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
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 Developmentwith
the exception of the tax regime, which was outside the CSR's coverageas
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
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
(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
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 evidencesome 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
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
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
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
(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
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
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 accounteven 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
21. Departments' plans for
establishing targets to green their own operations, including
energy efficiency, will be set out in the Green Ministers published
(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
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
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.