House of Commons - Communities and Local Government Committee

Communities and Local Government's Departmental Annual Report 2008 - Communities and Local Government Committee Contents

Memorandum by Communities and Local Government (DAR (07-08)01)

INTRODUCTION

1. This memorandum sets out the Department's response to questions raised by the Committee by correspondence of 15 July, 7 August and 11 September (which corrected and expanded on earlier questions on the European Regional Development Fund).

PERFORMANCE AND DELIVERY

What were the reasons for the reorganisation of the Department? Did the Department undertake any internal consultation or receive any external advice before undertaking the reorganisation?

2. The Communities Board keeps the organisation of the Department under review to ensure that the Departmental structure remains appropriate to delivery of key Ministerial priorities. On this basis:

— a review of portfolios was carried out in summer 2007 informed by discussions across the Department's Senior Civil Service and supported by an external consultant; and

— subsequently, further changes were made to enable a closer departmental focus on Thames Gateway delivery.

3. The structure set out in the Annual Report reflects the combined outcome of these changes.

4. In addition, we announced on 8 September the creation of a new Communities Group. This brings together the existing Cohesion and Resilience Group with responsibilities for community empowerment (which move from the Local Government and Regeneration Group) to provide a closer focus on delivery of PSA 21—leading across Whitehall on building more cohesive, empowered and active communities.

In 2007, 27% of staff are described as being in the Governance and Communications group. In 2008, there is no equivalent. What group are these staff now part of, and how has their role changed with the new structure?

[and]

The restructuring in the department has resulted in changes to the descriptions of the roles of a number of the Directors General. How has the role of the Director General of Cohesion and Resilience changed from that of the Director General of Equalities? What additional responsibilities has the Director General taken on to replace those responsibilities which have passed to the Government Equalities Office? Which Director General is now responsible for Governance and Communication?

5. As previously, governance and communications staff remain within Chris Wormald's group, although this was renamed as Local Government and Regeneration group as part of the summer 2007 portfolio review. Their roles have not changed.

6. Prior to the restructure undertaken on 8 September, the Director General for Cohesion and Resilience was responsible for:

— community cohesion, tackling prejudice and extremism, and delivering race equality (each of which were also responsibilities for the Director General for Equalities);

— the Fire and Rescue Service, national and regional resilience and the Department's role in post-incident recovery (each of which transferred from the previous Governance and Communications Group as part of the portfolio changes made in summer 2007, as described above);

— European policies and programmes (which transferred from the Regions and Communities Group, as referred to above); and

— the Department's cross-cutting interests in migration.

As part of the reorganisation you have established a Delivery Sub-Committee, Programme Boards and a Delivery Unit. What has been the impact of these new bodies and what impacts are you hoping they will have?

7. The new delivery bodies identified were established to provide a stronger departmental focus on delivery. They each play an important role in driving progress and managing risk:

— Programme Boards take responsibility for delivering key outcomes and monitoring progress and performance;

— the Delivery Sub-Committee is responsible for scrutinising the delivery of our key, high risk programmes, intervening where necessary to provide additional support and resolve problems which may threaten progress; and

— the Delivery Unit supports delivery of the Department's key priorities and assists the Delivery Sub-Committee in its assurance and scrutiny role. It also provides a central point in the Department to ensure that consistent progress is made towards delivering the Department's key priorities and works closely alongside Programme Boards and programme teams to identify and manage risks, providing a flexible resource to tackle problems and challenge progress.

8. Together, these bodies:

— ensure consistency and robustness of the Department's performance and risk management process;

— make use of wider independent assurance and peer review on our key programmes and projects;

— establish robust arrangements for leading and contributing to the new cross-government PSA set and to our departmental strategic objectives; and

— increase the focus on evidence and analysis and up-skilling staff on programme and project management (PPM).

9. This activity should continue to build our capacity to improve and deliver, and further embed our departmental values. We would expect to see their impact reflected in future assessments of performance and governance.

The Department issued 48 public consultations during the period. What were their subjects, how many responses were received, and in how many and in which cases were proposals modified as a result of the consultation? How does this compare with the amount of public consultation undertaken by other Departments, and what are the reasons for any significant differences in volume?

10. Details of the Department's consultations are provided on its website. The Department aims to publish responses to public consultations within two months of the consultation ending, and these will normally include information on the number of replies received and a summary of how these responses have helped to shape the Department's policy. For ease of reference, a table setting out the links to each consultation response alongside the number of replies received is attached at Annex A. In summary, the Department received around 72,000 responses to its 48 consultations in the 2007 calendar year.

11. We do not keep a record of consultations undertaken by other departments and do not, therefore, have a comparator against which to judge this performance.

Performance against the PSA targets is currently mixed, with only two "On course", five reporting "Slippage" and two already "Not met". How does the Department assess its overall performance to date? What discussions have been held with HM Treasury regarding the Department's performance against its PSA targets and what has been the outcome of those discussions?

12. Our reported performance against the headline SR04 PSA targets reflects the approach set out in the technical notes, the Committee's recommendations in past reports and the NAO's performance brief supporting last year's inquiry on the 2007 report.

13. Progress has been made across the Department's priority areas. Whilst only two PSAs are rated overall as "on course", 65% of the Department's sub-targets and indicators are either "ahead", "met" or "on course".

14. For example, overall progress against the PSA 1 Neighbourhood Renewal target is assessed as slippage despite five out of six sub-targets being either ahead or on course. Similarly, the Planning PSA requires eight sub targets to be met for success. As such, the overall `not met' status masks success against 50% of the sub targets so far.

15. This shows there are complexities in assessing progress for each PSA overall. The Department does not make an overall assessment of progress across all of the PSAs, but regularly updates HM Treasury on performance and jointly agrees the ongoing programme of work undertaken to support progress towards the targets.

In the 2007 report, the assessment of each PSA included a specific assessment of data systems as Good, Average or Poor, which has been replaced in the 2008 report by an overall assessment of progress against the PSA. What are the current assessments of data quality for each PSA and on what basis are they assessed?

16. The quality of data systems is formally assessed (ie as good, average or poor) once in each Comprehensive Spending Review cycle. However, the Department continually monitors the quality of its data systems, and commentary was provided after each PSA assessment in the Department's Annual Report on the quality of the data underpinning our assessments.

The Annual Report notes that performance indicators for DSOs will be "kept under review to ensure that they continue to provide the Department and our partners with the right information to assess progress". (DAR p 179) Does this mean that they can be altered, added to, subtracted from or otherwise amended during the period to 2010? If so, what will be the process under which changes are made?

17. It is important that the DSO framework is fit for purpose and has the flexibility to reflect changing circumstances if necessary.

18. In particular, we have already made clear our intention to further shape DSO 5 by developing indicators which cover users' perceptions of the planning process and the quality of design. In addition, we expect updates in due course to the relevant indicators in DSO 1 and 6 following the introduction of the Comprehensive Area Assessment in 2009.

19. However, as a rule, and as made clear in HM Treasury's guidance on the publication of the 2008 Autumn Performance Reports, amendments will be made in exceptional circumstances and require agreement from HM Treasury.

You have given information on the relationship between the Strategic Priorities (SPs) and SR04 PSAs as well as between the SR04 PSAs and the DSOs. What is the direct relationship between the current SPs and the DSOs? How do the new CSR07 PSAs relate to the DSOs and their objectives?

20. The Department's current Strategic Priorities are now termed Departmental Strategic Objectives. There is not a direct relationship between the SR04 Strategic Priorities and DSOs. The DSOs represent a fresh perspective for CSR07 and reflect changes in the Department's focus following machinery of government changes since SR04. However, as you would expect, there remain strong connections between the SR04 Strategic Priorities and DSOs. Broadly speaking:

Strategic Priorities 1 (tackling disadvantage) and 2 (development of the English regions)

Strategic Priority 3 (delivering better services)

Strategic Priority 4 (housing supply and demand)

Strategic Priority 5 (decent places to live)

Strategic Priority 6 (reducing inequalities and building community cohesion)

21. The new CSR07 PSAs represent the government's top priorities for the spending period and focus in particular on areas where cross departmental working will have the most benefit. PSA indicators are also DSO indicators in their own right, creating a clear line of sight between cross-governmental priorities and the business of individual departments. The Department leads on PSA 20 (increasing long term housing supply and affordability) and PSA 21 (building more cohesive, empowered and active communities).

22. PSA 20 will be achieved by successful delivery of DSOs 2 and 5—specifically the following indicators:

— 2.1—Number of net additional homes provided;

— 2.2—Trends in affordability: the ratio of lower quartile house prices to lower quartile earnings (housing affordability);

— 2.3—Number of affordable homes delivered (gross);

— 2.4—Number of households living in temporary accommodation;

— 2.5—Average energy rating for new homes (SAP—Standard Assessment Procedure for the energy rating of dwellings); and

— 5.2—Local Planning Authorities to have adopted the necessary Development Plan Documents, in accordance with milestones set out in their Local Development Schemes, to bring forward sufficient developable land for housing in line with PPS3.

23. PSA 21 will be achieved by successful delivery of DSOs 1 and 4—specifically the following indicators:

— 1.2—Percentage of people who feel that they can influence decisions in their locality;

— 4.1—Percentage of people who believe people from different backgrounds get on well together in their local area;

— 4.2—Percentage of people who have meaningful interactions with people from different backgrounds; and

Where elements of one SP have been incorporated in two DSOs or elements of two SPs have been combined into one DSO, what was the rationale for these elements being separated or joined respectively? And why have the priority areas for the Department altered? For example why was it felt that the Fire and Rescue Service should become a DSO distinct from supporting local government? Why does Tackling deprivation (SP1) and Regional economic performance (SP2) merit only a single DSO (DSO 3)?

24. The DSOs are designed to better reflect Government and Ministerial priorities for the Department as we enter the CSR07 period.

25. The amalgamation of Strategic Priorities 1 and 2 into DSO 3 reflects the transfer of responsibility for regional economic productivity (ie Strategic Priority 2) to the Department for Business, Enterprise and Regulatory Reform.

26. Strategic Priorities 4 and 5 are covered by two DSOs, which are designed to provide clarity across the Department's ambitions for both housing and planning.

27. The inclusion of a specific DSO on fire (DSO 6), confirms the importance we place on our work in this area. Significant infrastructure improvement projects (New Dimension, Firelink and FiReControl) are underway in this area and the work underpins the Government's wider strategy for preventing and being prepared for emergencies.

Which of the ongoing targets and indicators currently included in the CLG's set of nine PSAs is not included as an indicator in CLG's lead PSAs for 2008-11 or in the Department's DSOs and so will continue to be reported on separately in the 2008 APR?

28. We will set out which SR04 PSA targets on which we will continue to report in the Autumn Performance Report.

Does the Department intend to produce a technical note, or its equivalent, for its new PSAs and DSOs (including their indicators) to outline what the targets are, how the indicators will be measured, over what timescale they will be measured and what constitutes achievement, at both a high level (DSOs and PSAs) and a the individual indicator level?

29. The Department has made measurement details for its DSOs available on its website.[2] This includes an explanation as to what constitutes "achievement" for each indicator. Assessment at a high level (DSOs and PSAs) will be made according to the guidelines set by HM treasury in its updated guidance for Autumn Performance Reports and Departmental Annual Reports during the CSR period.

What mechanisms does CLG have in place to ensure that it has the capability to effectively interact with and influence the other government departments which are part of the PSAs it is involved with?

30. The Department leads on PSA 20 and PSA 21. As with all PSAs, the Department manages, influences and holds other departments to account for delivery through two cross-departmental PSA Delivery Boards focusing on each PSA.

31. The Department also sits on a number of other PSA Delivery Boards which oversee PSAs with a Communities contribution or interest. In addition, stocktake meetings can be arranged if the lead department deems it necessary, bringing together senior officials to review contributions across Government to the PSA set—managing the input the Department has and ensuring we are maximising the opportunities these links provide.

32. We also have a strong role in ensuring that Local Area Agreements support delivery of PSAs across government by acting as an effective tool to manage performance at a local level. An ad hoc, cross-government Director General group has been established to support this work.

HOUSING AND PLANNING

The first performance indicator which is part of PSA 5 relates to Low Demand. In the 2007 DAR, its assessment was "Slippage". In the 2008 DAR, the assessment was "On course". It consists of two parts, neither of which appear to be in a substantially different position in 2008 to 2007. Why has the assessment of the Low Demand indicator changed when progress against its constituent parts appears not to have changed?

33. As indicated in the assessment section for PSA 5 in the Annual Report, although no overall measure of success for this PSA was set out in the SR04 Technical Note, we will consider the headline target to be met if all three elements—low demand, high demand and homelessness—are met.

34. The low demand element comprises two specific indicators: one measures reductions in the long-term rate of vacant dwellings in three regions; the other measures reduction in the number of local authorities with 15th percentile house prices less than 70% of the national level. The assessment of progress for this element therefore takes account of performance against both of those indicators.

35. For the first low demand indicator (long-term vacancy rates), in two of the three regions covered (Yorkshire and the Humber and the North East), performance is broadly on trajectory, with this trend having been in place for some time. In the North West, vacancy rates initially rose above trajectory but this trend has reversed since 2004. At the time of the 2007 Annual Report, there were two years of available data showing this reversal in the trend. We now have another year of data that confirms this trend in the North West. This suggests that performance is now on course to meet the long-term, 2016 target in all three regions.

36. Performance against the second low demand indicator (15th percentile prices) significantly exceeds the target and this trend has continued for some time. The downward trend has continued for latest available data at Q4 2007, used in the 2008 Annual Report, showing that the number of local authorities falling within the threshold has reduced to 20, from 22 at the time of the 2007 Annual Report.

37. Therefore, performance can now be seen to be broadly on course for the first indicator and significantly exceeding target for the second indicator, resulting in our assessment of the target as "on course".

The green belt indicator in PSA 6 has changed from "On course" in the 2007 Annual Report to "Slippage" in the APR and "Not met" in the 2008 Annual Report. Has this indicator been continued into the DSOs? How is the Department going to address the decreasing green belt in some regions over the CSR 07 period?

38. Our DSO indicator 5.7 uses "net change in the area of Green Belt". The aim will be to "sustain the level of Green Belt nationally, measured by region, over the period 2008-11".

39. This reflects national planning policy on Green Belts as set out in Planning Policy Guidance Note 2 (PPG2), which makes clear that a key characteristic of Green Belt, once established through Regional Spatial Strategies and Local Development Plans, is its permanence over time.

40. Future measurement of Green Belt for this indicator will be on a national basis (though we will continue to collect and publish figures for Green Belt area in each region). Again, this measure better reflects the Government's role in setting national policy on Green Belts.

41. It should be borne in mind that a reported reduction in Green Belt does not necessarily mean that Green Belt land has truly been lost. Most of the apparent change in each region has come about because local authorities are employing improved measurement tools, especially digital mapping techniques.

42. After improved measurement has been taken into account, since 1997, the amount of Green Belt land nationally has in fact grown by around 33,000 hectares (80,000 acres), making up around 13% of the land mass of England. This increase has been driven by the success of the protection afforded by PPG2, and through the creation of entirely new Green Belt, for example, in Wansbeck (950 hectares) and Blyth Valley (150 hectares).

43. Changes to a Green Belt, once it has been established, can happen only in exceptional circumstances. If any alteration is proposed, the Secretary of State would seek satisfaction that the local authority has considered opportunities for development in urban areas contained by and beyond the Green Belt. Detailed boundaries should not be altered or development allowed merely because land has become derelict.

44. The Regional Spatial Strategy (RSS) and Local Development Framework (LDF) processes involve widespread public consultation and independent examination of the proposed policies. The Secretary of State will continue to monitor emerging RSSs and LDFs to ensure they continue to apply the strong policy protection to Green Belt set out in PPG2. Government Offices in the regions will scrutinise draft proposals, working closely with the regional planning body and Local Planning Authorities in each region, and will make representations to the independent examiners. Ultimately the Secretary of State has powers to direct that changes be made to RSSs or LDFs. However, those powers are intended as a last resort.

The Ministerial planning casework indicator has been altered from "On Course" in the 2007 Annual Report to "Slippage" in the APR to "Not met" in the 2008 Annual Report. This is due to an over run of one day in one case in 2006-07. Why was this indicator not classified as "Not met" immediately that this delay happened but rather as "Slippage" in the 2007 APR? Has this indicator been taken forward into the CSR07 period? If so, how has it been adjusted to give a more useful representation of Ministerial casework?

45. A reporting error was made both in the 2007 Annual Report and the 2007 Autumn Performance Report, for which we apologise. Each should have classified the measure as "not met". However, we consider that 99.5% in year (and 100% in other years) represents a good level of performance.

46. This indicator has not been taken forward into the CSR07 period. However, in compliance with paragraph 8 of Schedule 2 to the Planning and Compulsory Purchase Act 2004, the Secretary of State is required to make a separate report to Parliament (by way of an Act Paper at the end of each financial year) on performance in meeting the timetables set for Ministerial casework.

In Table 10.1, summarising expenditure against each PSA, PSA 6 is the only one for which spending falls consistently over the period? Why is the spending on that PSA decreasing? Has that decrease been one cause of the PSA not being met?

47. The reason for the decline in Planning Delivery Grant (PDG) over the period was twofold. First, it was front loaded to allow local authorities to deal with the impact of the new planning system introduced by the Planning and Compulsory Purchase Act 2004; second, additional resources for local planning authorities were provided through a significant (25%) increase in fees from 2005.

48. There are two elements of the PSA that were not met where PDG was being used to incentivise performance. The first was development control performance where the target of 100% of local authorities meeting the 13 week standard was not met. However, performance did improve from 20% of local authorities to over 80% meeting the standard. As noted in the Annual Report, we have now changed the target to measure the number of decisions made in the timescale rather than the number of local authorities as this is considered to be a better measure of performance.

49. The second element was delivery of Local Development Frameworks. We believe that the main reason for delay has been the complexity of the process and lack of understanding and capacity, senior leadership and commitment. These are now being addressed through the changes we have made to the process and the capacity building work through the Planning Advisory Service and others.

50. In particular, we have introduced new regulations and revised guidance in the form of PPS12 and the online LDF manual. The regulations simplified the process by giving local authorities greater flexibility, with the previous "issues and options" and "preferred options" stages replaced by a single requirement to consult and engage. In addition, the submission date to the Planning Inspectorate was moved back to allow problems to be fixed if they emerged in the final consultation on the proposed plan. The new PPS stripped out much of the guidance on process but was much clearer on the objectives and the tests of soundness while the manual makes use of real examples of best practice.

On PSA 7, the Department continues to assess "Slippage" against the target for non-decent social sector dwellings. What improvements has the Department made over last year, when it was also assessed as "Slippage" and what does the Department intend to do to address this continued under-performance? To what extent is the achievement of this target out of the Department's control?

51. We first reported slippage in the 2005 departmental Autumn Performance Report. In the Departmental Annual Report for 2007 we reported that local authority and RSL data showed that at April 2006 we had achieved an estimated reduction of 41%, leaving 980,000 non-decent social homes. In our last Annual Report we reported that by April 2007 a 52% reduction had been achieved leaving 858,000 non-decent homes.

52. In June 2006 the then Secretary of State, Ruth Kelly, announced that we would be willing to extend the original target date for landlords who wanted to undertake more radical transformation programmes that would be a mixture of demolition, rebuilding and refurbishment and additional market or intermediate housing, which would take time to deliver. Since that date we have acknowledged that we will not deliver 100% decency by 2010.

53. In line with the reporting requirements of the PSAs the trajectory against which we are measuring delivery is fixed. Therefore, if slippage occurs for reasons from which we cannot recover then we will always report slippage against the trajectory unless the trajectory is adjusted in line with revised circumstances.

54. Of the four reasons why slippage has occurred, only one will show improvement as we approach 2010. This is the impact of elemental works. Over half the decent homes programmes are carried out on this basis whereby works are carried out over a number of years on an element by element basis (eg bathrooms, kitchens, windows) across an estate. This introduces a significant lag in the reduction in the number of non-decent homes because a home cannot be counted as decent until the last element is improved. We expect an increase in the rate of reduction on non-decent homes as these programmes begin to complete.

55. The remaining reasons, however, will always result in a level of slippage against the set trajectory but we have put actions in place to mitigate the impact. These reasons and mitigation are follows:

We have agreed to extend some completion timetables:

The majority of landlords with an extended timescale have new delivery dates and departmental officials with the support of colleagues in Government Offices and the Housing Corporation are monitoring progress to ensure that delivery to revised timescales remains on track. We are negotiating new delivery dates with the remaining three authorities (Brighton and Hove, Ellesmere Port and Neston and Waverley).

Longer than anticipated development time for schemes:

The ALMO support network is in place to help ALMOs improve their performance. The Audit Commission often provides support to help ALMOs improve through its Advice and Assistance powers. In addition, departmental officials work closely with the local authority and their ALMO to help deliver improvements. Where an ALMO has really struggled to deliver services to the standard required the Department has part funded additional support from the Audit Commission to help the ALMO develop strategies and processes to implement service improvements to meet the required inspection standards.

Decent homes delivery routes needing revision:

With the support of the Government Office and the Department some local authorities have opted for retention but with an extended timescale. Others have been successful in revisiting the transfer route. For the more difficult cases we are working with Government Office officials to find a solution using some of the opportunities set out in the Housing Green Paper such as Special Purpose Vehicles.

The Department and Government Offices have been very active in working with those local authorities that have struggled with delivery. We still expect that the majority of social landlords will ensure all homes are decent by 2010 and that overall 95% of all social sector homes will be decent by this date, although there are continued risks to the achievement of 95% decency. To maintain the drive towards delivery we have negotiated the inclusion of the decent homes indicator (NI158) as part of the set against which performance will be measured in the Local Area Agreements for those LAs where delivery of decent homes still presents a challenge. 24 local authorities have an indicator in their main set of indicators and an additional 19 local authorities have included decent homes as a local indicator.

56. We are conscious of the long term sustainability of the tremendous achievement of the Decent Homes programme, and the Review of Council Housing Finance, launched by the Minister for Housing in March, will consider how we can take this forward. Responsibility for delivery of decent homes programmes will transfer to the Homes and Communities Agency when it is established on 1 December. The Agency will continue to actively monitor and manage the programme and any risks identified, and will report progress to the Department.

The largest area of proposed efficiencies in the VfMDA is New Affordable Housing Supply (£734 million out of £887 million). How it is expected that the housing market issues and the current difficulties in the construction industry (including significant staff cuts at Bovis, Redrow, Persimmon, Taylor Wimpey and Barratt) will affect the achievement of these efficiencies? What effect will this have upon the Department's objectives for the provision of affordable housing?

57. Vfm savings in new affordable housing supply will be measured by comparing the level of grant needed to supply a home within the 2008-11 Affordable Housing Programme to the level of grant needed to provide an equivalent home in the baseline programme (the 2006-08 programme). To ensure the comparison of like-with-like, the home will be standardised in terms of size, location, inflation and policy innovations.

58. The current housing market provides a challenging environment for the delivery of our affordable housing targets. There are a number of factors which put upward pressure on grant rates and so reduce vfm: increased RSL borrowing costs and the availability of bank finance to RSLs; the loss of subsidy through S106 contributions; and the loss of cross-subsidy from low cost home ownership sales, "staircasing" (subsequent equity sales), and speculative housing built for outright sales. In the future we anticipate there to be a number of factors which could counteract this pressure including opportunities to acquire stock from developers and reduction in land values. However, it is important to note that construction costs continue to rise.

59. The recent announcements have been designed to respond to current conditions in the housing market and to increase confidence and help ensure stability.

60. In May we agreed that the Housing Corporation could use flexibilities available to them in their current programme to fund purchases where they represented good value for money. We agreed that the Housing Corporation should set aside £200m to fund the acquisition of completed homes from housebuilders. As confirmed in July, this is not a cap. If properties at the right price and in the right locations and offering good standards are available the Corporation will fund more to support delivery.

61. At the beginning of September, we gave the Housing Corporation limited flexibility to exceed the efficiency targets that were set through the Spending Review to achieve continued delivery of new housing schemes. Scheme bidding will continue to be undertaken within the Corporation's competitive framework and this will continue to be a strong driver of value for money, with those bids which meet the Housing Corporation's assessment criteria and offering best value for money being prioritised for funding. The increased flexibility will allow the Housing Corporation to fund good schemes which in the current market require a higher level of grant funding.

62. The Government remains committed to a substantial increase in affordable housing. It is too early given the current uncertainty to predict outputs. In the long term we are confident that the Housing Corporation, the new HCA and RSLs are well placed to continue to maintain good levels of affordable housing delivery.

Why has Resource DEL for DSO 5, Planning, more than doubled over the CSR period (£149.6 million to £311.6 million)?

63. The main reason for the increase in resource DEL is Housing and Planning Delivery Grant (HPDG) which grows from £67 million in 2008-09 to £221 million in 2010-11. In addition HPDG contains a capital element of £33 million/£29 million/£29 million which is not recorded in this table. HPDG came out of the recommendation in Kate Barker's 2004 review of housing supply where she recommended that Government should incentivise local authorities to meet housing growth targets.

64. The Grant is also used to incentivise planning performance in a similar way to Planning Delivery Grant (which it replaces) on the grounds that this will support housing supply as well. The specific outcomes that are rewarded are additional houses built, local development plan documents delivered to time, establishing a five year housing land supply and joint working between local authorities on plans. It is included under the table for DSO 5 (planning) because it cannot be easily split between planning and housing supply objectives.

65. Another much smaller increase of £10.5 million is to build capacity in local authority planning departments.

Note 1.5.2 states that the Department invested £10 million in 2004-05 in a capital venture fund, the Coalfield Enterprise Fund (CEF) to invest in former coalfield areas. It states that the "fund is less than the initial investment, but is expected to recover in the medium to long term." Note 15 on page 58 show the fund is valued at £8.7 million following a write down this year of £1.0 million. Why has such a substantial fall in the value occurred? What effect has this had on the ability of the fund to operate? Why does the Department believe the fund will recover in the medium to long term?

66. The Coalfield Enterprise Fund (CEF) provides venture capital supporting new and growing smaller businesses located in or near to the English coalfields, addressing the equity gap in these areas. It provides investment to growing and sustainable businesses which have exhausted "traditional" sources of finance. The Department provided £10 million to the Fund in 2004 which, with match funding and recycling of receipts, will ultimately bring about £25 million investment in the former coalfields areas.

67. The drop in the value of the Fund from £10 million to £8.7 million results from net provisions of £1.090 million having been made against four of the investments made, which were considered as under-performing, offset by an uplift in the valuation of a fifth. Whilst these businesses continue to trade, it was considered prudent to recognise their under-performance in the valuation of the investments. The remaining investments were held at cost. The drop in the value of the fund is low given that it invests risk capital. The rate of loss—ie. from companies failing—is much lower than industry average. The Fund is currently investing in 21 companies comprising higher risk start-up and early stage businesses through to more mature and lower risk companies. Receipts from early investments are now starting to flow back to the fund and there have been some notable successes.

68. For example, H2O Networks Limited designs and installs fibre optic systems using the sewer network. The Coalfield Enterprise Fund has invested around £500k to support the development of the business. From a position of having four employees, the company now employs around 30 and its management is now proposing to buy back the Fund's investment for around £1 million. Continuing receipts from successful investments have ensured that the Fund is operating in line with its business plan and, at the present time, has around £5 million available for new investments.

FIRE AND RESCUE SERVICES

PSA 3 is assessed as "Slippage" overall due to the slippage against sub-target 1. Eight out of 47 authorities are stated to have had a fatality rate from accidental fires in the home more than 1.25 times the national average. You state the national average is 4.23. What were the fatality rates for the eight authorities that were above the target?

69. As per our letter to the Committee clerks of [25] September, the figures for sub-target 1 published in the Department's 2008 Annual Report were incorrect. Five and not eight FRAs as reported were above sub-target 1.

70. The miscalculation was the result of raw numbers of deaths being compared, rather than deaths figures adjusted for 100,000 of each FRA's population size as required in the PSA3 technical notes. This occurred following a change in key staff.

71. This miscalculation also affected the National Average. The correct average (when expressed per 100,000 of the national population) is 0.49 and not 4.23 as given in the Annual Report. We apologise for this error, which does not affect the overall assessment of "slippage" for either the sub-target or for PSA 3 as a whole.

72. The five FRAs which had a rate more than 1.25 times the national average are:

Table 1

Area	Current average fatality rate based on 2002-03—2006-07 data
England average	0.49
Rate 1.25* the national average	0.61
Lancashire	0.87
Greater Manchester	0.74
West Yorkshire	0.66
Durham	0.64
South Yorkshire*	0.61
*Note South Yorkshire exceeds the floor target when average rates are taken to 3 decimal places.

73. Please note that the figures used in the table above for 2006-07 are provisional.

Given that PSA 3 sub-target 1 was known to be "not robust" when the Department gave the Committee oral evidence in 2007 on last year's Annual Report, why was it not dropped or altered for 2008? Was there no mechanism by which a no-longer meaningful PSA target or sub-target could be amended once its lack of utility became obvious?

74. It would have been possible in principle to agree with HM Treasury not to continue to track performance against this sub-target on the basis that it was felt to no longer be a meaningful measure of progress (as was done, for example, for indicator c under PSA 4). However, whilst imperfect, the measure has provided a helpful way to ensure the Department and the Fire and Rescue Service are focused on reducing accidental fire-related deaths. Therefore, we chose to continue to pursue it while recognising the issues around its robustness.

75. We have reviewed and changed the performance measures for the Fire and Rescue Service through the CSR07 process. This is reflected in the new performance framework through National Indicator 49 (number of primary fires and related fatalities and non-fatal casualties per 100,000 of the population) and DSO 6 (to ensure safer communities by providing the framework for the Fire and Rescue Service and other agencies to prevent and respond to emergencies).

76. National Indicator 49 is a more statically robust measurement as it reviews the total number of primary fires and associated fatalities and the number of non-fatal casualties (excluding precautionary checks) per 100,000 of the population. By contrast, PSA 3 sub-target 1 (accidental fire-related deaths in the home) assessed performance against a single, low incidence indicator—which resulted in widely-fluctuating results, eg one or two deaths in a small fire and rescue authority could mean it exceeds sub-target 1.

The Government's Response to the Committee's last inquiry into the Departmental Annual Report noted that a research project on fire response times would report in April 2008 (Para 19, Cm 7335). May the Committee see the outcome of that project?

77. The research project on Fire and Rescue Service response times has taken longer than originally planned as we requested some additional work be done. It has now been completed and the report is currently being finalised for publication during autumn 2008.

78. The provisional conclusions of the research are that response times to primary fires in England increased from 1999 mainly due to increased traffic levels. However, an analysis of nine FRAs' response times to road traffic collisions (RTCs) presented less clear results. Whilst some FRAs showed increased response times, others showed no change. Limited data availability and inconsistent reporting by FRAs on these types of incidents make it difficult to draw solid conclusions. The shortcomings in the data available will be addressed by the new electronic Incident Recording System which will improve data collection on all types of incidents, including road traffic collisions.

79. The research also indicates that increased response times may contribute to around 13 additional fatalities in dwelling and other building fires each year. However, annual dwelling fire fatalities fell by 142 between 1996 and 2006, suggesting that the impact of increased response times on dwelling fire deaths has been more than offset by other factors such as community fire safety work over this period.

80. The increases in response times started around four years before the introduction of Integrated Risk Management Plans and the increased focus on community fire safety. A qualitative review of changes in operational practices, such as donning Personal Protective Equipment before entering appliances, indicated that these would not account for the observed increasing trend in response times.

81. Given that traffic levels are still rising, we are encouraging FRAs to consider, where appropriate, further means to counter the effect of traffic and to reduce reliance on emergency response, for instance by further increased fire prevention.

You state that the fatality rate from accidental fires indicator for PSA 3 is not a robust measure of performance as one fatal incident can be sufficient to cause an authority to fail this indicator. You state a similar indicator has been used in the local government national indicator set. Has this indicator been included in the new PSAs or DSOs? If so, how has it been adjusted to provide a robust measure of performance?

82. Performance on fire deaths will continue to be monitored through the Department's DSO 6. This DSO and the National Performance Framework both contain National Indicator 49 (number of primary fires and related fatalities and non-fatal casualties) and, together with the other DSO 6 indicators, this indicator provides a more robust statistical framework than PSA 3.

83. National Indicator 49 was specifically devised to overcome the volatility of the PSA 3 floor-target 1. By including all fires and fire casualties, rather than focussing on accidental fire-related deaths in the home, National Indicator 49 provides a broader and more statistically valid basis to relate outcomes to performance by not focussing on the relatively rare accidental dwelling fire deaths (sub-target 1). It also enables citizens and communities to assess the fire safety support provided by their local Fire and Rescue Authority and will be assessed formally by the Audit Commission as part of the Comprehensive Area Assessment.

LOCAL GOVERNMENT AND THE REGIONS

PSA 1 shows slippage against its education target. You state that this was a "stretching and aspirational" target. Why is it not on course? What impact could CLG have to bring it back on course? What is CLG planning to do to achieve the target?

84. To lift all NRF secondary schools above the floor target in all three subjects (English, mathematics and science) was always a substantial challenge. However, there has been considerable progress in these areas—in 2007 there were 199 schools achieving below 50%, compared with 399 in 2003, with many of the remaining schools achieving positive change towards the floor target. Others have had a considerable way to travel to achieve the target, and progress has slowed.

85. The PSA 1 education indicator has essentially finished as the 2008 Key Stage 3 (KS3) exams, which will be reported on in 2009, were sat earlier this year. However, the PSA 1 indicators were linked with other government department PSAs[3] to ensure that the drive to improve outcomes in deprived areas became embedded and sustained in mainstream policy delivery across Government.

86. We have monitored and supported policy development and implementation plans, project planning and the way in which education funding is targeted, working locally with DCSF and the Government Offices, to influence the Local Area Agreement (LAA) process and maintain the schools focus in LAAs. There has been a strong take-up of education-related indicators and we will continue to monitor the gap in education between schools in deprived areas and the rest, and to develop analysis and research into deprivation more generally.

87. As part of this relationship, the DCSF and the Department have been working closely together to understand and address the slower than expected progress in meeting the PSA 1 education indicator to inform future activity. The substantial investment in personalisation combined with changes to the KS3 curriculum provide a strong platform for securing further improvements. But we recognise there needs to be a more concerted focus on the hardest to reach schools and that this should include a greater consideration of how to better link supporting activity in local communities with educational and parental interventions.

As part of the section on progress against PSA 4 you also state that the changes to the CPA have made it difficult to develop a target for component (c). What has been agreed with Treasury in respect of this target? Will failure to assess this indicator lead to the PSA not being met? Does the Department have any plans to attempt further to develop a target?

88. PSA 4 component (c) of the target relates to the performance of district council performance. As set out in the Annual Report, HM Treasury recognises the difficulty of setting a meaningful and quantifiable target for this, given that the performance of district councils is not now measured in a way that enables a comparable annual update. HM Treasury has agreed with the approach adopted by the Department of not attempting to assess the target on the basis of the partial information available.

89. The other five components of this PSA target are on course or ahead of trajectory. And the information that is available under CPA about district council performance indicates positive progress in qualitative terms, even though it is not possible to set a meaningful quantifiable target for component c) as it was envisaged when the PSA was agreed.

90. The Audit Commission continues to broadly assess all 238 district councils' performance and improvement annually by making judgements about their use of resources and direction of travel, and through assessment of a core set of performance indicators. As set out in the Annual Report, since the publication of the 2003-04 district CPA scores the Audit Commission has carried out re-categorisation assessments for 39 district councils. 38 of these councils improved their CPA score as a result and the other remained the same. The Commission did not judge that there was sufficient evidence of a change in other district councils' performance to require further assessment for re-categorisation.

91. There are no plans to attempt to develop a target for component target c) since nothing in the CPA framework will change further that would make it any more possible to devise a meaningful quantifiable measure. The Department will, however, continue to monitor the performance of district councils against PSA 4 component target a) (no authorities, including districts, rated poor in December 2004 to remain in the lowest CPA category by 31 March 2008).

92. CPA itself will be replaced by the new Comprehensive Area Assessment (CAA) from April 2009, with the final judgements of council performance under CPA being published by the Audit Commission in February 2009. CAA will include reporting of organisational assessments for district councils as well as single tier and county councils. The Audit Commission and other inspectorates, who have been tasked by Government to develop a methodology for CAA, are currently consulting on detailed proposals for carrying out and reporting their assessments.

Resource DEL against DSO 2 (improving the supply and quality of housing) is forecast to decrease from £2,098 million in 2008-09 to £509 million in 2009-10 in Annex B Table 1 of the Annual Report. It is explained that this is due to "£1.7 billion for Supporting People which brought together funding from a number of other funding streams including some from other Departments such as the Department for Work and Pensions." Why has this expenditure been moved from DSO 2 to Area Based Grant? Will this reduction in expenditure shown against DSO 2 (75% reduction in Resource DEL) have any effect on delivering the DSO? Is the responsibility for delivering on the DSO being devolved to local authorities?

93. The Local Government White Paper set out a new approach to allocating funding. There are three routes:

— preferably, through non-ringfenced general grant (made up of Revenue Support Grant and national non-domestic rates);

— through non-ringfenced Area Based Grant—a general grant providing additional revenue funding to areas according to specific policy criteria; and

— through ringfenced or non-ringfenced specific grants where this can be justified—the Government's presumption is against this approach.

94. The Supporting People grant of £1.7bn is currently paid as a specific ring-fenced grant to local authorities. The Department aims to include the Supporting People programme grant in the Area Based Grant from 2009-10, subject to the satisfactory outcome of pilots in 2008-09.

95. Area Based Grant enables local authorities, working with partners, to decide where best to invest their resources, using the most effective and efficient routes to delivering local priorities. It meets the White Paper commitment to increase local flexibility over the use of resources whilst further reducing onerous reporting requirements.

96. There is no reduction in resources for achieving DSO 2. The reduction shown reflects the fact that it is not possible to now separate out elements of the new unhypothecated Area Based Grant, which has been introduced in 2008-09, between the different DSOs. Area Based Grant, Formula Grant and other grant funding for local government will fund the delivery of the single set of performance indicators including the improvement of the supply and quality of housing.

97. The Department remains accountable and responsible for ensuring delivery of its DSO. This accountability cannot be devolved. However, we continue to work with local authority partners to ensure delivery of the DSO and agree objectives and targets. Local authorities and their partners will be responsible for working towards delivering against the National Indicator Set and their Local Area Agreement targets, some of which are also in the DSO. The new Performance Framework provides a robust assessment regime to scrutinise progress against priorities, as well as how effectively authorities use their resources. Local authorities will continue to be assessed on their `Use of Resources' as part of the new Comprehensive Area Assessment. This will make assessments along a similar basis of the existing Comprehensive Performance Assessment arrangements.

The Government issued a second response to our Report on Coastal Towns on 26 October 2007. In it the Department made a commitment to establishing a cross-departmental working group on issues affecting coastal towns. How many times has the working group met and what issues is it working on?

98. The cross-departmental working group on coastal towns has met twice so far, on 6 February and 23 July 2008. The next meeting is scheduled for November 2008.

99. In partnership with the RDA-led Coastal Towns Network, the group is working across government to improve the evidence base on the challenges and opportunities facing coastal towns, and its knowledge of the effectiveness of existing policy approaches and mechanisms in addressing them. It is involved in setting up at least two sub-groups to help progress this work. One will explore the scope of Local Area Agreements (LAAs), and possibly Multi-Area Agreements (MAAs), as strategic mechanisms for improving coastal town regeneration outcomes. The other sub-group will look at options for raising employment and skill levels in coastal locations.

100. The working group will also provide a mechanism for engaging with other government departments on issues relating to coastal erosion and flood risks and the regeneration of coastal areas.

When will the Department publish Professor Fothergill's benchmark study on coastal towns?

101. We aim to publish the final report in October, following consultation on the draft with the cross-departmental working group on coastal towns. We will provide the Committee with a copy of the report once it is available.

How many times has the RDA-led network on coastal towns met, and what issues are being worked on?

102. The RDA-led Coastal Towns Network has met once, in Brighton, on 26 June 2008. The next meeting, in Skegness, is planned for 3 October. The network will meet approximately three to four times a year.

103. A draft work plan for 2008-09 has been prepared, which complements the work of the cross-departmental working group. The underlying aim of the Network is to promote the sharing of learning, knowledge and expertise on coastal town regeneration and economic development across and within regions. As set out above, two proposed sub groups, looking at the role of strategic mechanisms like LAAs and MAAs in delivering coastal town regeneration, and options for raising employment and skills levels in coastal areas, will provide a key focus for the Network's activities. A further sub group, looking at how to encourage business and enterprise growth in coastal towns, is being considered. Further discussions are taking place to agree priorities and actions for the sub groups in preparation for the October meeting.

HUMAN RESOURCES AND TRANSFORMATION

Why has the Department exceeded its workforce reduction targets by so much (910 FTEs to date against a target of 400)?

104. The Department achieved an overall reduction of more than 1100 FTEs against the target of 400. This included a reduction of 600 civil servants from the central department and the Government Offices together. These reductions are part of a planned process to change the shape of the Department as we move towards a smaller, more strategic role for the Department in the future, with delivery focused through our partner organisations such as the new Homes and Communities Agency, and a new strategic relationship with local authorities, including Fire and Rescue Authorities. There has been significant restructuring within the Department, with headcount reduction facilitated through measures such as a more rigorous approach to recruitment and voluntary exit schemes. Major change programmes within the Government Office network and the Audit Commission have also contributed substantially to the overall reduction. We have in parallel continued to invest in staff development, to ensure that our overall capability is maintained.

The figures in Table 6 of Annex B of the Annual Report indicate that staff numbers will continue to fall substantially in 2008-09. How far is the number of staff expected to fall? Will it begin to increase in the near future (within the CSR period)?

105. Our workforce planning assumptions are built on the premise of a further reduction in posts of at least 100 a year this year and in each of the next two years. We do not expect overall staff numbers to increase within the CSR period although certain areas of the Department may require additional staff resources to help them meet business priorities.

How does the Department ensure that the quality of its outputs does not fall when the number of staff available to undertake the work is falling so rapidly?

106. As noted above, our strategy has been to focus our efforts on those areas where the Department can add most value, and secure best value for money. We have done so by forging new relationships with our key partners, for example through Local Area Agreements; building new and powerful delivery agents, such as the Homes and Communities Agency; streamlining our own organisation, seeking synergies and economies wherever we can; and working to maximise the contribution both of our senior leaders and of our staff as a whole. We believe that taken together these measures are enabling us to maintain and improve the quality of the outcomes that we seek to secure for the public, within the framework of the available resources.

The Capability Review one year update found that "progress has been made across the board... but there is still some way to go". In the section entitled "Transforming our capability" the Department provides information on what it has done but little on what it will do to continue progress. The committee would like further details on what the Department believes needs to be achieved to address the issues raised in the Capability Review and the one year update and details of how it intends to achieve this before the next full review in December 2008.

107. We are currently undertaking a self assessment of our performance and our improvement priorities and are gathering a range of evidence to share with the Cabinet Office ahead of our next review, which is due to take place in November 2008.

CORPORATE PERFORMANCE

How many public appointments did the Department make in the Annual Reporting period to April 2008? How many of those appointed were men? How many were women? Is the Department meeting its targets in respect of public appointments and gender balance?

108. The target for public appointments is expressed in terms of OCPA-regulated posts. The Department made 37 new appointments and 38 reappointments to OCPA-regulated, ministerially appointed posts in the year to 31 March 2008. Of these, 47 (63%) were men and 28 (37%) were women. The Department's target for 2007-09 is that 38% of appointments should be women.

109. It is worth noting that the transfer of responsibility for equalities to the Government Equalities Office in October 2007, led to the loss of responsibility for a further 37 OCPA regulated posts. At the time of this transfer 24 (65%) of these posts were held by women.

110. The Department also made 1,196 appointments not regulated via the OCPA to various tribunal bodies including Rent Assessment Panels and Valuations Tribunals. The figures for these were:

Rent Assessment Panels and Residential Property Tribunal Services

Male 257 (71%)

Female 105 (29%)

Of whom:

BME 31 (9%)

Declaring a disability 7 (2%)

Valuation Tribunals

Male 655 (79%)

Female 179 (21%)

Of whom:

BME 60 (7%)

Declaring a disability 78 (9%)

According to the Environmental Audit Committee, "Overall performance by Government departments and agencies in tackling carbon emissions has remained extremely poor, with progress lagging far behind the trajectory required to meet the 2010-11 target (reducing carbon emissions from Government offices by 12.5% from 1999-2000 levels)." What assessment has been made of CLG's performance in this respect, and what action is to follow over the period to April 2009?

111. The Department has made progress over the last 18 months towards delivering the Government Estate sustainability targets and was ranked second out of 21 Government departments in the Sustainable Development Commission's 2007 Annual Report. Recent analysis indicates that the Department has already exceeded the majority of its 2010-11 targets and is on course to meet the remaining target deadlines.

112. The Department's carbon emissions from offices baseline comprises emissions from electricity and gas use on the central CLG estate, its office based executive agencies and selected NDPBs. In 2006-07, the Department was 7% above its baseline but early analysis indicates that emissions reduced to 2% above baseline in 2007-08. The Department's current trajectory is now aligned with the reduction required to meet the 2010-11 target deadline.

113. We are particularly focused on reducing carbon emissions in our buildings. We have adopted a harder test—against the Building Research Establishment Environmental Assessment Method's definition of "excellence"—for all major refurbishments and new builds. All decisions on the Department's estate consider the potential impact on carbon emissions such as reduced plant operating times, installation of more efficient lighting and better control of heating, ventilation and cooling provision.

114. This work has already had an impact. In 2007-08, the Department reduced its electricity and gas consumption in Eland House by 22% and 37% respectively. We aim to make further progress in the next year.

EFFICIENCIES

Can the Department provide an analysis showing what element of the reported efficiency savings have been classified by each of the OGC categories as "provisional", "interim" and "final"?

115. In our quarterly reporting to HM Treasury we are required to classify efficiency savings as "Preliminary", "Interim" and "Finalised". We reported delivery of £1,086 million efficiency gains at December 2007, of which £898 million (82.7%) had been classified as "finalised", £177 million (16.3%) as "interim" and £11 million (1%) as "preliminary".

In the 2007 Annual Report, you stated that over 70% of efficiency gains delivered had been validated by the Department's internal audit team. The 2008 annual report does not include a comparable figure. What percentage of efficiency gains delivered to date have been validated by the Department's internal audit team?

116. Over 80% of the efficiency gains delivered as at December 2007 (£1,086 million) have been validated by the Department's internal audit team. We will be reporting final figures on the efficiency savings we have delivered over the course of the programme to HMT in October, and expect the total to be over £1.3 million. These include further efficiencies delivered by March 2008 that are currently being audited by the Department's internal audit team.

Was the reduction in efficiency gains for Administration from £8.6 million at the end of September 2007 to £5.4 million at the end of December 2007 due solely to the adjustments described in paragraph 9.7? Why were these adjustments made?

117. As stated in paragraph 9.7 of the Annual Report, the adjustment in the administration efficiency savings total claimed at the end of December 2007 was made on the basis of advice from internal auditors that certain savings previously claimed did not meet the sustainability criteria according to the strict Office of Government Commerce (OGC) definition.

118. The adjustment primarily affected savings claimed in relation to commodities procurement. Although savings of approximately £6m across the two years were indeed made during 2005-06 and 2006-07 (and claimed following receipt of quarterly status reports from OGC Buying Solutions), they were not deemed as sustainable against the OGC definition and therefore not allowable to contribute towards achieving the Departmental £25 million target. Only 2007-08 savings for commodities procurement were deemed sustainable according to the OGC definition. Changes were also made to the forecast figures for the anticipated estates management savings, whereby in-year savings for 2005-06 and 2006-07 (a combined total of approximately £3 million) were similarly viewed as unsustainable against the OGC efficiency savings criteria.

119. The £5.4 million figure for gains reported as delivered at end December 2007 therefore excluded the commodities procurement savings from 2005-06 and 2006-07, although it did reflect the procurement savings from the first two quarters of 2007-08 (as supported by the respective letters from OGC Buying Solutions), as well as savings validated by the internal auditors relating to the Department's Finance Shared Services Division.

How do you expect to achieve an increase in administrative efficiency savings of over £10 million to £16.2 million by March 2008? Are you satisfied that these gains will be sustainable according to OGC definitions? Why are these gains only being achieved so close to the end of the SR04 period?

120. Throughout the SR04 efficiency programme, the Department has erred on the side of caution in officially claiming savings and has only declared savings once they had been independently validated. (In relation to the commodities procurement savings for 2005-06 and 2006-07 which have since been disallowed, we had assumed that the OGC Buying Solutions letters—an annual statement from the OGC of savings made in the Department's procurement activity in each year by using OGC Buying Solutions—were satisfactory validation).

121. This approach has meant that although those managing individual work streams indicated that savings had indeed been made, it was felt better to delay the "official" claim until validation had been received, primarily from the Department's internal auditors. This had the inevitable result that a large proportion of the anticipated savings have not been claimed until late in the SR04 period. Furthermore, for a number of work streams, the advice from the internal auditors that only the 2007-08 savings would be deemed sustainable against the OGC savings definition has meant that we have had to wait for the 2007-08 Departmental accounts to be closed before we know the precise level of savings that should be claimed.

122. As at 31 March 2008, the total administration savings claimed and notified to HM Treasury had risen to £8.67 million. As at 31 July 2008, an additional £3.99 million is ready to be claimed, bringing the current total to £12.66 million. Savings claimed in 2007-08 have yet to be validated by the internal auditors, but we are confident the amounts claimed are consistent with the interpretations from previous validation management letters from the internal auditors, and therefore the OGC savings definition.

123. In addition, savings relating to two workstreams are still to be finalised (Integrated Facilities Management and outsourcing of IT services). It is anticipated that approximately £2.3 million savings will be realised from these two workstreams, thereby giving a final administration savings total in the region of £15 million.

124. The anticipated final savings figure has reduced from the £16.2 million as stated in the Departmental Annual Report due to forecast adjustments on commodities procurement, estates management and outsourcing of IT services work streams.

The VfMDA includes an initiative to reduce Administration costs by £43 million by 2011. Given the difficulty which the Department has had in achieving their targeted efficiencies of £25 million over the SR04 period, why does the Department believe it will be possible to achieve the far harder task of making efficiencies of £43 million in CSR07?

125. The administration Value for Money (VfM) gains, which the Department has agreed to deliver over the three year CSR07 settlement period will reflect gains realised across the whole Department (again including the Government Offices). The Department will look to achieve value for money by maintaining outputs and ensuring that its resources are deployed in support of its priorities, achieving the necessary cash reductions through a combination of bearing down on low impact and low priority work, and establishing a group corporate services strategy to improve delivery of corporate services across the wider family (including NDPBs), as well as further reducing and better utilising its estate.

126. The then Office of the Deputy Prime Minister efficiency delivery plan (2004) for administration costs was based on anticipated savings across the SR04 period from a relatively small number of pre-identified corporate services workstreams. Whilst administrative savings have been made in other areas, the fact that these were not included in the initial remit, and did not have established baselines precluded their later inclusion. Some of the assumptions made in the ODPM delivery plan also proved to be incorrect or unachievable.

127. OGC's strict definition of sustainable savings meant that significant in-year savings which the Department had anticipated as secure in meeting its £25 million administration savings target were no longer allowable (particularly for commodities procurement, £6 million, and estates management, £3 million). Additionally, the HR shared services review, led by Cabinet Office, was not pursued which meant that anticipated savings for ODPM in the region of £1 million were also lost. Had the total originally anticipated savings for commodities procurement and estates management been allowed and the savings for HR shared services been realised, the Department would have met the £25 million target.

128. The Department's Value for Money agreement (including for administration costs) has received endorsement from HM Treasury. Further detailed methodologies for achieving the vfm gains will be submitted to Treasury in the near future.

The VfMDA includes savings of £43 million against administration spending. The total departmental spending (Annex B—Table 1) on Central Administration is forecast to increase from £180.6 million in 2007-08 to £216.1 million in 2010-11 peaking at £228.5 million in 2008-09. How will this £43 million in savings be achieved against this increase in budget?

129. The central administration line within Table 1 records not only resource costs and plans which are included in the administration budget (as given in Table 5), but also other resource costs and plans outside the Departmental Admin Cost Limit (administration other current costs, administration capital costs and departmental and Government Offices restructuring costs).

130. Planned expenditure on other resource costs outside the Admin Cost Limit varies significantly from year to year, whereas the Admin Cost Limit is subject to the 5% real annual reduction as prescribed by the Department's CSR07 settlement. The vfm gains target will be measured against the reducing funding envelope of the Departmental Admin Cost Limit.

FINANCE

Figure 10.1 shows a significant variance in the spending on each of the Strategic Priorities (SPs). Does this allocation of spending reflect the importance the department puts on each of its SPs? Has the translation of SPs to DSOs led to spending being more evenly or less evenly balanced between objectives?

131. Our planned expenditure reflects a range of factors including, for example, the extent to which activities require direct Government investment and the relative costs of those investment (so that, for example, unit costs of investment in social housing or decent homes will be higher that those of investing in local initiatives to support community cohesion and resilience to extremism without those cost differentials indicating any relative differences in importance).

132. Annex B, Table 1 of the Annual Report (pp 163) which sets out spend by DSO under the total departmental spend heading, therefore reflects how our actual expenditure maps to those DSOs, and should not be taken to imply that the DSOs are the starting point for how those budgets were allocated.

Why is the Resource AME against DSO 2 in Annex B Table 1 of the Annual Report negative from 2008 to 2011? Why has the Resource AME for Local and Regional Government been forecast to decrease so much in 2008-09? What is the reason for the high figure in 2006-07 and 2007-08?

133. Items are generally included in AME because they are difficult to forecast accurately, are volatile and/or would be difficult to manage within fixed three year DEL budgets. The income received by local authorities for social housing rent is pooled on a national basis, redistributing assumed surpluses from some authorities and using them to fund assumed deficits in other authorities. Where the system generates an overall surplus over and above the amount redistributed between authorities, that resource goes to the Treasury.

134. In recent years the system has been in deficit nationally with HM Treasury making positive contributions to make up the shortfall. From the current financial year it is expected to move into surplus nationally. This means that resource will go to the HM Treasury rather than be disbursed by them, and for this reason the figures are shown as negative subsidy.

135. All the figures for the years 2008-09 to 2010-11 are estimates of the levels of resource that could go to HM Treasury, and are provided as part of the Department's regular returns to them. Actual outturn figures in any one year will be dependent on factors such as the dwelling stock remaining in local authority (LA) ownership, inflation, and costs of servicing LA housing debt. Table 1 shows our estimates for potential surpluses at the time, with £185 million in 2008-09. This figure is likely to change later in the year as LAs submit more precise claims.

136. Beyond 2008-09, the figures are more tentative, with our forecasts dependent on decisions yet to be taken by Ministers on the annual Housing Revenue Account Subsidy Determination. However, even when decisions on the determination have been taken, actual outturn figures for future years will change for the reasons given above.

137. The forecast of £463 million for Local and Regional Government resource AME in 2008-09 relates solely to the Non Domestic Rate Outturn Adjustment programme. The Outturn for this national programme is difficult to forecast in advance because of its volatility. This is reflected in the annual outturn which has varied from £169 million in 2002-03 through to £707 million in 2006-07and £453 million in 2007-08. The latest forecast for 2008-09 is for an outturn of £600 million. Additional provision to cover this will also be sought in the forthcoming Winter Supplementary Estimate.

138. In 2006-07 and 2007-08 (and 2005-06) the resource AME total for Local and Regional Government also included funding for LABGI. (Local Authority Business Growth Incentive scheme). This programme's budget was £935 million over three years ending in 2007-08. Since the data in the Annual Report was prepared, however, the unspent funds from 2007-08 of £103 million are now planned to be brought forward at the forthcoming Winter Supplementary Estimate to add to the 2008-09 budget.

What is the rationale for the level of the Departmental Unallocated Provision for Resource and Capital DEL? What possible future expenditures are these figures based on?

139. With fixed Departmental Expenditure Limits covering a period of three years it is prudent to keep a small reserve to cope with unforeseen pressures as Departmental Unallocated Provision (DUP). In each case the amounts currently in the DUP amount to less than 0.5% of total budget. Indeed, HM Treasury's consolidated budgeting guidance encourages departments not to allocate their DELs fully against their programmes at the start of a financial year but to hold some provision back to deal with unforeseen pressures that emerge subsequently.

Annex B Table 4 of the Annual Report (Capital employed) shows reductions from 2007-08 to 2008-09 in "Plant and machinery, owned" from £20.4 million to £7.4 million and "Transport equipment, owned" from £52.2 million to £5.2 million. At the same time, "Information technology, owned" is to increase from £35.2 million to £80.5 million. What are the reasons for these significant changes? Why are NDPB net assets forecast to increase by over £850 million from 2008-09 to 2009-10?

140. The planned large reductions are for transfers out from the Department of New Dimension Civil Resilience equipment and vehicles to the local Fire and Rescue Authorities. The New Dimension kit was purchased initially by the Department to ensure it fulfilled a specification that could deliver nationwide interoperability and helped secure economies of scale. However, it has always been planned by Ministers, as agreed by the LGA and CFOA, that assets purchased under the programme would later be transferred to the brigades themselves, to unite asset use and ownership. Now that roll-out of the kit is essentially complete, we have commenced discussion on asset transfer with FRAs, CFOA and LGA.

141. The planned large increases are for IT investments in the Fire Control Room and Firelink programmes to support local Fire and Rescue Authorities. These are new, additional assets for the Department, not asset replacements, so appear as step changes in capital employed for the central Department.

142. The planned large increase in NDPB net assets relates to English Partnerships land regeneration stocks. These are forecast to require a valuation change when the new Homes and Communities Agency is created in 2009. The change from historic cost to market value is forecast to increase stock values from £1,002 million to £1,845 million.

Annex B Table 5 shows different figures to Table 1 for Central and Government Office Administration costs. Could you explain the differences between the figures and explain which will be used for assessing efficiency measures?

143. The central administration line within Table 1 records not only resource costs and plans which are included in the Administration budget (as given in Table 5), but also other resource costs and plans outside the Departmental Admin Cost Limit (administration other current costs, administration capital costs and CLG and Government Offices restructuring costs).

144. The Department's assessment of vfm gains will be based on outturn against the administration budget (ie Table 5 figures, thus excluding resource costs outside the Admin Cost Limit). The methodology, agreed with HM Treasury, will use 2007-08 near cash administration cost outturn (as reported in the Departmental Resource Accounts) as a baseline. The Department will then calculate its vfm gains by comparing the level of spend outturned in each year of the CSR07 period against the baseline and making adjustments to take account of inflation. The vfm gains will be offset by the total cost of any investment initiatives.

Annex B Tables 7 and 8 show three regions (East Midlands, Eastern and South Eastern) where the expenditure on services and the expenditure on services per head is approximately doubling over the CSR period. What is the explanation for the significant increases in these specific areas?

145. Estimates of the regional split of planned expenditure can be based on a number of factors, and particularly, directly, after a Spending Review, can be only rough estimations of future spending patterns—for instance based on those elements of the budget which have already been identified on a regional basis, on relevant indicators or on extrapolations of past spending. Each programme is assessed individually.

146. In the case of one programme—Housing Revenue Account Subsidy (HRAS)—we have identified that the changes going forward were inaccurate. These projections were not, and were never intended to, influence the actual amounts to be paid, once known, and hence no authorities have been paid incorrectly as a result. The projections for HRAS were calculated through taking past regional shares of the overall subsidy total. However, because on this occasion proportions derived from a past positive total were applied to negative totals for future years, this produced the undesired effect in this particular case of large negative values being attributed for future years to regions with large positive values, and vice versa. We have reviewed the calculations and have produced some revised estimates incorporating figures which better reflect likely proportions for HRAS for the future and which are shown below. The figures however remain very much estimates at this stage.

Revised Table 7

	2007-08	2008-09	2009-10	2010-11
NE	349.1	335.3	347.9	334.7
NW	733.5	731.7	779.5	867.6
YH	491.4	462.9	499.9	476.0
EM	260.1	278.6	331.5	434.2
WM	400.9	415.4	491.9	600.0
E	326.9	352.6	428.0	493.5
L	1,940.4	2,110.0	2,126.9	2,140.5
SE	466.8	549.5	662.7	741.9
SW	387.0	430.8	500.5	522.9
England	5,356.1	5,666.8	6,168.8	6,611.2

Revised Table 8

	2007-08	2008-09	2009-10	2010-11
NE	137.0	131.2	135.7	130.2
NW	106.3	105.5	111.7	123.7
YH	95.1	88.9	95.2	90.0
EM	59.2	62.8	74.1	96.1
WM	74.4	76.6	90.2	109.4
E	57.8	61.7	74.1	84.6
L	256.1	276.3	276.2	275.6
SE	56.3	65.7	78.7	87.4
SW	74.8	82.5	94.9	98.2

147. We will be looking at how we can produce better figures going forward, and ensure that the inaccuracies which did occur are not repeated.

148. Within the revised figures there remains an overall increase reflecting the increases agreed in the last Spending Review, which impacts across all regions. In addition there are some specific factors, for instance specific projects by English Partnerships in certain regions more than others. These include, for instance, in the East Midlands, a £40 million increase in direct project spend in areas such as Meden Valley, The Waterside project in Leicester and significant spend on former Coalfield sites such as Avenue Cokeworks and Gelding Colliery; and for Eastern regions, a £15 million increase in direct project spend due to a Land Stabilisation Programme in the area. However, overall the revised figures show far less marked changes than those which were published.

In the Operating Cost Statement, staff costs of the core department for RfR 1 have shown a significant increase of around 60%. This appears to be due to £11 million which has transferred from admin staff costs to programme staff costs. What is the reason for this transfer? Have the individuals being paid changed jobs or was the classification in 2006-07 incorrect?

149. The two figures are not linked. The reduction in admin staff costs largely arises from a reduction in staff numbers—see staff numbers table in Note 8 to the Resource Accounts—whereas the increase of programme costs arises largely from an increase in temporary staff costs on programme activities.

In the OCS, income for RfR 2 has increased from a negligible amount in 2006-07 to over £31 million in 2007-08. What is this income stream and why has it increased so markedly from last year?

150. This £31 million is the return of capital grants in respect of the LG PSA programme for pump priming grant. Originally issued as capital, agreement was reached to allow local authorities to repay up to £32.5 million in 2007-08 in exchange for resource grant. There is a corresponding increase in resource grants going out from Section G3 of RfR2—so the amounts balance in the accounts. A similar amount of income is expected in 2008-09.

In paragraph 3.53 on page 17 it is stated that the negative Taxpayer's Equity "reflects the inclusion of liabilities falling due in future years, which are to be financed by drawings from the Consolidated Fund." Liabilities falling due after more than one year total (£454 million). Taxpayer's Equity is (£1,593 million). The remaining £1,139 billion must be from liabilities falling due within the year. Can you provide the committee with further information on the expected payment profile of the liabilities falling due in under a year?

151. The adoption of commercial accounting in government leads to some anomalies, one of which is that the balance sheet can be negative, ie liabilities exceed assets. (A commercial company could not survive in these circumstances). The comment under "Going Concern" therefore explains that this is acceptable because future Parliamentary Supply is assured (in a commercial company this is the equivalent of a further injection of equity).

152. The amounts in the question are incorrect. The correct figures are broken down in the balance sheet on page 36 of the accounts. Details of the make up of the General Fund—which at £1,599 million is broadly equal to Taxpayers Equity of £1,593 million—are in Note 21 on page 63. The balance sheet shows liabilities falling due after one year at £347 million and this sum represents deposits received from the EC against future payments of ERDF grants. Details of provisions (£197 million) are given in Note 20 and these are largely for early retirements and ERDF related (see Note 1.20). The remaining figure of £1,139 million (not £1,139 billion as posed in the question above) represents Total Assets less Current Liabilities. Within this Current Liabilities are £2,562 million and a breakdown of this sum is given in note 19.

153. The expected payment profile of these items is as follows:

— other taxation and social security—this balance is made up of items associated with payroll which are paid over in the month after the payroll;

— creditors—the Department's policy is to pay valid invoices within 30 days;

— Accruals and Deferred Income—these items are mainly grant related and would be expected to be cleared within the first period of the New Year;

— Consolidated Fund creditor—this item becomes deemed Supply in 2008-09; and

— CFERs etc—these items are paid over in the first quarter of the New Year.

Current liabilities have increased by just under £1 billion from 2006-07 to 2007-08. Note 19 shows that the main source of these liabilities is accruals and deferred income. Can you explain why this line has increased by this amount in 2007-08?

154. The bulk of this results from a £934m increase in accrued grant expense. In 2006-07 all Overhanging Debt repayments were made by 31 March. However, in 2007-08 there was a delay in the cash payment of Overhanging Debt (£755.6 million) of which £735 million related to Liverpool City Council (on which we sent you a separate explanation in response to your questions on the Spring Supplementary Estimates). This meant there was an increase in liabilities on the balance sheet of this amount for a short time, covering the end of 2007-08 and beginning of 2008-09, between the recognition of the expenditure and the actual cash payment. There were also increases in accruals for LA Business Growth Incentive grant, Housing Market Renewal Fund, LA Homelessness grant, LG Other Growth Areas grant and Gap Funding.

155. There was also a reduction in accruals for the following programme spending: Local PSA Performance Fund, Online Grant Payments, New Deal for Communities and Capacity Building.

The remuneration report shows a rise in salary for the Permanent Secretary of around £20k. The remainder of the board do not show equivalent increases. What is the reason for the increase? Was a bonus paid in 2006-07 and 2007-08 and if so, how much were the bonuses?

156. The incorrect salary bracket (£170,000-175,000) was quoted in the 2006-07 Resource Accounts, and we thank the Committee for bringing this to our attention. We have lodged a correction in the Parliamentary record and on our website. In 2006-07, the Permanent Secretary's pay should have been placed in the £180,000-185,000 band. The correct band of £190,000-195,000 has been provided for this year's report. The difference is therefore less than stated in the question.

157. Bonuses were paid in both years, amounting to £9,000 in 2006-07 and £14,500 in 2007-08.

EUROPEAN REGIONAL DEVELOPMENT FUND

In the Annual Report, the Department refers to impositions of "financial corrections" on the ERDF programme. It also states that this will not impact on the grant recipients in the North West. Have any fines been levied as a result of the issues surrounding these payments? If it will not impact on the grant recipients, from where will the money to fund the "correction" be taken? How much have the Commission proposed as additional financial corrections in respect of the 1997-99 programmes?

158. The Commission has levied the

25 million financial correction and the costs were accrued in the Department's resource accounts for 2007-08. The Department accepted full liability for the financial correction as these arose from shortcomings at programme management level in 2000-05. The costs were met from the overall Departmental Expenditure Limit (DEL) for programme near-cash. Where irregularities are detected at project level there is a well established procedure to pursue recovery of the affected amounts. Write-off is agreed as a last resort only once all recovery measures had been considered or exhausted.

159. To give some context to this financial correction the ERDF 2000-06 programme round is valued at £3.4 billion and ERDF grant is delivered through 20 programmes comprising over 5,700 individual projects. The liability we accepted reflected the particular circumstances of the management of two ERDF programmes in the NW in 2000-05.We took extensive and rapid action in 2006 and 2007 to respond to EC general concerns about the extent of financial monitoring of ERDF programmes in England. Action which the EC has described as "exemplary". As a result we were able to satisfy the EC about what we doing in 18 of the 20 programmes. In the event the correction was imposed on two programmes in respect of 11 of the 33 intermediaries operating in the NW and amounted to less than 5% of the value of the grant paid from the start of the programme in 2000 to the end of 2006.

160. Following successful hearings at the Commission in June and July 2008, the additional financial corrections in respect of the 1997-99 programmes were reduced immediately from £109 million to £48 million. This figure is now subject to the result of further analysis by the EC of the substantial evidence and argument we have presented. The Department is confident that this analysis will lead to further reductions in the amount of the proposed correction.

There is a total of £81 million of ERDF payments that are at risk and have been accrued and provided for. Have these payments already been made to the recipients? If so, does the Department intend to recover these amounts from the grant recipients or is it covering these payments itself?

161. These payments have already been made to the recipients. The total amount relates to programmes in the 1997-99 and 2000-06 ERDF rounds and other programmes such as Business Links and Interreg. The irregularities were identified by audits carried out by the Commission. The total includes irregularities identified on a sample of ERDF projects with the established error rate on these projects then being extrapolated across the whole programme in that region. Where financial correction is based on extrapolation recovery is not possible as it does not relate to specific recipients. The costs of such financial corrections will be met from the overall Departmental Expenditure Limit (DEL) for programme near-cash.

In note 1.20.10 it is stated that "A number of unsupported balances were identified which were caused by accounting errors in earlier years. These balances have been written back." What is the total value of these write-backs in 2007-08. Could you provide a breakdown of the two figures related to ERDF in note 10 (ERDF write-offs & disallowances and ERDF exchange losses)? Can you explain how the figures are constituted from elements of the financial correction (1.20.5), the potential disallowances (note1.20.6-1.20.9) and the accounting errors (1.20.10)?

162. Whilst expenditure and income were reported correctly, ERDF items on the balance sheet were not managed effectively and errors were not identified and resolved. The main cause of the errors was incomplete reconciliation between the Department's main accounting system and the systems used for grant management in the 2003-04 financial year. These problems were exacerbated by a system interface failure at that time which resulted in the recording of some transactions being incomplete. The resolution of these issues resulted in a write back to the Operating Cost Statement of £61 million.

163. The "ERDF write-off and disallowances" figure of £30.389 million includes the financial correction already levied—£19.8 million (note 1.20.5) and the sums accrued—£7.979 million (notes 1.20.7 and 1.20.8). The remaining sum—£2.61 million—arises from the write-off of disallowed expenditure which it is not possible to recover from grant recipients because, for example, the body has been put into liquidation.

164. ERDF exchange losses in 2007-08 arose largely because of the need to restate the balances held as ERDF deposits. Note 19 shows deposits held rising from £262.795 million in 2006-07 to £346.972 million in 2007-08. This increase reflected the receipt of £47.329 million as 2% deposit on the 2007-13 ERDF programme and £36.848 million from translation of the balance at the balance sheet date to reflect the £/

exchange rate change. As an increase in a creditor this is recorded as an expense in the operating cost statement.

Note 1.20.11 states that the management of the ERDF component of the 2007-13 structural funds will be assigned to the RDAs rather than the GOs. In responses to previous Committee questions you discussed the activities to improve controls over ERDF funding through RDAs. Has an assessment been done of how successful those control changes have been? Was the responsibility removed from the GOs due to their failures in adequately managing the previous rounds?

165. The transfer of ERDF work from GOs to the RDAs should be seen in the context of Government's policy for enhancing the effectiveness of sub-national economic development and regeneration. The Review of Government Offices in 2006 set out a more streamlined, strategic role for the GOs network in shaping national policy through local and regional expertise, and coordinating sub-national work across departmental boundaries. This value-adding shift in focus was assisted with reduction in workload related to administration of grants such as ERDF. Following the conclusion of the Review of Sub-National Economic Development and Regeneration (SNR) in July 2007 as part of CSR07 the Government gave RDAs executive responsibility for drawing up a single regional strategy for their region and supporting achievement of the economic growth parts of the regional strategy through deployment of their single programme budgets aligned together with the ERDF.

166. At present no amounts from the 2007-13 ERDF programmes have been identified to be at risk as RDAs are currently finalising funding agreement for their projects. Risk assessment is an essential part of the Managing Authority functions discharged by the Department. Working closely with the RDAs and others the Department has put in place a number of systems and procedures to ensure compliance with EC and national regulations and manage risks. A hierarchical corporate governance structure has been set up through Boards and Implementation Groups with clear remits which bring together all key stakeholders to allow early identification of issues, and provide a forum for discussion and problem solving. Issues can be escalated to the Department's Board as and when necessary. A central risk register has been created to identify and address threats and opportunities related to the successful delivery of ERDF programmes and to help avoid or minimise the chances of financial correction or de-commitment by the Commission.

167. Risk assessment is also an essential component of the audit strategy that the Audit Authority is pursuing to verify the effective functioning of the management and control systems of the ERDF operational programmes and for conducting audits of an appropriate sample of projects that receive funding.

168. The Audit Authority is in the process of completing a review of the controls in place in RDAs and the central bodies that comprise the Managing and Certifying Authorities. There is no means of compelling RDAs to take a common approach and whilst not ideal, work was ongoing to minimise the inherent risks so the purpose of this review is to provide a formal assessment of the effectiveness of the controls in place, which will be presented to the EC. The assessment is planned to be completed in December.

You have previously said in the Annual Report that the financial correction will not affect grant recipients as it will be "deducted form claims already made to the Commission". Had this correction not had to be deducted from claims already made, would the money that had been claimed from the EU have been available to CLG to spend, or would it have had to pay that money to Treasury?

169. The Department was able to top-up ERDF grants on the back of the benefit of foreign exchange rates; a strong pound against the Euro. Regulations regarding ERDF are clear. In such circumstances any benefit derived must be re-invested into ERDF programmes and, as such, would not be available to the Department to spend elsewhere and nor would we have been obliged to pay the money to Treasury.

John Healey's letter to the Chair of the Committee of 19 March stated that there would be no adverse budgetary impact as a result of the Commission's financial correction due to the appreciation of the Euro against the Pound. Similarly to the question above, if the department had benefited from favourable exchange rates but had not had to pay the penalties, would the Department be free to spend those monies on other programmes, or would it have been returned to the Treasury?

170. Claims for ERDF are made in Euros and are converted from sterling at the time the claim is made. Receipts from the EC are in Euros and are converted into sterling at the rate prevailing when the receipt enters UK Government accounts. The delay between submission of the claim and payment does give rise to exchange rate gains or losses.

171. If the exchange rate moves so that sterling strengthens against the Euro, the Department would have to cover any loss from its own resources in accordance with HM Treasury rules on management of EC funds.

172. Similarly, and true in recent times, where the movement has been in the other direction we have made a gain on expenditure defrayed. This has helped the Department to meet the cost of corrections. Because payment of claims was suspended by the EC for a period from late 2006, during which time the pound depreciated significantly against the Euro, the (cumulative) exchange rate gains were greater than they would have been if payments had not been suspended. The benefit of this was used to enable CLG to meet the cost of the NW financial correction without the need to reduce expenditure elsewhere.

Note 29 discloses a contingent liability for "possible administrative irregularities (Article 4 and 10 checks) in respect of the European Regional Development Fund programme". The committee would like more information on the nature of this liability? Why was this liability not included with the other ERDF liabilities in note 1.20?

173. Article 4 checks are carried out to verify the delivery of the products and services co-financed from ERDF funding, the reality of expenditure claimed by projects, and compliance with EU regulations. Article 10 checks are carried out on an appropriate sample basis of projects to verify the effectiveness of the management and control systems in place and to verify selectively, on the basis of risk analysis, declaration of expenditure made. Separate teams within Government Offices carry out Article 4 and 10 checks. Where irregularities are found as a result of these checks there is a well established procedure for Government Offices to pursue recovery of the affected amounts. Write-off is agreed by the Department as a last resort only once all recovery measures had been considered or exhausted. Expenditure on this was about £2.4 million in 2007-08, compared with the contingent liability reported in the 2006-07 Accounts of £4.9 million. In effect this is routine programme management activity and so was not included in the explanations in Note 1 to the Accounts which provided explanations for the exceptional ERDF items affecting the 2007-08 accounts.

In note 17(a), other debtors has increased by £418 million from 2006-07. Prepayments and accrued income has decreased by £412 million year on year. Are these differences due to a reclassification of debtors? If so, what has been reclassified and why? If not, could you explain the changes?

174. The movements described above reflect the impact of routine accounting for ERDF grants, impacted by claims for ERDF grant being made to and accepted by the Department. A posting is made to reflect the related ERDF income expected from the EC. This posting is to Accrued Income. When a declaration is made to the EC for grant an EU debtor is created in Other Debtors and Accrued Income reduced. The changes between Other Debtors and Prepayments and Accrued Income reflect changes in the timing of claims to the EC and, more significantly, improved more rigorous accounting for these ERDF transactions.

ORDNANCE SURVEY

Note 12 breaks down net operating cost by spending body. In 2006-07, Trading Funds and Public Corporations contributed a net cost of £412k. In 2007-08, the estimate was £3.8 million income but the outturn was an income of £927k. Note 2 shows that this is due to a net cost of Ordnance Survey of £209k against an estimate of £2.28 million income. This is due to an increase in grant from £1.32 million in the main supply estimates to £3,839. Why did this grant increase?

175. The figures in the grant column represent the cost of capital charge incurred by the Department on Ordnance Survey's average capital employed. In 2007-08 the actual figure, which is based on the Ordnance Survey's preliminary accounts, was higher than anticipated resulting in an increase in the grant.

The 2008-09 main supply estimates also show a provision for "other current" expenditure of £39.46 million. What is this expenditure and why has it been included in 2008-09 and not 2007-08? Ordnance Survey is a trading fund and therefore expected to recover its costs. Why is it expected to cost the Department net £14.5 million in 2008-09?

176. The Department has two distinct relationships with Ordnance Survey. The first is as "shareholder" in the trading fund; the second is as customer for geographical information on behalf of central government. The Department maintains separate relationships with Ordnance Survey at both Ministerial and official level. However, both of these relationships are presented in the same line in the estimates for the first time in 2008-09.

177. A similar forecast was included in the main estimate in 2007-08 but was incorrectly reported under the "Central Administration" heading in 2007-08.

178. The £39.46 million covers outgoings anticipated on the Department's geographical programmes. The figure includes the expenditure anticipated on the Pan-Government Agreement (PGA) for the provision of mapping data. CLG manages the PGA, including the financial arrangements, on behalf of more than 100 central government bodies. While the majority of the PGA is with Ordnance Survey, from 1 April 2008 payments are also made to Next Perspectives for height and aerial photography data products.

179. The £14.5 million is the Department's own forecast expenditure on its geographical programmes. We pay our PGA licence fees from this money. The licence fees are not a subsidy to Ordnance Survey but rather payment for the services which CLG receives. The Ordnance Survey trading fund does cover its expenditure from receipts and provides an annual dividend to the Department. For 2007-08, this was £3.7 million.

180. We intend during the winter supplementary process to re-classify the expenditure we incur in our role as customer for geographic information to more clearly set out the financial relationship with Ordnance Survey.

CLG Consultations January—December 2007

	Consultation	Link	No of response
1	Getting Equal: Proposals to outlaw sexual orientation, discrimination, in the provision of goods and services	http://www.communities.gov.uk/documents/corporate/pdf/565856.pdf	2,747
2	Consultation—Allocation of Accommodation: Choice Based Lettings: Code of Guidance for Local Housing Authorities	http://www.communities.gov.uk/documents/housing/pdf/cblresponsecode.pdf	83
3	Disabled Facilities Grant Programme—the Governments proposals to improve programme delivery—consultation	http://www.communities.gov.uk/documents/housing/pdf/dfgprogrammeresponse.pdf	253
4	Amendments to the Model Code of Conduct for Local Authority Members—Consultation	http://www.communities.gov.uk/documents/localgovernment/pdf/320632.pdf	906
5	Home Information Pack Update: Towards 1 June	http://www.hipsco.co.uk/downloads/hipsresponse.pdf	280
6	Consultation on revised planning guidance in relation to Travelling Showpeople	http://www.communities.gov.uk/documents/housing/pdf/439243.pdf	60
7	Development and Flood Risk: A Practice Guide Companion to PPS25 "Living Draft"—A Consultation Paper	http://www.communities.gov.uk/documents/planningandbuilding/pdf/pps25summaryresponses.pdf	63
8	Proposed Marine Minerals Dredging Regulations: Supplementary Consultation on Revised Application Fees	http://www.communities.gov.uk/documents/planningandbuilding/pdf/324072.pdf	5
9	Landlord and Tenant Act 1954: Section 57—Consultation Paper		18
10	Amendment to the Temporary Stop Notice Regulations: Consultation	http://www.communities.gov.uk/documents/planningandbuilding/pdf/amendmenttemporaryresponses.pdf	27
11	Local Authority Registers of Building Control Information Consultation—A Consultation Paper	http://www.communities.gov.uk/documents/planningandbuilding/pdf/laregistersbuildingcontrol.pdf	143
12	Proposals for Future Unitary Structures: Stakeholder Consultation	http://www.info4local.gov.uk/documents/publications/550387	55,000
13	Changes to Permitted Development: Consultation Paper 1—Permitted Development Rights for Householder Microgeneration	http://www.communities.gov.uk/documents/planningandbuilding/pdf/565952.pdf	262
14	Revision of Local Government (Best Value Authorities) (Power to Trade) (England) (Amendment) Order 2004—A consultation document	http://www.communities.gov.uk/documents/fire/pdf/revisionlocalgovernment.pdf	35
15	Delivering Property Searches: Good practice guidance for Local Authorities and personal searches		315
16	Draft Guidance on the design of sites for Gypsies and Travellers—A Consultation Paper		39
17	Changes to Permitted Development: Consultation Paper 2—Permitted Development Rights for Householders	http://www.communities.gov.uk/publications/planningandbuilding/householderpermitted http://www.communities.gov.uk/publications/planningandbuilding/changesdevelopmentconsultation	459
18	Planning Performance Agreements: a new way to manage large scale major planning applications—Consultation	http://www.communities.gov.uk/documents/planningandbuilding/pdf/566310.pdf	204
19	Improving the Appeal Process in the Planning System: Making it proportionate, customer focused, efficient and well resourced—Consultation	http://www.communities.gov.uk/documents/planningandbuilding/pdf/improvingappealresponse.pdf	291
20	Planning Fees in England: Proposals for Change—Consultation	http://www.communities.gov.uk/publications/planningandbuilding/planningfees	251
21	Planning for a Sustainable Future: White Paper	Planning for a Sustainable Future Analysis of Consultation Responses Background Report B	500
22	Updating the English Indices of Deprivation 2004: Stage Two "Blueprint" Consultation Report—Summary of Responses	http://www.communities.gov.uk/publications/communities/indicesdeprivationresponses	103
23	Proposals for Future Unitary Structures: Means of Prioritising Proposals—Consultation	Related consultations and responses: Stakeholder Consultation: http://www.communities.gov.uk/publications/localgovernment/proposalsfuture http://www.communities.gov.uk/publications/localgovernment/unitarystructureresponses Bedfordshire Stakeholder Consultation: http://www.communities.gov.uk/publications/localgovernment/bedfordshireconsultation http://www.communities.gov.uk/publications/localgovernment/unitarystructurebedfordshire	64
24	Discrimination Law Review: A Framework for Fairness: Proposals for a Single Equality Bill for Great Britain—A consultation paper	http://www.equalities.gov.uk/publications/Government_Response_to_the_consultation.pdf	4,226
25	Delivering Housing and Regeneration: Communities England and the future of social housing regulation—Consultation—Summary of Responses	http://www.communities.gov.uk/documents/housing/pdf/635017.pdf	187
26	Tenant Empowerment—A consultation paper	http://www.communities.gov.uk/documents/housing/pdf/Summaryofresponses.pdf	76
27	Modernising Empty Property Relief—Summary of consultation replies and Government response	http://www.communities.gov.uk/documents/localgovernment/pdf/emptypropertyrelief.pdf	175
28	Local Government Finance Formula Grant Distribution: Consultation Paper	http://www.local.communities.gov.uk/finance/0809/sumcon/analrep.pdf	316
29	Shared Ownership and Leasehold Enfranchisement—Consultation	http://www.communities.gov.uk/documents/housing/pdf/sharedownershipleasehold.pdf	53
30	The future of the Code for Sustainable Homes—Making a rating mandatory	http://www.communities.gov.uk/documents/planningandbuilding/pdf/549499.pdf	109
31	Homes for the future: more affordable, more sustainable—Housing Green Paper	http://www.communities.gov.uk/documents/housing/pdf/greenpaperresponse.pdf	521
32	Proposed amendments to the Central List Regulations: National Non-Domestic Rates and Local Loop Unbundling	http://www.communities.gov.uk/documents/localgovernment/pdf/647459.pdf	22
33	Commonhold and Leasehold Reform Act 2002: A Consultation Paper on Regular Statements of Account and Designated Client Accounts	http://www.communities.gov.uk/publications/housing/regularstatementresponse	99
34	Longer time limits for prosecution of breaches of Building Regulations—Consultation	http://www.communities.gov.uk/publications/planningandbuilding/longertime	85
35	Transfer of Planning Appeals to Inspectors: Consultation	http://www.communities.gov.uk/publications/planningandbuilding/transferappealsresponse	34
36	Overriding Easements and Other Rights: Possible Amendment to Section 237 Town and Country Planning Act 1990	http://www.communities.gov.uk/documents/planningandbuilding/pdf/overridingeasementsresponse.pdf	69
37	Mechanism for setting Guideline Rents in Housing Revenue Account subsidy 2008-09 and 2009-10: Consultation		95
38	Tolerated trespassers—Consultation	http://www.communities.gov.uk/documents/housing/pdf/toleratedtrespassersresponse.pdf76
39	Clarifying the Right to Buy rules: Consultation	http://www.communities.gov.uk/documents/housing/pdf/rightobuyrules.pdf	62
40	Councils' Proposals for Unitary Local Government: An Approach to Implementation (Discussion Document)	An Approach to Implementation was not strictly a formal consultation exercise in the true sense. The exercise was used to inform the content of the Structural Change Orders, for areas implementing unitary local government structures.	158
		In response to this document, we received representations from 158 stakeholders involved/affected by the local government restructuring. We did not publish any formal response to this document as such. But the exercise was use to inform the content of the individual Structural Change Order and those Order can be found on OPSI website at the following locations: Statutory Instrument No 490—The Wiltshire (Structural Change) Order 2008 http://www.opsi.gov.uk/si/si2008/pdf/uksi_20080490_en.pdf Statutory Instrument No 491—The Cornwall (Structural Change) Order 2008 http://www.opsi.gov.uk/si/si2008/pdf/uksi_20080491_en.pdf Statutory Instrument No 492—The Shropshire (Structural Change) Order 2008 http://www.opsi.gov.uk/si/si2008/pdf/uksi_20080492_en.pdf
		Statutory Instrument No 493—The County Durham (Structural Change) Order 2008 http://www.opsi.gov.uk/si/si2008/pdf/uksi_20080493_en.pdf Statutory Instrument No 494—The Northumberland (Structural Change) Order 2008 http://www.opsi.gov.uk/si/si2008/pdf/uksi_20080494_en.pdf Statutory Instrument No 634—The Cheshire (Structural Change) Order 2008 http://www.opsi.gov.uk/si/si2008/pdf/uksi_20080634_en.pdf http://www.opsi.gov.uk/si/si2008/em/uksiem_20080634_en.pdf Statutory Instrument No 907—The Bedfordshire (Structural Change) Order 2008 http://www.opsi.gov.uk/si/si2008/pdf/uksi_20080907_en.pdf http://www.opsi.gov.uk/si/si2008/em/uksiem_20080907_en.pdf	158
41	Implementation of European Directive 2005/36/EC for Architects		6
42	Enabling Electronic Communication of Building Control Documents—Consultation Paper	http://www.communities.gov.uk/documents/planningandbuilding/pdf/enablingelectronicsummary.pdf	33
43	Town and Country Planning (Environmental Impact Assessment) (England) (Amendment) Regulations 2007		33
44	Housing and Planning Delivery Grant (HPDG): Consultation on allocation mechanism	http://www.communities.gov.uk/documents/housing/pdf/523099.pdf	217
45	A Centre of Excellence for the Fire and Rescue Service—Consultation Paper	http://www.communities.gov.uk/documents/fire/doc/fsc21-2008cvg.doc	76
46	National Indicators for Local Authorities and Local Authority Partnerships: Handbook of definitions—Draft for Consultation	http://www.communities.gov.uk/documents/localgovernment/pdf/735215.pdf	583
47	Fire and Rescue Service Equality and Diversity Strategy: 2008-18	http://www.communities.gov.uk/documents/fire/pdf/equalityanddiversitystrategy.pdf	58
48	Fire and Rescue Service National Framework 2008-11 Consultation	http://www.communities.gov.uk/documents/fire/pdf/nationalframeworkresponse.pdf	47
49	Creating Strong, Safe and Prosperous Communities Statutory Guidance: Draft for Consultation	http://www.communities.gov.uk/documents/localgovernment/pdf/887903.pdf	167
50	Principles of representation: A framework for effective third sector representation in Local Strategic Partnerships		58
51	Changes to the Capital Finance System: Capital Finance Amendment Regulations Minimum Revenue Provision Guidance	http://www.communities.gov.uk/documents/localgovernment/pdf/739218.pdf	107
52	GLA Act 2007: consultation on the draft Mayor of London Order and GOL Circular: Strategic planning in London	http://www.gos.gov.uk/gol/Planning/624901/	36
53	Draft Housing Revenue Account (Item 8) and Draft Housing Revenue Account Subsidy Determinations 2008-09	http://www.communities.gov.uk/documents/housing/pdf/LettertoCFO.pdf	59
54	Tree Preservation Orders: Improving Procedures—Consultation Paper		105
55	Streamlining Local Development Frameworks: Consultation	http://www.communities.gov.uk/documents/planningandbuilding/pdf/ldfsummaryresponses.pdf	241
56	Local Government Finance Settlement 2008-09 and Provisional 2009-10 and 2010-11 Settlements	This is not a full public consultation and therefore does not fall under the Cabinet Office guidelines. We do not publish the analysis of consultation responses.	323
57	Energy Performance Certificates for Private Marketed Sales of Dwellings: Validity Period of Certificates		23
58	The New Place Survey: Consultation	http://www.communities.gov.uk/documents/localgovernment/pdf/880186.pdf	435
59	"Face-to-Face and Side-by-Side": A framework for inter faith dialogue and social action—Consultation	http://www.communities.gov.uk/documents/communities/pdf/898791.pdf	186
60	Consultation Paper on new Planning Policy Statement 4: Planning for Sustainable Economic Development	http://www.communities.gov.uk/documents/planningandbuilding/pdf/921761.pdf	219
61	Proposals for future unitary structures in Bedfordshire: Stakeholder Consultation	http://www.communities.gov.uk/documents/localgovernment/pdf/787812.pdf	26
62	Local petitions and Calls for Action: Consultation	http://www.communities.gov.uk/documents/localgovernment/pdf/906801.pdf	202

1 http://www.hm-treasury.gov.uk/media/E/9/pbr_csr07_psa21.pdf Back

2 http://www.communities.gov.uk/corporate/about/howwework/publicserviceagreements/departmentalstrategicobjectives/ Back

3 DCSF's SR04 PSA 7. Back



© Parliamentary copyright 2009	Prepared 4 March 2009