifiable costs and benefits, including impacts on the environment, to be taken into account—even when they are not easy to value in monetary terms.

20. Moreover, the Government will also consider how the guidance for allocations from the second round of the CMF can best encourage proposals which will deliver environmental improvements.

21. Departments' plans for establishing targets to green their own operations, including energy efficiency, will be set out in the Green Ministers published report.

(l) We are very concerned about the constraint the fixed three year spending limits place on key policies which are due to be finalised within the next year or so. We ask the Government again to tell us what provision it has made to enable forthcoming policies to be taken forward, in particular the Sustainable Development Strategy and the Renewable Energy Policy. We ask particularly whether there will be scope to address the need for any new spending on these for the year 2001-02 which, although it is the third year of the current Comprehensive Spending Review period, is also to be the first year of the second Comprehensive Spending Review.

22. The Comprehensive Spending Review set firm expenditure plans for the next three years. As the Chief Secretary explained in his evidence to the Committee, it is up to departments to deliver new commitments from within this provision by securing productivity improvements elsewhere on their programmes or reordering their priorities.

(m) We urge the Cabinet Committee on Public Services and Public Expenditure Committee (PSX), to remember the importance of sustainable development issues even though they have perhaps not always been fully spelled out in the Public Service Agreements. In the absence of an obvious champion for the environment within PSX we recommend that the Government should require departments to identify their contribution to sustainable development in their annual performance reports to that Committee.

23. In the light of the PSAs and other information, PSX's key role is to monitor performance against Public Service Agreement targets and advise on public expenditure allocations in the 2000 spending review. PSX is mindful of the need to take sustainable development issues into account and will consider the Committee's recommendation carefully in carrying out this role.

(n) In the second Comprehensive Spending Review and its report the Government should more fully reflect its commitment to sustainable development and the approach it is adopting, so that it is clear that its spending proposals and performance targets are fully consistent with its strategic policy intention.

24. The Government will take the Committee's views into account in setting the parameters for the next spending review. The Sustainable Development Strategy has set out clearly the Government's principles, which Departments will be able to follow in reviewing their programmes.

(o) For the benefit of openness and to enable an audit trail, key guidance on matters to be addressed in the second Comprehensive Spending Review should be publicly available. This guidance should spell out clearly that departments should take into account their contribution to sustainable development in their reviews, proposals, targets and investment strategies and that they should report their overall approach in the resulting documents.

25. The Government would be happy to tell the Committee in due course what the review guidance will say on this point.

(p) To ensure that sustainable development considerations are taken into account and given sufficient weight the second Comprehensive Spending Review should involve a checking mechanism, drawing on the expertise of the staff of the Sustainable Development Unit and, if possible, Ministers with a special interest in the overall sustainable development policy.

26. The Government is minded that for the next spending review there should be 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 to departments as a source of expertise on environmental considerations. We would be grateful to know if this would meet the Committee's concerns.

(q) The next Public Service Agreements should include performance targets related to key aspects of the Government's sustainable development strategy and its commitment to greening government operations.

27. The Government will review the Public Service Agreements, in the light of its Sustainable Development Strategy, when Agreements are next drawn up.

(r) The next Comprehensive Spending Review should make clear the funding position regarding important policy developments which are already known to be under review for completion within the expenditure period.

28. The Government is happy to make the position on this matter clear. Where the outcomes of policy reviews which are likely to report in the next expenditure period can be anticipated, they will be taken into account in the next spending round. Where they have not been anticipated departments will be expected to find room for them when they arise from within their allocations by securing productivity improvements elsewhere on their programmes or reordering their priorities. There exists a small Reserve but this is for genuinely unforeseeable contingencies only and will not be generally available to fund new policy developments.


 
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