Examination of Witnesses (Questions 380
- 395)
WEDNESDAY 18 OCTOBER 2006
DR HELEN
PHILLIPS, MR
DAVID YOUNG
AND MR
POUL CHRISTENSEN
Q380 Mrs Moon: Therefore, is that
one of the reasons why we are going to find difficulty with the
European Union accepting this Vision? Is that going to influence
their fear of land abandonment, is that going to be why they will
cling to the current practices?
Mr Christensen: I think our view
on that is one of the reasons, of course, is the social context
in which that happens is much greater than in the UK. If you go
to large parts of southern Europe in particular many very small
businesses, if that was abandonment and they just walked out,
there would be a massive social problem. I think Europe see it
a bit more as a social problem whereas I think we are looking
at it very much as an environmental problem.
Dr Phillips: I think the other
reason why it is a harder vision to sell in Europe is probably
more to do with the view that it is the UK that are squeezing
Pillar 2 payments and at the same time seeking a domestic mechanism
through voluntary modulation to bridge that gap for the UK. I
think that is in many ways part of the essential stumbling block
to us being able to get wider ownership and "buy in"
to the UK Vision.
Q381 Mrs Moon: Buying into the vision,
as outlined by David Miliband at the Royal Show, was the statement
that we currently have 40% of land in England under some form
of agri-environment scheme and that part of your task was to move
that up to 60% at least at entry level scheme by the end of 2007.
How important to Natural England's success is the implementation
of agri-environment schemes? Is success best measured by take
up of agri-environment schemes, either at entry level or the higher
level, or by the provision of the environmental goods and services
that you talked about earlier?
Dr Phillips: I think we are in
a position at the moment where we are spending quite a lot of
time measuring take up and other forms of inputs and not sufficient
time on measuring outcomes. The first thing we did in terms of
corporate strategy for Natural England was describe the fact that
we need to be able to explain not only to the public, and particularly
the 80% of the public who pay for these benefits that the rural
communities are delivering, and live in cities and towns. There
is a loss of connection between those public benefits that are
being delivered by rural communities, not only in terms of what
it is doing for biodiversity but what it is doing for resource
protection and what it is doing in terms of downstream flood risk
management (which can be proved to the extent of 20% if we are
getting sensible management of the natural environment in the
uplands). That connection is missing and I think we are going
to have to work hard not only to emotionally connect people with
what is being delivered by land managers but also so that when
we are having negotiations not only for more concerted action
across Europe but the right level of resources and funding to
go into it. I think it is difficult for us to be able to describe
at a UK level and particularly at a European level with sensible
metrics what precisely the benefits are. We can point to the examples
we have given to you earlier about the stone curlew, the characteristic
landscapes and the characteristic patterns of land management
but, frankly, it needs to become much more fine grained sort of
descriptions that we can give.
Q382 Mrs Moon: I just wonder if you
could talk a little bit more about how we know what the public
wants in terms of the environmental goods and services. We are
talking about engaging the public with it. How do we do that and
how do we actually ascertain from them what it is they are wanting,
and how do we educate and inform that opinion and view so it is
not just a case of this but that they fully understand the implications
of what they are proposing and desiring?
Mr Young: From our point of view,
the first position is to ensure that the public is aware of what
the benefits are that are being delivered through the programmes.
As Helen has said, we think that is far from the case. We think
there is a complete lack of awareness of the wildlife conservation
benefits and contribution to the rural economy that these schemes
actually deliver. Just by way of example, research done in 2004
shows that about 60% of rural tourism and recreation is underpinned
essentially by healthy and attractive landscapes and wildlife.
Our own research indicated in 1998 that about £11.5 billion
was generated per annum and about 340,000 jobs in rural
tourism. We heard today from the National Farmers' Union that
their view is that is nearer £14 billion in updated terms,
so it is a very substantial underpinning that comes through these
schemes which is really not widely recognised. Having said that,
there are all sorts of evaluations and studies that demonstrate
that the public has a very high willingness to pay despite this
lack of understanding and awareness. Whilst we are very cautious
in our view of contingent valuation studies, as the jargon goes—they
are quite subjective when people have to actually dip in their
pockets to pay compared to what they say they are going to pay—we
are absolutely convinced that public goods are undersupplied compared
to what is actually desired and wanted. How much it is undersupplied
we are not in a position to say exactly and the targeting that
we will do as Natural England around precisely specifying outcomes
we hope will enable the taxpayer, the consumer if you like, to
be more informed and therefore able to influence those choices
more clearly in the future.
Q383 Mrs Moon: If I can stay with
the money questions and how we make our choices, there have been
reports in the media that entry to the higher level scheme has
actually been racked up and the difficulties of actually entering
it have been increased as a result of you having to meet your
budget limitations. Is that true? Is that what is affecting entry
into the higher level scheme?
Dr Phillips: It is a slightly
distorted version. The first thing to say is that while it has
been well-publicised the fact that Natural England and our founding
bodies have been subject to budget cuts in year, the very first
thing we did when we had discussions with officials about that
was to say that we needed to set aside the resources to pay for
entry level schemes and higher level schemes, so everything you
have read about budget cuts in Natural England does not apply
to our delivery of agri-environment schemes. That was an agreement
we reached early on with Defra. Within that we have had a much
higher level of application to the entry level scheme than we
anticipated initially, which has caused us to have to take some
judgments around the rate at which we can approve Higher Level
Stewardship agreements. Of course in Entry Level Stewardship the
whole idea is that you have open applications and in many ways,
I suppose, that helps the farming community relate to voluntary
modulation in the way that there is an opportunity for everybody
to not only share the pain but to take the benefits of it. Higher
level schemes were always designed to be much more targeted and
consequently they are competitive, not only in terms of us being
able to make sure that the resources go round but that we are
getting the right level of targeting about the species and habitats
that we are trying to protect, so the bar has indeed been raised.
Q384 Mrs Moon: There is that bar
and the restriction on the budget. Can I deal with the question
of monitoring of outcomes because you talked about the importance
of actually looking at outcomes. Is some of your budget restriction
going to impact on the NGOs, who are party to that monitoring
who actually look at the outcomes that you are talking about?
How much is the impact going to be on them if you cannot actually
see what the outcomes are of agri-environment schemes so you are
not able to track the changes and improvements that you need to
then go back to justify them. You are in this cycle, are you not?
Dr Phillips: We spend between
£900,000 and £1.1 million a year on monitoring the benefits
of agri-environment schemes. That budget was part of the same
negotiation we had with Defra officials about it being ring-fenced
and kept separate from other funding revenue streams that we had
to apply the in-year budget cuts to, so that is protected. That
is not to say that there are not a lot of NGO partners and other
partners we have who are being directly affected by budget cuts
in other parts of our budget, but not in that particular regard.
Q385 Sir Peter Soulsby: Can I just
return briefly to the discussion about the fear of land abandonment
because it was something that the Committee heard from Commission
officials earlier in the year when we were in Brussels. We heard
it in France and Germany and we heard it again from Commissioner
Fisher Boel earlier in the year. It obviously is an issue in itself
but I wonder to what extent it is symptomatic of something else
that has been put to us which is that the vision statement put
forward by the UK Government really has not thought through a
lot of these issues adequately, and that that is a fairly major
weakness in it. In your early evidence you talked about gaps in
provision and the need for further sophistication. I just wondered
whether that was a rather polite way of agreeing with the criticism
that there were major elements in the vision that had not been
properly worked through.
Mr Young: Our vision for a revised
and redesigned Pillar 2 is what we think is missing from the UK's
vision. That is the big gap that we think is absent. I suggested
earlier that our vision for Pillar 2 is a European vision for
Pillar 2. We think that the redesign of Pillar 2 can overcome
the problem that Europe faces with land abandonment, whilst giving
the UK the opportunity to progress its agri-environment schemes
at a pace that we decide, so we think it is a gap. We certainly
think it is something that needs to be addressed and we think
we have some ideas around how it could be done on a Europe-wide
scale.
Q386 Sir Peter Soulsby: I think that
is perhaps an agreement that there are elements of the vision
that do need further refinement if it is to be made credible.
I understand that. Can I just ask you about your own budget; is
your budget for the current year now fixed?
Dr Phillips: It is. If your question
is around the Natural England budget—
Q387 Sir Peter Soulsby: More generally
but obviously with this specifically in mind.
Dr Phillips: The Natural England
budget in round figures is £500 million. In response to Mrs
Moon's questions I have talked about the protection we sought
to get around the £300 million very early on in those very
lengthy negotiations. Of the remaining £200 million we experienced
an £8 million cut last December, which of course was prior
to the arrival of the Executive Board of Natural England which
was at the end of February. Shortly after our arrival we were
faced with a further £12.9 million cut to our budget. We
have now reached a situation where £6.4 million of that has
been restored this year and a further allocation of £1.685
million specifically for the marine survey work over two years
has been restored, and we have been given some certainty in terms
of planning assumptions for 2007-08 going forward, most notably
in respect of the costs we will incur having been the first NDPB
to enter into Defra shared services, entering into IBM-enabling
contracts and also experiencing some of the vagaries of VAT payments
now as an NDPB as opposed to some of the exemptions that the founding
bodies enjoyed.
Q388 Sir Peter Soulsby: I know this
is taking this rather beyond our inquiry today but it is too good
an opportunity to miss; can I just ask what degree of certainty
has been given for future years and, in broad terms, what sort
of proportion is actually there and guaranteed?
Dr Phillips: I think it is only
appropriate to refer to the certainty that we have had in writing
as opposed to discussions we have had and clarity we have sought
about assumptions. The certainty we have had in writing is effectively
around those components I have described to you which is cost
neutrality in respect of shared service costs, in terms of IBM
enabling and in terms of the VAT burden on Natural England arising
from those specific issues in terms of shared services and IBM
enabling, and also third party costs in respect of some of the
advice we get from other organisations to deliver advice to farmers
and to land managers.
Sir Peter Soulsby: Thank you.
Chairman: Jamie?
Q389 Mr Reed: Given the CSR implications
and given the CSR review that everybody is going through and the
straits that all Whitehall departments are in, that sounds like
a pretty good deal to me. Nobody likes to lose anything from their
budget but it seems whether by good luck or good judgment or arm
twisting or whatever that you have done pretty well.
Dr Phillips: I think it has been
a very difficult time for Defra for all the reasons that you will
be only too familiar with, and it has been—well, I would
say this would I not—a particularly painful time for us
as a new organisation, number one, having to cope with our ambitions
for the natural environment, which were signed off by a new ministerial
team pretty early on in their tenure in their new roles, with
the fact that we were not going to have enough to deliver on that.
Speaking frankly, when you push me about what level of certainty
do we have, I would like certainty that the cuts the founding
bodies have experienced this year will not be rolled into Natural
England's budget for next year. I do not have that certainty.
In the absence of that certainty, I think we are going to have
to be prepared to adjust our expectations and our stakeholders'
expectations of what it is we can deliver. The elements I have
described to you that we do have certainty on are, in effect,
a reflection of the fact that we have delivered three major changes
simultaneously, not only the vesting of Natural England as a new
organisation but Natural England being the first NDPB to go into
government shared services, Defra shared services, and accession
to an IBM enabling contract. I think it will be very difficult
for Defra to be put into the position where you had 17½%
VAT disincentive for entering into shared services, particularly
where the whole business case was predicated on you not having
to face that. So I think we have managed to reach some practical
solutions for, frankly, impossible scenarios but, I am sure like
many other Defra NDPBs, I would like much more certainty about
what it is we are going to be able to do in respect of our environmental
programmes because this year's budget cuts have gone, unfortunately,
to the heart of our environmental programmes. I said in response
to your question that we were focusing on the £200 million.
Of that £200 million, £130 million approximately are
salary or fixed costs so the burden of that £8 million cut
and £12.9 cut has effectively been falling at this late stage
on the uncommitted environmental programme, which at that stage
was left at about £70 million, so it has been exceedingly
painful, and I hope not to be in that position in future years.
Q390 Mr Reed: With that in mind,
do you have any understanding of what future fluctuations might
be and, if so, do you have any clear understanding of how they
might aggressively impact upon your body of work?
Dr Phillips: Returning to the
subject matter of the Committee and the UK vision for CAP, the
huge unknown is around—
Q391 Mr Reed: Sorry, my caveat would
be with regard to CAP.
Dr Phillips: Absolutely. The huge
unknown is about what is going to happen in Europe about levels
of voluntary modulation, how much of it we are going to see in
the UK, and what level of co-financing we have. Mrs Moon asked
how central is agri-environmental delivery to what it is that
Natural England achieves. The reason that English Nature, the
Rural Development Agency and the Countryside Agency were brought
together is because we are genuinely a happy marriage. People
enjoy precious landscapes and nature as a unified experience,
not with access over here and nature over here, and then having
the vehicle which actually helps us deliver improved access, improved
bio-diversity, improved habitats, improved species through the
agri-environmental schemes, is effectively the underpinning of
what it is we are about. If we do not have a sensible level of
funding around that, it is going to make delivery of our statutory
functions very difficult. That would lead you to say that we are
here supporting Pillar 2 payments because it is essential to Natural
England's budgets going forward. That is certainly something we
feel strongly about, but certainly not the reason why we are suggesting
that you need to be supporting and advocating not only sensible
levels of funding in Pillar 2 but also voluntary modulation. We
do genuinely believe that it will help unify and get better and
more sustainable land management practices across Europe.
Q392 Mrs Moon: Just taking up the
issue that you were talking about in terms of the impact on the
staffing, do you feel that your budget is going to allow you to
retain and recruit the professional skills base that you need,
both to carry out your current requirements in terms of monitoring
and rolling forward agri-environment schemes, but also if we actually
move to this vision where we move more to Pillar 2? Would you
actually have the professional staff with the skills base or would
you also need to expand to carry out your duties of monitoring
and regulation?
Mr Young: Natural England was
formed with an additional challenge as well as the three that
Helen has outlined and that was also delivering some major efficiencies.
Those were a total of £11.5 million over three years, and
that has necessarily meant that we have had to take some pain.
We are at the moment going through some voluntary (I hasten to
say) redundancies, and that is not a pleasant experience. There
are also necessary adjustments that need to be made in terms of
skilling. We are partly taking the pain of voluntary redundancies
now so that we do not simply have to put a salary freeze on in
perpetuity so that will allow us to recruit the necessary skills
both to deliver our programmes today but also to prepare us and
position us for the sorts of programmes that we anticipate and
will be delivering in the future. So we will be recruiting and
we will be reskilling and we will be retraining, but it is also
true that we are going through some pain at the moment as a result
of the merger and the efficiencies that we were required to make.
Q393 Mrs Moon: All this pain must
be having a tremendous effect on staff morale. How is it impacting
on the staff and their capacity to focus on the task rather than
the structures and the changes within the organisation?
Dr Phillips: The skills and quality
and calibre of people at Natural England and the founding bodies
are tremendous. Our staff, virtually to a man and woman, are vocationally
motivated. They get out of bed in the mornings to come to work
to make the natural environment a better place. We have been through
a six-month long change programme simultaneously delivering three
major changes. Our staff have experienced the best part of three
years of some degree of uncertainty. That is a pretty difficult
environment to work in. I think that has been fairly publicly
commented on, in addition to our financial situation. It has also
been quite challenging (which is probably a euphemism) in that
the new leadership of Natural England has been closeted away in
an office not so far from here whilst we have been looking to
people in the founding bodies to lead people through a period
of change while they themselves have been exposed to some uncertainty,
and that has been tremendously difficult. Over the last three
or four weeks we have been out and about talking with staff as
part of the launch of Natural England, both internally and externally.
I have to say that I feel a huge groundswell of enthusiasm for
what it is we need to do. Staff are necessarily a bit ground down
from the change process, they are very anxious about the implications
of the budget cuts and what it is we are going to be able to do
for the natural environment in the long-term but their professionalism
and their enthusiasm for the job in hand continues to shine through.
Mr Christensen: Just in case you
think that is coming from the Chief Executive, let me give you
a non-executive view. I have been on half of these staff road
shows and they have been incredibly enthusiastic. You have seen
the enthusiasm and the passion with Helen and that is reflected
right through the staff. That is not to say that there are not
pockets of real concern and anxiety and a feeling of loss because
that is inevitable. On the road shows that I have been on and
looked at from the outside, I have been really enthused by them.
I can give you some examples which I will not bother you with
now, given the time, of what they were doing on those days and
they were looking at tomorrow all the time and they were looking
at our vision and that is so enthusing for me as a non-executive.
Q394 Mrs Moon: I have got absolutely
no doubts about the commitment of your staff, I have got no doubt
about their desire for the job, what worries me, looking at this
Common Agricultural Policy vision, we have just finished a review
on climate change and what we are seeing is increasingly pressure
on the professional staff and cuts whether it is in Natural England
or whether it is in work and that does worry me, that we are building
up a skills deficit in the area that we need to focus on and be
the champions for the changes that face us. That is my concern.
Mr Christensen: Very quickly,
may I say I share that concern right across the whole industry.
A lot of the research and development resources are also under
threat and we are in danger of losing scientists. We are a science
based industry and I do share your concerns.
Q395 Chairman: Thank you very much.
I am sorry that our session has been somewhat disrupted by the
division bell but I think we have got a clear flavour of where
you come from. If there is anything you do want to add, please
do not hesitate to write but that which you have said, subject
to your correction Dr Phillips, remains on the record. Thank you
very much for your contributions both this afternoon and for your
written submission.
Mr Christensen: Can we thank you
very much indeed for the opportunity to come.
Mrs Moon: A lesson for you, always get
your retraction in before the Chairman!
Chairman: Thank you.
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