Examination of Witnesses (Questions 60
- 79)
WEDNESDAY 18 JULY 2007
MS HELEN
GHOSH AND
MR STEPHEN
PARK
Q60 (18.07.07) Chairman: A great
headline: ""Defra finished in ten years", says
Permanent Secretary"!
Ms Ghosh: Yes. It may not have
a raison d'étre. We can all move to something else.
Q61 (18.07.07) Chairman: This is
between us, of course! Mr Park, what actually is the number for
efficiency savings you are supposed to post by March 2008?
Mr Park: Forgive me if I just
refer to my notes.
Q62 (18.07.07) Chairman: No, you
go ahead. I have got a number, so I want to see if your number
ties in with my number.
Mr Park: The number agreed in
the SR 04 settlement is for financial efficiencies of £610
million by April 08.
Q63 (18.07.07) Chairman: We are both
on the same number, so how are you doing?
Mr Park: A large part of that
will be delivered through local authorities. I do not know whether
you have that number as well. The latest forecast is that we will
deliver financial efficiencies of over £700 million by the
end of 07-08.
Q64 (18.07.07) Chairman: You have
just alerted me. I am glad you said it was going to be delivered
by local authorities, because I would like you to explain to me
how this is going to be done when on page 37, chapter 4 of your
report, under "Issues", it tells me that local authority
waste management costs are rising steadily, and yet the source
of your savings—and I thought there was something like £630-odd
million, but whatever the number is—is supposed to come
from more efficient local authority waste strategies. So could
you tell me how the circle is squared, because I do not understand
how you can get a saving of the order of magnitude you have just
indicated against a background where your own annual report tells
us that that is an area of cost increase for local authorities?
Ms Ghosh: We have discussed this
at a previous session and I think we need to nail it by giving
you a detailed note. The first thing I would say is that it must
be true, within the terms of the Gershon exercise, because these
figures are audited both by the NAO and by the OGC. I suspect
the answer to your question is against rising prices and against
increased demand it is less expensive than it would otherwise
have been. This does not represent a declining line in terms of
spend. That is my understanding, but can I say we will send you
a detailed note so that we all understand it?
Q65 (18.07.07) Chairman: I would
like this, because we have been at this for two years -
Ms Ghosh: We have, and there must
be a simple answer, and we will send it to you.
Q66 (18.07.07) Chairman: There must
be an answer because Mr Park said, with all the authority of the
Finance Director, that this is where all the money is coming from
and you, with all the authority of the Permanent Secretary, are
telling me, "We have got to find out how we are going to
do it"?
Ms Ghosh: No, sorry, I think the
other thing that is very important here is that some of these
savings are savings that actually, as it were, help us in the
real world. Efficiencies, of course, can produce cash, can mean
you have freed up money for something else, but it can mean against
a rising demand you have done it more efficiently in terms of
unit.
Q67 (18.07.07) Chairman: Let us have
the note, because otherwise I could spend time that we have not
got probing something which neither of us can actually answer.
Ms Ghosh: I think we did send
you some interesting material in the follow up note about the
Environment Agency. In the case of the Environment Agency you
can specifically see that they have provided flood protection,
for example, to more homes for the same price and I think that
is the kind of example I mean. For the same amount of money they
have protected more homes and I think that is the kind of example
where you do not get any money out of it, they just manage to
achieve more. So I think the Environment Agency is a good example
of that. That did not release any cash.
Q68 (18.07.07) Chairman: I fear I
am going to have to break my own golden rule not to go into it.
It says in your supplementary to the Committee that the Government
looks at all pressures, including waste and local government when
setting the overall level of funding for the local authorities.
"Considerable investment has been made in local government,
an increase in overall grant accounts of 39 per cent." So
that implies that there is actually more money, because Defra
also provides other support to local authorities?
Ms Ghosh: Yes.
Q69 (18.07.07) Chairman: It talks
about that and yet we are supposed to be seeing more money to
local authorities, but less to waste, but it is more expensive
to deliver the waste strategy according to the council assessment?
Ms Ghosh: Exactly, so this must
mean that is a line that sits better than it would otherwise have
done, but we will come back to you with a note.
Q70 (18.07.07) Chairman: Good. Now,
where is the rest coming from?
Mr Park: There will be savings
on the workforce reductions that we were talking about earlier
and there will also be the relocations from London and the South
East, and a large number of those have already been delivered,
or will be delivered by the end of 2007-08.
Q71 (18.07.07) Chairman: Are they
really going to be real savings, because my understanding of the
commercial property market, for example, is that rental levels
have either plateau'd or are coming down? Sometimes in the provinces
they have been on catch-up compared with London and the South
East. Are these real savings that are going to be made by the
relocation policies that you have embarked upon?
Mr Park: I would say, yes. Part
of the Renew programme is to look at the right size of Defra and
the right shape of Defra, and that includes, for example, where
the finance team is based, which is now largely based in York
rather than in London. We are looking at closing some of our sites
and those sites will come on the market either later this financial
year or early next year. So, yes, there are relocations that will
reduce costs. Where we are able to close down relatively uneconomic
sites and move those people to existing Defra sites, then those
do represent real savings.
Q72 (18.07.07) Mr Drew: If we could
take obviously the issue of the moment, flooding, firstly this
increase which has been committed, the increase from £600
million to £800 million by 2010/2011. Does that money come
directly to Defra, or does it go to the Environment Agency?
Ms Ghosh: No. As with all the
money, whether to our own executive agencies or to the NDPBs,
most of that comes to us through our CSR settlement -
Q73 (18.07.07) Mr Drew: And then
goes straight off to the Environment Agency?
Ms Ghosh: —and then goes
straight off as a result after this exercise. If you take the
example of last year, the £800 million figure compares with
a £600 million figure in the year we have just had, we only
actually give just over £400 million to that and I think
other money comes to the Environment Agency from other sources,
I think local government sources. So, as I say, if you take last
year the total budget was £600 million, which Hilary used
as the base that he was describing to go to £800 million,
so not all of the £800 million will in fact come from our
settlement but a high proportion will.
Q74 (18.07.07) Mr Drew: Without trying
to reprise Mr Rumsfeld's "known unknowns and unknown unknowns,"
this is something which is going to be pretty well in a sense
predictable in terms of the additional monies that will be required?
Ms Ghosh: Yes.
Q75 (18.07.07) Mr Drew: Two questions.
Firstly, you know that you are going to have to find more resources,
preferably within the pot of Government?
Ms Ghosh: Yes.
Q76 (18.07.07) Mr Drew: So you have
got to bargain pretty hard at the CSR because this is something
that would not be acceptable if you were not to bargain hard.
But secondly, you have a dilemma inasmuch as what is happening
today is that the more extreme places of flooding are clearly
in complete need of substantial sums of money and unless you can
increase the size of the pot the money has to come from within
existing budgets. There is a lot of evidence that money has now
been siphoned off from areas which are less critical but potentially
in need of protection, because we all know what happened this
time was that it hit the areas which were not the traditional
areas in the main, it hit new flood plains, and maybe if the money
had been allocated in slightly different ways at least some of
the misery could have been prevented. So how do you cope with
those two issues, the fighting for the CSR amount and then the
reallocation within the existing budget?
Ms Ghosh: To take those broadly
in order, the announcement that Hilary made is the result of highly
successful discussions (by the Department with the Environment
Agency) with the Treasury about the level of funding that would
be needed, and this was very much based around—and that
then brings us on to your second point—the predictions,
on the basis of risk, climate change and sticking to our current
assumptions about the levels of protection we would give against
the incidences of particular hundreds of years. That is how we
reached that kind of figure as being one that was appropriate.
There are always lots of debates within a limited pot about where
you should make the investment and in fact I was in Ludlow yesterday
talking to Shropshire County Council, amongst other things, and
while I was there actually Tenbury Wells was being hit by the
same thing. The point they made, and indeed Barbara Young has
made the same point, was that there it was not the failure of
flood defences, it was the sheer volume of water, run-off from
land which normally could have been able to absorb it but which
could not absorb it because of high water tables and the fact
that it was the middle of the summer. You could have predicted
that if all those circumstances came together some of the rivers
would flood their banks, but as Barbara and others have said,
the idea that we could build flood defences as opposed to looking
at all the ways we need to manage land, position housing and other
contributory factors—we have now actually got to think imaginatively
about how we can respond to that kind of flooding, which is not
the traditional kind of flooding, in a more successful kind of
way. Some of the lessons learnt—and Hilary has announced
the first phase of that about the immediate response, but going
forward and thinking with the EA about where we invest, how we
invest and how we use risk is something we need to do.
Q77 (18.07.07) Chairman: What I think
would be quite helpful for the Committee is to have a rather more
detailed note on the phasing of this extra expenditure, because
it is not clear to me whether in fact you are going to spread
the additional £200 million in a wise and neat sort of amount
over the years or whether there is going to be a sort of Big Bang
spend at the end of the period. Can you help us with that?
Ms Ghosh: The answer to the question
is that we have not yet had that discussion with the Environment
Agency and it has not yet been decided. There will be some element
of phasing, but we need again to look at it alongside the other
demands on the Environment Agency and other delivery bodies. It
will be a rising line, but we need to discuss exactly how the
phasing works to make sure that it is affordable and sustainable.
Q78 (18.07.07) Chairman: Bearing
in mind the point that you were making a moment ago, could you
also break that down in terms of the sourcing, because figure
19 on page 102 perhaps gives a flavour of the different sources
and the impression is being given that it is Defra that funds
the whole shooting match, but you have just made the point that
out of the £600 million, £400 million is the Defra spend?
Ms Ghosh: Yes, the line that you
can see there, the top line, is the 400.
Q79 (18.07.07) Chairman: If you are
going to move up to £800 million it would be very interesting
to know what, of the extra, is coming from the Defra budget and
what is coming from everybody else, because I am not entirely
clear.
Ms Ghosh: No, and indeed how it
comes through the local government settlement is also part of
that, so we will break that down.
Chairman: That would be very helpful.
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