Examination of Witnesses (Questions 140
- 159)
WEDNESDAY 21 NOVEMBER 2007
MRS HELEN
GHOSH
Q140 Patrick Hall: What was it last
year?
Mrs Ghosh: Approximately. It was
approximately £60 million more than that in the previous
year.
Q141 Patrick Hall: So there has been
this quite steep reduction.
Mrs Ghosh: Exactly.
Q142 Patrick Hall: Which has been
difficult to cope with.
Mrs Ghosh: Yes, given the extent
of fixed costs in the organisation, to adjust that fast. So we
are adjusting as fast as we can. The line for administrative spend
in the CSR period starts off with the baseline we have for this
year and then we will be looking to find the five per cent, five
per cent, five per cent admin reductions over the CSR period.
Q143 Lynne Jones: So when you started
the financial year with an admin budget of £269 million you
knew that if you did not take action then you were going to be
how much over budget?
Mrs Ghosh: If everybody just carried
on as they were carrying on before—
Q144 Lynne Jones: You said half way
through the year you were £50 million. There is nothing new
in what you said.
Mrs Ghosh: There is nothing new
in what I said.
Q145 Lynne Jones: You knew at the
start of the year you would need to take mitigating action.
Mrs Ghosh: Yes and the mitigating
actions we have already taken are pulling the admin overspend
down. We will carry on taking them to the end of the year and
then we will give ourselves a better place to be for moving into
the CSR period.
Q146 Lynne Jones: So at the beginning
of the year you felt that this was a reasonable thing for you
to have to do in this year.
Mrs Ghosh: We thought it was a
challenging thing to do this year which is why we took early action
on things like the reduction in head count numbers.
Q147 Lynne Jones: That would not
affect the efficiency of your department.
Mrs Ghosh: That would not affect
the efficiency of the department.
Q148 Chairman: Coming back to the
£65 million which is not in the admin section, how are you
going to deal with that?
Mrs Ghosh: As I say, what we are
doing at the moment is making accurate assessments of that and
in the normal way—you will know this from your Treasury
experience—we will be discussing it with Treasury colleagues.
We will be looking for opportunities, if there are any, and we
are of course monitoring programme spend across the whole range
of our programme budget. It may be that, by the end of the year,
there are offsetting savings elsewhere that emerge.
Q149 Chairman: Would I be right in
general terms that if you cannot, after your discussions with
the Treasury and adjusting the expenditure profile of the programmes
you have in the department, then you might yet be faced with having
to make some more painful in-year adjustments.
Mrs Ghosh: As I say, the first
thing is to make sure that if we look at our existing programmes—our
other programmes which we are monitoring extremely carefully—we
make sure that if such reductions in spend or slower spend than
people are anticipating arise we will be able to offset this potential
overspend against underspends elsewhere. We are not proposing—I
am happy to say this—to make any budget cuts to our programmes
elsewhere to offset this, to answer a question you asked at the
beginning.
Q150 Dr Strang: The scale of that
£32 million for FMD and £35 million for flooding, the
Treasury should recognise that that is a role for their contingency
fund as opposed to having to find it out of your departmental
budget. What would be your reaction to that?
Mrs Ghosh: That is obviously for
the Treasury to judge and what we are doing is keeping a good
tally on what we are spending and we will be having those discussions
with them. They obviously have other calls on the contingency
fund.
Q151 Chairman: As we now have a flavour
of the challenges you are facing this year, let us move onto the
situation for the next three years.
Mrs Ghosh: Indeed.
Q152 Chairman: There was a denial
process put in place when the articles appeared in the press with
the usual line that you do not comment on leaked documents. That
was the first line. Then the next line was that no decisions have
been taken. Let us come down to the facts of the matter. You have
been given your allocation by the Treasury in public because I
am looking at it now. On page 246 of the Comprehensive Spending
Review it says that Defra's expenditure in the next three years
goes up by plus £236 million, £306 million and £452
million above your 2007/08 base line. We can cease our inquiry
now if you say those are the right numbers, those are the ones
you are going to stick to and there is no need to adjust them.
Mrs Ghosh: I think I can give
a simple answer to that. We will have to live—and we are
doing our business planning process now and working closely with
ministers to do so—within our CSR figures. Yes, is therefore
the answer to your question, Chairman.
Q153 Chairman: So those numbers are
not going to change.
Mrs Ghosh: That is what the chancellor
has given us in our CSR settlement and that is the envelope within
which we are doing our business planning.
Q154 Chairman: So you can look me
in the eye and say that in addition to having to live within the
stated totals you have not made any demands whatsoever on your
directorate-generals and other senior people in Defra to make
any further adjustments in their budget to bring expenditure down.
Mrs Ghosh: Can I state this from
my point of view and then perhaps we will meet in the middle.
We have been given a CSR settlement. We have been given an uplift
in our total budget in the CSR settlement; we have a 1.4 per cent
real terms increase, we have £3.9 billion. We have had particular
rises in a number of areas that were highlighted in the Comprehensive
Spending Review so the additional capital on flood management,
the environmental transformation fund (another £570 million)
and a settlement on waste PFI. The overall budget for the department
is up. Our overall spend through the CSR settlement will be higher
than it is now. What we have to do, having taken that overall
envelope—capital and revenue programme—is to look
at the other demands there are on the budget and there are a number
of new demands. There is, for example, the flood management resource—you
cannot just have capital, you need some resource—and we
announced with much support from RSPB and others that we would
be increasing, as you know, the rural development programme is
going to double over the next seven years and we had to do our
share of match funding. Therefore we have a commitment of around
£200 million a year to match that, that is already out there.
The Prime Minister the other day announced £100 million over
the CSR period on green homes. We need, as you were implying in
your opening remarks, to make sure we do have some kind of contingency
reserve precisely to cover those kinds of emergencies because
that is the kind of department we are. Again we have some perfectly
reasonable, in all our on-going discussions with our delivery
bodies, suggestions from some of our delivery bodies that actually
for all sorts of demand side reasons they need a little more money.
So what we are doing at the moment is saying that if those are
the additional pressures, the new priorities that people have
got—and the CSR process gives us the chance to re-prioritise
to some extent where we spend our money looking at the overall
picture—what does that mean in terms of how we re-allocate
the rest of our spend? So some of the figures that were quoted
in the press—I am more than happy to state them again here—if
for example you look at some of that bundle of new priorities
that I describe and compare it with the baseline we actually go
into the CSR period with, there is a gap and we have to think,
among the rest of our programmes, if that is a set of priorities,
how we will reallocate funds there. The figure that was quoted
in the press of around £270 million is that, but it is not
a cut overall because our overall budget is going up.
Q155 Chairman: That is why I asked
you the question. For the avoidance of doubt, the figures on page
246—
Mrs Ghosh: I do not have that
in front of me.
Q156 Chairman: I would have thought
it would be imprinted in your memory by now. According to page
246 the departmental expenditure limit for 2008/09 roughly speaking
is £2.7 billion and then it goes to £3.8 billion and
then it goes to just a fraction over £3.9 billion.
Mrs Ghosh: In the third year,
yes; I entirely agree with that.
Q157 Chairman: I want to make certain
we understand this. You are talking on your territory and we are
asking questions on ours, so I would like to start from something
which is common territory which is page 246 of the CSR.
Mrs Ghosh: If what you are saying
to me is whether we have magically managed or are we asking somebody
or is there some other pot of money which we think we are going
to live within, the answer is no.
Q158 Chairman: So the overall amounts
of money you have to spend remain as printed in the book.
Mrs Ghosh: Absolutely.
Q159 Chairman: So what has happened—if
I have understood you correctly and the Secretary of State made
it clear to us when he came before us—is that there are
number of areas which, if you like, you have ring-fenced and predetermined
the expenditure and when you net those off you are left with a
lower sum of money which you have to allocate amongst all your
other activities.
Mrs Ghosh: You then have to re-prioritise
some of your other activities. You have—as I think the Secretary
of State said when he came and talked to you—to think about
how you do things, you have to think about how you join activities
up together. You have to think about people issues, so for example
one of the things we have done this year and will carry on doing
is putting more people into priority areas.
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