Select Committee on Environment, Food and Rural Affairs Written Evidence


Memorandum submitted by the State Veterinary Service (DAR 11)

BACKGROUND

  The attached questions are designed to provide more detail about issues covered in the Committee's inquiry into Defra's Departmental Report 2006 and Defra's 2006-07 budget. The State Veterinary Service's response will be circulated to Members in advance of the Committee's evidence session with Defra officials in early December.

EFFECT OF BUDGET CUTS ON THE STATE VETERINARY SERVICE'S WORK

  Defra has announced cuts in the State Veterinary Service's (SVS) 2006-07 resource budget of £3 million. This represents a 3% cut in the SVS's expected resource budget for that year.

1.  Could the State Veterinary Service (SVS) provide a detailed breakdown of which programmes and projects are affected by the £3 million reduction in its resource budget? Within these programmes and projects, what specific services have been, or will be, affected, delayed or stopped altogether? The Committee would like as much information about this as possible.

ANSWER

  As part of Defra's review of its resource DEL expenditure, the Department asked the State Veterinary Service (SVS) to explore ways of reducing its expenditure for 2006-07. SVS advised that £3 million of its internal Business Reform Programme expenditure could be reclassified as capital, which would reduce the Department's resource DEL expenditure by £3 million.

  (DEL = Departmental Expenditure Limit)

  The table below sets out SVS initial 2006-07 funding allocation and its subsequent movements:


Resource
£'m
Capital
£'m
Total
£'m

Initial Funding
94.3
7.3
101.6
Additional In-Year Funding
3.2
0
3.2
97.5
7.3
104.8
Transfer to Capital
-3.0
3.0
0
94.5
10.3
104.8


  The additional in-year funding was provided to finance additional activities taken on in the year—eg rabies work transferred from core Defra to SVS and additional avian influenza work as agreed last year.

  SVS' budget has not been reduced in total. The only change has been in how the amount has been apportioned between resource and capital accounts, in relation to an internal change programme. The budget change has no impact on current front-line operations.

2.  To what extent will the budget cuts affect the delivery of its various programmes and projects, particularly those concerned with security against animal disease? Which programmes and projects are more at risk than others?

ANSWER

  See answer to question 1 above.

3.  How has the SVS attempted, or how does it intend, to mitigate the effects of the budget cuts on the various programmes and projects affected?

ANSWER

  See answer to question 1 above.

  There has been no cut in SVS' overall budget and no effect on front line operations. However, SVS and Defra are continually working together to improve planning and actively manage changes in policy or work volumes.

4.  How much discretion was the SVS given to determine which programmes and projects would be affected by the cuts?

ANSWER

  SVS has gone through the process of looking at where its money is spent. As a delivery body, SVS cannot commit unilaterally to reducing spend, but it can advise on the risks and impacts of reductions in funding. As policy customers, it is for Defra and the Devolved Administrations to decide if there are areas that they wish to cut back on.

5.  How many job losses are expected within the SVS as a result of its budget cuts?

ANSWER

  There are no job losses expected as a result of the budget change.

EFFECT OF BUDGET CUTS ON NON-GOVERNMENTAL ORGANISATIONS AND SPONSOR ORGANISATIONS AFFILIATED WITH THE STATE VETERINARY SERVICE

6.  Which Non-Governmental Organisations, and other smaller bodies and companies affiliated with the SVS, will experience cuts in their respective budgets owing to the SVS's resource budget cuts, and to what extent?

ANSWER

  Not applicable, but see answer to question 7 below.

7.  To what extent has the SVS, or Defra, provided advice to those bodies affected about their situation? What measures have been taken to assist such bodies in coping with cuts in their budgets?

ANSWER

  SVS spends around a quarter of its budget on services provided by private vets acting as Local Veterinary Inspectors (LVI). SVS is currently working closely with the British Veterinary Association (BVA) to introduce new contractual arrangements with the practices that provide these services. Any proposal to reduce LVI expenditure would affect these negotiations.

BUDGET CERTAINTY FOR 2006-07

  In evidence to the Committee on 25 May 2006, Defra's Permanent Secretary said that the Department had "failed in our aim to give our delivery agencies enough warning" about the cuts in the 2006-07 budgets.

8.  Was the SVS given enough certainty at an early stage about the extent of its 2006-07 resource budget cuts? If not, what impact did this lack of certainty have on the SVS's work and plans?

ANSWER

  See answer at 9 below.

9.  Could the SVS provide an approximate time-line to set out what Defra told the SVS about the extent of its budget cuts between the first warning that cuts would be made and its latest position on the budget? What was the impact of these messages on the SVS, in terms of planning and delivering its 2006-07 work programme?

ANSWER

  SVS submitted its bid for 2006-07 in January 2006. Notification of the budget actually allocated was received in March. In June, SVS was asked to consider how it could implement a 5% cut in its budget allocation. SVS carried out a review in June and provided advice to Defra on the risks and impacts of making cuts in the SVS budget. At that time, SVS advised Defra that £3 million of the SVS resource budget could legitimately be reclassified as capital budget. This contributes to relieving the pressure on Defra's overall resource budget, without actually reducing SVS' overall budget or impacting on front-line delivery. This latter course was accepted in August.

  SVS was aware of the tightening financial situation in the Department, the public finance position generally and the difficulties caused by the Treasury changes to end of year flexibility.

10.  Were there any discussions about the causes of the cuts?

ANSWER

  Yes. SVS has been kept informed about the reasons for seeking cuts.

BUDGET CERTAINTY FOR FUTURE YEARS

11.  Has the SVS been told by the Department about the likelihood of further cuts in its budget in 2007-08, and beyond? What are the current estimations about the size of the SVS's budget next year, and beyond?

ANSWER

  The SVS' initial resource allocation for 2007-08 is £101.9 million (prior to funding switches for transfers of functions and work). This budget allocation excludes resources required for:

    —  Volume changes in work relating to current policies.

    —  New work arising from new policies.

    —  Hampton delivery landscape changes.

    —  Necessary SVS organisational development to build capacity and capability.

    —  New legislation and the cost of complying with regulations arising from other departments eg new employment legislation.

    —  Emerging risks—eg the prospect of a Bluetongue outbreak and/or the the instigation of widespread surveillance zones.

  SVS has been asked to consider how it could reduce resource expenditure in 2007-08 by 10%.

12.  If further cuts are expected in 2007-08 and beyond, which programmes and projects are likely to be affected? What would be the impact of further significant cuts to the SVS's budget next year?

ANSWER

  In reviewing how the SVS' 2006-07 budget could be reduced, it was recognised that a reduction in expenditure of the scale sought, could only be achieved by reducing Local Veterinary Inspector (LVI) costs, through the scaling down of work: LVI costs being the only "tap" which could be turned off to release sufficient cash in the time available. This translated into three months LVI work. This risked EU Infraction Proceedings, GB Trade Status, increased disease incidence (particularly bovine TB), increased compensation payments and a breakdown in relations with the British Veterinary Association (BVA), with whom SVS is trying to establish a modern working relationship for LVI deployment. It could also result in a reduction in the number of large animal veterinary practices, which would erode the supplier base the SVS can call upon in an emergency and would be irredeemable. Additionally, PSA and SVS' own targets could be undermined and any short term reduction in expenditure could generate additional future costs. Ministers determined that SVS' 2006-07 budget should not be cut and that the SVS' operational capacity should not be reduced.

  Consideration needs to be given to the impact any budget reduction would have on SVS' already thin footprint and on its ability to respond in an emergency.

  As SVS' cost drivers and cost base will be the same in 2007-08 as they are in 2006-07, reducing expenditure by 10% will continue to incur the same risks. The likelihood of these risks being realised, however, increases, as the reduction now being sought for 2007-08 translates into four months LVI work.

  The one possible route out of this dilemma is to review the policies which drive the work and therefore the costs—it is recognised that a review of these may determine that there are sound reasons why policy should not change. Should policy changes not be acceptable, SVS cannot reduce its 2007-08 expenditure and avoid the risks outlined above. It is for SVS' policy customers to determine which combination of policies they wish SVS to deliver and which risks they wish to carry to achieve the budget reduction goal.

State Veterinary Service

November 2006





 
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