The work of the Committee in 2008-09 - Environment, Food and Rural Affairs Committee Contents

Annex C: Government Response Table

---

Government Response Table[2]

The potential of England's rural economy—11^th Report (HC 544, 2007-08), PUBLISHED 29 OCTOBER 2008, GOVERNMENT RESPONSE PUBLISHED 21 JANUARY 2009 (—1ST SPECIAL REPORT (HC 155, 2008-09))

—  Conclusion/Recommendation	—  Government Response
—  THE POTENTIAL BENEFITS
—  1. We recommend that Defra economists make an effort to quantify the potential of the rural economy as this would assist in making a case for the necessary use of resources to fully address the challenges arising from the rural economy that this report and others identify. (Paragraph 1)	—  During oral evidence, the Committee was particularly interested in obtaining from Defra an estimate of the value of the economic potential of rural areas to compare with that contained in the Rural Advocate's report. As outlined below, a full response to that report, including an analysis of the estimated 'value' of rural economies will be published shortly. However, we do have reservations regarding the basis for the estimates used. In developing the response to the Rural Advocate's report, Government has carried out a thorough analysis of the issues raised. —   —  We do agree that it is important that all levels of Government have an effective understanding of the reasons why some areas, both urban and rural, perform less well than others, including the spatial dimensions to any differences. —   —  Defra is a joint delivery partner for PSA7 "Improve the economic performance of all English regions and reduce the gap in economic growth rates between regions". Our contribution to this PSA focuses on the following question; "Analysis of trade-offs: can the risk of increased intra-regional disparities, with particular regard to peripheral rural areas, be minimised?". —   —  This work builds on the evidence that, whilst most rural areas are performing quite well, there are rural areas where levels of economic performance are below average and prospects for growth are more limited. These tend to be in areas more distant from economic mass. The aim is to provide the evidence base suitable to support action at the appropriate level to limit intra-regional disparities based on geography. A key element of this work involves making sure that the relevant players understand the effects on rural areas of economic interventions so that the potential of peripheral rural areas to contribute to regional economic performance can be recognised and realised. —   —  Defra is working with the London School of Economics to expand the work programme of the Centre for Spatial Economic Research to look into the relative economic performance of rural areas.
—  THE BURGESS AND TAYLOR REVIEWS
—  2. The Burgess and Taylor reviews are an indication of the Government's willingness to consider what further measures could be taken to strengthen the rural economy and address the continuing problem of housing availability for those on low incomes. What are needed are innovative schemes such as Community Land Trusts to build upon the exceptions policy in local development frameworks and to kick start these initiatives. We urge the Government to publish detailed responses to both reviews, setting out whether it agrees with their findings, what specific actions it intends public bodies to take as a result, and an implementation timetable. (Paragraph 6)	—  The Government will be responding to both reviews shortly. Defra and CLG are working together to respond to the recommendations made by Matthew Taylor. A cross Whitehall working group has been brought together under the chairmanship of Defra to develop a joint response to the recommendations made in the Burgess Review. This group includes HMT, BERR, CLG, DIUS and DWP.
—  UNDERSTANDING THE RURAL ECONOMY
—  3. Based on the concerns put to the Committee, we recommend that Defra carry out a review of whether planning decisions by National Park Authorities reflect the correct balance between protecting the natural environment and ensuring that communities located within national parks are sustainable and will survive. (Paragraph 9)	—  The Government's planning policies for development in National Parks are contained in Planning Policy Statement 7 which encourages policies in Local Development Documents (and Regional Spatial Strategies if necessary) to support suitably located and designed development necessary to facilitate the economic and social needs of National Parks. There is no presumption against development in National Parks although, naturally, stricter policies apply to major development proposals. Government keeps all of its planning policies under review but has no reason to believe that those for National Parks in PPS7 are working in any way other than as intended. —  In pursuing the National Park statutory purposes of conservation and recreation, the National Park authorities have a duty to foster the economic and social well-being of their local communities. The Government does not consider the authorities are failing to do this or that it is necessary to review the planning decisions taken by them. It is the responsibility of every local planning authority to take into account all material considerations when deciding a planning application and this would include the environmental, economic and social sustainability of the proposed development. Local planning authorities, including National Park authorities, are best placed to consider the various issues raised by each planning application and the implications for their area. It is considered inappropriate for the Government to second guess any decisions reached by a National Park authority, unless, of course, it came before the Secretary of State for Communities and Local Government as an appeal or called-in application. —   —  In any case, the Government does not accept that the National Park authorities have failed to correctly balance the need to protect the natural environment with the need to ensure that park communities are sustainable and survive. The National Park authorities have done an excellent job at conserving the high environmental quality of the Parks but this has not been at the expense of the communities and businesses within them. Research shows that National Parks help businesses to prosper and that a healthy natural environment and a healthy rural economy go together. To lay a greater emphasis on the economic development of National Parks would threaten the very qualities of natural beauty and opportunities for sustainable recreation which attract people to them—and which attract businesses to relocate in or near them. —   —  The planning application in the Yorkshire Dales National Park referred to in the report was one that was made in 1990 and permitted in 1991. It is difficult to see what lessons could be drawn from such an old case. But it is notable that the application site was on land owned by the National Park authority which was gifted to the business. The site was a sensitive one which fronted the Dales Countryside Museum, a traditional building of considerable character. That is why the permission was conditioned to ensure traditional materials appropriate to such a site were used. —   —  Socio-economic projects funded by the National Parks include: The New Environmental Economy Programme ran from 2002 to March 2008 in the Peak District National Park and offered grants to businesses developing new products and services based on using the high quality environment of the Peak District as a business asset. Several Authorities are involved in projects to revive rural skills, for example the 'Traditional, Boundaries Traditional Skills' project in the Northumberland National Park and the bursary scheme to support the training of reed and sedge cutters and millwrights in the Broads. The Parks' Sustainable Development Funds (SDF) have been used to support many local businesses for example, in the Exmoor National Park SDF grant was used to help a micro-brewery enterprise with the additional costs of converting a disused agricultural building.
—  4. The differences between running a business in a market town and a smaller rural community seem to us at least as significant as the differences between running a business in a market town and a city. Defra should ensure that its rural affairs targets take this into account and that its data enables it to distinguish between different types of rural areas, so that its policies can be tailored accordingly. (Paragraph 11)	—  We agree that all rural places are not the same. Indeed there may be significant diversity between the issues faced not only by different types of rural settlement e.g. markets towns and smaller rural communities but also between similar types of settlement in different parts of the country. We fully recognise that all places are different, that is why Government policy is increasingly designed to create the regional and local flexibility to respond to the specific needs of specific places. —   —  The Government's review of sub-national economic development and regeneration (SNR)[1] was published in July 2007. The review focused on improving the economic performance of England's regions, cities and localities, as well as tackling persistent pockets of deprivation. It was based on the principles of managing policy at the right spatial level; ensuring clarity of roles for those bodies acting sub-nationally; and enabling places to reach their full potential. Defra is working with other departments to ensure the guidance for single regional strategies draws out the need to rural proof these strategies. —   —  In October 2008, Government announced "Solutions for Business—funded by government" a streamlined package of 30 publicly-funded business support products accessed via Business Link to help companies start, survive and succeed. This simplified system will make it easier for all business, including those based in rural areas, to find the right products to help them with common business issues such as finance, innovation and skills.
—  THE MARGINALISATION OF RURAL AFFAIRS
—  5. We are concerned that the decision to have a rural affairs target that is a Departmental Strategic Objective, rather than a cross-government Public Service Agreement, means that less attention will be focused on realising the potential of the rural economy, both across Government and within Defra. The environment has clearly been Defra's number one priority, and rightly so. However, this should not mean that rural affairs struggle to attract the attention they deserve. We urge that, in the next Comprehensive Spending Review, consideration be given to making the rural affairs target a cross-government Public Service Agreement. In the meantime, there is, at the very least, a strong perception amongst those involved that rural affairs are being marginalised in Defra and the Department should set out how it intends to address this concern. (Paragraph 18)	—  The Government remains firmly committed to strong rural communities. This is one of the eight key objectives (DSOs) for Defra agreed with Treasury. The DSO is already cross government in the sense that: the monitoring indicators for the DSO reflect the breadth of Government policies few, if any, of which are the direct responsibility of Defra; the programme board for delivery of the DSO is cross -Departmental; rural mainstreaming of policy is a concept that is accepted across Government already; and rural proofing is the responsibility of all government Departments. —  So all departments are engaged in the delivery of the DSO in the same way they would be for a PSA. We agree that the way the DSO works across departments and the role that Defra plays may not be fully and widely understood. Defra is currently considering ways to publicise more widely and effectively information about the Strong Rural Communities Programme. —  The question whether a formal PSA is appropriate and would deliver anything different is an issue for the next Comprehensive Spending Review.
—  WHAT IS A "STRONG RURAL COMMUNITY"?
—  6. We are unconvinced that "Strong Rural Communities" is the most appropriate title for Defra's Departmental Strategic Objective and are encouraged by the Minister's willingness to consider alternatives. We recommend that Defra adopt the term "Socially and Economically Sustainable Rural Communities". (Paragraph 21)	—  We are grateful to the Committee for this helpful suggestion and as the then Minister for Rural Affairs Jonathan Shaw indicated in his evidence, we are happy to respond on this point. We believe that the suggested change is a constructive one which reflects the strategic aims underpinning the DSO. We agree with the Committee that this better description should help in engaging external organisations in the delivery of the outcomes sought under this DSO.
—  INTERMEDIATE OUTCOME NO. 1: NEEDS OF RURAL PEOPLE AND COMMUNITIES
—  7. We are concerned that having a mainstreaming target that is part of a Departmental Strategic Objective, rather than a cross-Government Public Service Agreement, will mean that other departments will be less engaged in trying to achieve it. We commend the good examples of rural proofing that we encountered during this inquiry. However, we are not convinced that the approach to rural proofing adopted by the Government and Defra is sufficiently rigorous or systematic. The CRC already publishes an annual report on rural proofing. To complement this, and to improve the mechanics of rural proofing, we recommend Defra set out in its annual report what work it does, on a department by department basis, to ensure that rural affairs are factored into policy development, how it monitors progress, and what criteria it uses to judge whether rural proofing has been successful. Defra should be proactive about approaching other departments to offer advice and should not simply wait for them to contact it. (Paragraph 27)	—  The Government is clear that it is the responsibility of individual policy departments to ensure that their policies and delivery arrangements are equally applicable to people in rural and urban areas. We do, recognise that some support can be beneficial and that a degree of monitoring can help to provide rural people, communities and businesses with reassurance that their interests have been taken fully into account. Defra supports the Commission for Rural Communities which is already charged with providing a challenge function for Government departments (and others) on the extent to which policies are rural proofed. Defra and the CRC are currently working together to improve the rural proofing support available to departments. And both are looking at ways in which they can adopt a more proactive approach towards assisting other Government departments. —   —  The following are examples of Defra's work with Whitehall Departments over the past few months: —   —  Broadband —  Defra has continued to work with BERR and CLG on the Digital agenda, ensuring that rural areas are taken into account in broadband policy development. This has included working on a specification for a research project into communities likely to be left behind as the next generation of broadband rolls out. This will also identify the existing 'not spot' areas and identify possible solutions for action at community level, The Invitation to Tender is due to be issued shortly, the contract to be let in January, with the project report expected in May. —   —  Affordable Rural Housing —  Work is continuing on the response to the Taylor report with the aim of publication shortly. This work is led by CLG at whom the majority of the recommendations were aimed with support from Defra. A major focus of our contributions has been around recommendations relating to supporting delivery of the Government's target of 10,300 affordable homes in settlements of under 3,000. —   —  Working in partnership with CLG Defra is funding a research and good practice project which will support the new Homes and Communities Agency to: —   —  a) Identify, contact and encourage poorly performing Local Authorities to 'up their game' on delivery of rural housing. —   —  b) Encourage high performing LAs to maintain performance and deliver even more quickly. —   —  c) Identify gaps in knowledge and commission research/carry out work to fill these. —   —  d) Identify, evaluate and disseminate good practice relating to rural delivery. —   —  Throughout the course of the project, HCA will keep the current target under review and will provide advice on target setting to feed into the next spending review. We The HCA aims to recruit for the two specialist posts supporting this project before Christmas and is planning a major event to engage local and regional stakeholders before the end of the financial year. —   —  Rural buses —  Defra has continued to engage with DfT on its plans to make changes to the Bus Subsidy Operators Grant (BSOG), which currently provides £413m a year to support marginal bus services, many of them in rural areas, DfT is keen to adjust the BSOG, which is currently linked directly to fuel usage, in order to improve value for money and energy/emissions efficiency, Defra accepts the need to improve the current subsidy arrangements, but has been clear that any changes should not adversely affect people living in rural areas. —   —  Community Empowerment —  Defra is actively working with CLG on participatory budgeting issues. It sits on the cross government working group. Parish councils in rural communities raise a precept which must be spent locally. It is an ideal candidate for participatory budgeting. It is also working with NALC (the National Association of Local Councils) and ACRE (Action with Communities in Rural England) on a package of proposals to support the empowerment agenda to complement funding provided by CLG. —   —  Rural Culture —  Defra has worked closely with DCMS on developing the Government's response to the case put forward by the Rural Cultural Forum for greater Government.
—  INTERMEDIATE OUTCOME NO. 2: RURAL ECONOMIC GROWTH
—  8. Focusing the economic intermediate outcome solely on low-performing areas is a wasted opportunity. Although it is important to improve poor economic performance, the DSO should not ignore rural areas that are performing well, but could perform even better with more support. We urge Defra to adopt a broader intermediate outcome to support economic growth in all rural areas. (Paragraph 30)	—  The Government's Rural Strategy 2004 set out our three key priorities for rural policy. On Economic and Social Regeneration our priority is—'supporting enterprise across Rural England, but targeting greater resources at areas of greatest need'. —  Essentially the DSO is about using Defra's resources and rural expertise to be able to be able to identify whether and to what extent there are systemic issues in relation to the delivery of Government policy in rural areas. By definition this will tend to point up any areas where there is disadvantage not just economic underperformance. —  The Government does want to see all rural economies fulfilling their realistic economic potential within environmental limits. Defra works closely with colleagues across Whitehall and in the Regional Development Agencies to ensure that the mainstream mechanisms designed to support businesses are effectively rural-proofed. —  The evidence shows that most of rural England is well-connected with strong links to nearby towns and cities and good access to local markets and job opportunities. That is why most of our rural areas are already performing strongly in terms of economic growth. —  However, the evidence also shows that there are some rural areas where levels of economic performance are below average and prospects for growth are more limited. It is right therefore that the principle focus of the DSO should be on those areas where rurality is generally understood to place a constraint upon the potential for growth. Our greatest challenge is those areas which are remote from major urban centres. —
—  THE DATA
—  9. We are concerned about the level at which the indicators operate. We agree with Defra that, for some indicators, it is not meaningful to compare data at a very local level. However, for the majority of indicators, comparing data at a district level will not enable Defra or other agencies to identify specific problems and target interventions accordingly. Our experience suggests that remote rural communities and market towns are encountering different problems, but we cannot see how the majority of indicators would pick up on this, or any of the other location-specific problems we encountered. We recognise that Defra is dependent on other departments and the Office for National Statistics for much of its data. We recommend that it identify the indicators for which it would be useful to have more detailed results and set out how it intends to work with its data providers to obtain this level of information in future. (Paragraph 37)	—  Defra has no particular difficulty in identifying or obtaining the data it requires in order to undertake an effective assessment of the outcomes in rural areas. It has an excellent working relationship with the Office for National Statistics who were collaborators in developing the sub-regional rural/urban analysis of Gross Value Added (GVA) used as our measure of productivity in the DSO. These data sets, like all of the DSO indicators utilise the lowest level data currently available for any area urban or rural. —  It would be a misapprehension to conclude that it is more challenging to access data at the right level for rural areas than it is for any other areas. The whole of Government is committed to improving the quality of the data we use to inform policy and Defra works closely with colleagues from across Whitehall to achieve this aim. —  It remains the case that a significant amount of administrative data is available only at District level which makes it less useful in assessing the needs of individual communities, whether rural or urban. This tends to be for practical reasons of data collection or ethical ones relating to the potential for disclosure of personal information. —  It was previously the case that a certain amount of administrative data was gathered at spatial scales against which it was not possible to apply either the rural definition or the Local Authority District Classification. However, recent work by the Government Statistical Service Regional and Geography Group (GSSRG) comprising representatives from Defra, Birkbeck College, CLG, Government Office Network, CRC and the Association of Regional Observatories has applied the rural definition to higher administrative geographies, including counties, police, and fire, waste and transport authorities. Over the coming months the rural definition will be applied to Primary Care Trusts, crime and disorder partnerships and parliamentary constituencies. So this is an area where improvement and refinement is currently being sought. More details can be found on the Defra Rural Statistics webpage: —  http://www.defra.gov.uk/rural/ruralstats/rural-definition.htm.
—  THE MISSING PIECES
—  10. Although it is encouraging that rural areas are performing well according to the criteria and measures Defra has selected, we see little value in having a Departmental Strategic Objective until 2011 that Defra has already largely achieved. We recognise that maintaining success is important, but we question whether this should be the focus of Defra's only rural affairs DSO. We acknowledge that no target or set of performance indicators can be all-encompassing. However, we are concerned that there are significant gaps in what Defra is measuring in its rural communities DSO. We would like to see a DSO that is sufficiently flexible, and fine-grained, to enable the problems in different communities to be recognised and tackled. We recommend that Defra consult the Commission for Rural Communities on whether the indicators for the DSO represent the best practicable way of identifying the issues affecting rural communities. Defra should revise its indicators in the light of this advice. (Paragraph 41)	—  It is important that we retain continuity in measuring performance against the DSO across the spending period. For that reason any changes at this stage would probably be unhelpful. —   —  But in any event the DSO indicators have been chosen to reflect the Government's overarching priorities for all communities rural and urban. They were not chosen as 'easy targets' against which we could show early success. Whilst we are pleased that the Committee considers that we have already largely achieved our objectives we feel that there is much still to be done. This is not just in the areas which are not yet 'green' on the traffic light system, but also in areas where there is apparent success. Even here, Defra is working to get behind the indicators to see if the headlines are masking any issues. However, Defra does not seek to undertake detailed work on every one of the diverse issues affecting people living in rural places. This would duplicate activity undertaken elsewhere in Government and represent poor value for money. As the DSO documentation makes clear, the public service needs of people living in rural areas are addressed by the same parts of the public sector that work for all of us. Our objective is not different or better outcomes for people living in rural areas than those enjoyed by people living elsewhere but equity and fairness for people where ever they live. The purpose of the DSO indicator set, therefore, is to identify any systemic issues that appear to be related explicitly to rurality. —  It is equally important that we are clear about the distinct roles and responsibilities of Government at all levels. It would be neither feasible nor appropriate for Defra to develop an indicator set designed to performance-manage outcomes at the level of individual communities. Addressing such issues at the community level is the role of Local Government who do this within the context of the Local Area Agreement framework and the National Indicator Set on which this DSO has been based. The Commission for Rural Communities remains closely involved both in the formal monitoring of the DSO, via the DSO Partnership Group, but also informally through its close involvement with Defra on all rural issues.
—  11. If Defra does decide to proceed with the current indicators, it should be careful to treat its indicators as no more than that: indicators of success. Defra must recognise that some important aspects of life in rural communities, such as transport, communications, planning and further education, are not covered by its mainstreaming indicators. It should also recognise that there may be problems that are not reflected by a simple comparison with the national average. It should set out how it intends to identify and tackle these problems. (Paragraph 42)	—  Defra is aware of the diversity of rural experiences and fully recognises that the relative strength of many rural communities does not preclude the existence of wide divergences from the average at local level. We do not assume that all rural communities or rural people enjoy the same outcomes. That is why the Government's focus is on mainstreaming rural policy through local delivery mechanisms which recognise that all communities are different. —  However, it is important in this context that we are able to distinguish between localised issues and concerns and evidence of any systemic challenges associated with rurality. This is what the indicators underpinning the DSO are designed to do. This baseline of information is not an end in itself; it helps us to prioritise our activity to ensure that we are focused on those issues where there is greatest evidence of need. The DSO highlights two particular areas for specific focus: affordable housing and economic productivity. These reflect the issues raised most frequently with the committee during its inquiry. —  We recognise that there are aspects of rural life that are not covered by these indicators, which were specifically chosen to focus on outcomes rather than inputs or outputs. We continue to work closely with our partners in the Commission for Rural Communities who produce a wide range of complementary data—such as the regular State of the Countryside Report which addresses many of the issues raised by the Committee. The joint Defra/CRC work on rural proofing and mainstreaming, mentioned above, will also help to ensure that Defra and the CRC are plugged into the activities of Government Departments and others who are developing policies or delivering services which impact upon people in rural areas. —  In respect of further education we would reiterate the statements made by Jonathan Shaw in his response to Michael Jack's letter of 21 July 2008 in which he noted that "Skills and education post-19 are indeed included in the performance indicators for the Departmental Strategic Objective". Educational attainment is covered under IO (intermediate objective) 1 which includes data on full time entrants to higher education. Further education and skills are also included, under IO 2, including: the percentage of the working age population with no qualifications; the proportion of the working age population with NVQ2+; the percentage of the working age population with higher qualifications; and on the job training.
—  DEFRA'S RESOURCES
—  12. We accept that the reduction in the number of people working on rural affairs in Defra should be viewed in the context of a paring back across the civil service. We also agree that Defra should be judged on outputs not inputs. However, there must be some link between the two. Defra should acknowledge that there are concerns about its capacity to deliver on its rural affairs commitments. If it believes that these concerns are unfounded, it should explain why. Its delivery plan for its DSO should indicate how it will make best use of the resources at its disposal. In the light of these observations, Defra should publish in the next six months a detailed commentary on its current rural affairs work. This would provide greater insight into its rural development role than that afforded by the limited commentary in its departmental annual report. (Paragraph 44)	—  As indicated in the evidence given by Jonathan Shaw, Defra believes that the current level of resources devoted to rural issues is sufficient to deliver against its functions and priorities. Rather than a six month review of its rural work, Defra will seek opportunities to publicise the work that it has been doing, particularly in partnership with others. —
—  KEY DELIVERY BODIES
—  13. Defra is in a difficult, although hardly unique, position: it has a DSO that cannot be achieved without significant assistance from other departments and bodies. Its success in achieving its rural affairs target will depend heavily on its ability to influence these key players. To this end, it should produce a strategy for working with RDAs, local authorities and rural community councils to ensure that it achieves the best possible outcomes for rural areas. The strategy should set out what assistance Defra requires from these bodies, how it will communicate these needs, when it will require feedback and how this will be provided. (Paragraph 45)	—  Whereas Defra is finalising a strategic partnership agreement with the RDA network and has a funding agreement with Rural Community Action Network that describes the work RCCs will do on its behalf, the Government agrees that there is room for greater clarity in defining the role that Defra plays in relation to the work that the RDAs, local authorities and Rural Community Councils undertake on behalf of rural people, communities and businesses. Defra does not control or dictate the work of these organisations, nor does it have direct responsibility for most of the policy areas that will be of interest but it does work with them to support their rural activities. However under the RDA sponsorship framework, RDAs are required to apply the cross-cutting principle of economic opportunities for all (which includes rural areas) to all their business. RDAs are required to set out in their annual reports how they have applied the cross-cutting principle and what effect it has had. In addition the regional economic performance PSA provides a forum for cross-Whitehall discussion about the economy, and the consideration of rural economic performance as part of that mainstream discussion. Alongside the joint Defra/CRC rural proofing and mainstreaming work, mentioned earlier, Defra will be looking at ways to further define and maintain key working relationships with the agencies the Committee mentions.
—  REGIONAL DEVELOPMENT AGENCIES
—  14. RDAs are doing some good work in rural areas, but there is still a perception that they are urban-focused and uninterested in small-scale projects. The extent to which this view is justified is certainly debatable. However, the opinions that were expressed to us indicate that RDAs are having difficulty communicating what they are doing in rural areas and we recommend that the East of England Development Agency, as the lead RDA for rural affairs, set out what action it intends to take to address this. (Paragraph 49) —	—  The RDAs welcome the Committee's acknowledgement that RDAs are doing some good work; a significant number of businesses in rural areas have been assisted to improve their performance. The percentage of firms getting business support in rural areas As part of its lead role, East of England Development Agency (EEDA) recognises the need to better communicate the work that RDAs are undertaking in rural areas to partners and stakeholders. It is working across all RDAs to showcase RDA activity better to a wider range of stakeholders. EEDA is reviewing its current communication mechanisms and is developing a practical and effective communication strategy with a range of mechanisms that will both address this issue in both the short and longer term and integrate both national and regional dissemination of information. The cross RDA Rural Affairs Network has already discussed the communication strategy at its meeting on 12th November. —   —   —   —  Examples of work undertaken by RDAs in rural areas include —  A site in Okehampton in West Devon (one of the 60 most rural authorities in England) was acquired by SWRDA to secure grow on space for the adjacent industrial park. The centre itself is being targeted at businesses looking for their first commercial premises and easy in/easy out terms. The development as a whole is enabling local people to work closer to home as opposed to commuting to Exeter. —  EEDA funded a rural gateway project to test and demonstrate how to deliver to rural areas. Once the methodology had been proven it was mainstreamed as the Business Link Gateway. A specific Partnership Manager is now funded within Business Link to promote generic Business Link services to business located in rural areas or businesses rural by nature. —  RDAs are delivering £554m of Rural Development Programme for England (RDPE) into rural areas. The funding is being used to make strategic investments in line with regional priorities, identified by partners and stakeholders working together to produce Regional Implementation Plans. RDAs have also approved around 60 Local Action Groups which will be investing funds, using a bottom-up approach, to meet identified local needs.
—  15. We do not want to add unnecessarily to the reporting burden of the RDAs and agree that there should be no additional formal mechanism to report separately to Defra on activity that may contribute to the DSO. However, such information should form part of the single reporting framework, and Defra and the RDAs should discuss progress against the DSO informally at the quarterly meetings that take place between the Minister and the chairs of the RDAs. Defra should include in its departmental annual report an assessment of the RDAs' success in delivering the rural aspects of their responsibilities. (Paragraph 52)	—  The RDAs are represented on the external-facing Partnership Group established to support the delivery of the DSO, and will be able to report on their activity in support of the DSO at the Group's regular meetings. In addition, Defra and RDA officials have established close working relations while agreeing the rural components of RDA Corporate Plans. In addition to the RDA sponsorship framework reporting arrangements mentioned above. There are also many informal mechanisms where progress is discussed, for example during the recent round of strategic visits to all RDAs by members of Defra's Management Board and the regular one to one meetings between Defra's Secretary of State and EEDA's Chair. —  As has already been noted, responsibility for providing an external challenge to all levels of Government in their rural proofing efforts rests with the CRC. The joint Defra/CRC project on rural proofing and mainstreaming will build on these relations and cover the RDAs' activities in rural areas. As noted, the outcomes of this project will be published, and will be summarised in the Departmental annual report. —   —   —
—  LOCAL AUTHORITIES
—  16. The changing map of local government, with more unitary authorities, will have a profound effect upon rural areas. It is vital that Defra works with the Department for Communities and Local Government to conduct research into the impact on the delivery of services in rural areas. (Paragraph 54)	—  The 'places agenda' led by Communities and Local Government (CLG) has established the infrastructure (e.g. Local Area Agreements and Local Strategic Partnerships), governance (e.g. performance framework and inspection regime) and accountability (e.g. citizen information, engagement and means of redress) needed for local areas to identify and respond to local priorities. —  Defra has developed a range of approaches to respond to this changing landscape. These include: working closely with CLG, in particular, to ensure that the guidance on Local Area Agreements to both Local Strategic Partnerships; and to Government Offices in their challenge role reflects the requirement to evaluate rural needs as part of this process. To this end Defra is also looking to improve contact with the Local Government Association and other Local Government representatives, such as Rural Services Network and County Councils Network. funding ACRE (Action with Communities in Rural England) and the RCAN network of RCCs with £3.4m a year to undertake strategic influencing to promote the interests of rural people and communities at county and community levels. Funding Regional Rural Affairs Forums to work with their local GO and RDA to provide a rural voice at the regional level. Each works in a way that best reflects regional needs and priorities, but is expected to meet a baseline set of roles and responsibilities to ensure consistency. The 8 Chairs meet quarterly with the Rural Affairs Minister and the Local Government Association (LGA). Resourcing the Commission for Rural Communities to plays a role in supporting and encouraging the effective rural proofing and through identifying and championing key areas where rural people and communities may need particular support. —  Defra's 2005 Local Authority District (LAD) Classification was developed to allow rural proofing of the wide range of statistics available at this geographic level. In April 2009 significant changes in the structure of local government come into force. Nine new unitary authorities will be created to replace 37 district authorities (and 7 county councils) resulting in a new total of 326 LADs in England. —  These changes have necessitated an update to the classification. The Government Statistical Service Regional and Geography Group (GSSRG) commissioned a working group comprising representatives from Defra, Birkbeck College, CLG, Government Office Network, CRC and the Association of Regional Observatories to look at this issue. —  The Unitary Authorities which will come into effect in April 2009 have been categorised using this 'new' LA classification. An overview of these changes has been circulated to regional partners including the Government Office Rural & Intelligence networks and the Association of Regional Observatories. The DSO indicators will be revised so that the baseline and reporting years use a consistent classification. This will avoid a break in the time series during the CSR period.
—  17. Defra must ensure that the knowledge that was accumulated during the Rural Delivery Pathfinders project does not go to waste. It should not be solely up to individual authorities involved to disseminate best practice; Defra should provide support. We are particularly interested in the suggestion in the Rural Delivery Pathfinder report that there should be a Defra/local government rural policy group and we urge Defra to consider whether such a group could be used to help it achieve its rural communities DSO. (Paragraph 56)	—  Defra agrees that the Rural Delivery Pathfinders project has been of considerable value and that its messages do need to continue to be properly promoted. Whilst those in the best position to do this are the participating authorities themselves, Defra is providing support to those authorities to disseminate the messages from the programme. Defra launched the national report "Rural Challenges, Local Solutions" at the LGA Improvement Conference in February 2008 where an exhibition stand and briefing session gave the opportunity for all local authorities present to find out more about the programme and its outcomes. A series of regional press notices, targeted to the regional audience, was issued at the same time. —  Defra worked closely with the pathfinder authorities and IDeA to create over 40 best practice case studies to showcase the work of the programme. These case studies are available on the IDeA website at —  http://www.idea.gov.uk/idk/core/page.do?pageId=7921369. —  At the time of the conference, an e-mail alert drawing attention to this resource was sent to IDeA members to coincide with the launch of the report. —  Defra continues to ensure that the best practice and messages arising from the pathfinder programme are disseminated. Over the summer, Defra invited the pathfinder authorities to submit suggestions to further promote the pathfinder work at the local level. As a result, some additional projects to disseminate the learning during 08/09 have been agreed with funding from Defra. —  In line with the recommendation in the national report, Defra is in the process of establishing a Defra/Local Government rural policy group. This will be an informal, official-level sounding board for policy discussions on matters of particular importance to local authorities. It will include representatives from the LGA, local authority practitioners, CRC, CLG, Rural Community Action Network, Government Offices and the Regional Development Agencies. The aim is to provide a strong network that will meet initially in early 2009. One of the aims of the sounding board will be to consider the progress of mainstreaming rural needs and interests into local policy-making and delivery. This will include tracking progress on the recommendations in the pathfinder report—recognising ownership of the recommendations at the appropriate level.
—  18. Although we accept that the PSA/DSO process was conducted largely within the civil service, we are both surprised and disappointed that the CRC was not invited to provide Defra with advice on the development of the rural communities DSO, given that this target will be central to Defra's approach to rural affairs until the next Comprehensive Spending Review. We recognise that the CRC has limited resources, but we urge it to do all that it can to advise Defra on how best to implement its DSO in the light of the concerns expressed by the witnesses in this inquiry. We seek its assurance that it will play a key part in monitoring Defra's success in achieving the DSO. We are concerned that the CRC's budget has almost halved since its creation in 2006. If the CRC is to be an effective adviser, advocate and watchdog, the Government must ensure that it has sufficient resources to carry out these tasks. (Paragraph 58)	—  Defra agrees that the Rural Delivery Pathfinders project has been of considerable value and that its messages do need to continue to be properly promoted. Whilst those in the best position to do this are the participating authorities themselves, Defra is providing support to those authorities to disseminate the messages from the programme. Defra launched the national report "Rural Challenges, Local Solutions" at the LGA Improvement Conference in February 2008 where an exhibition stand and briefing session gave the opportunity for all local authorities present to find out more about the programme and its outcomes. A series of regional press notices, targeted to the regional audience, was issued at the same time. —  Defra worked closely with the pathfinder authorities and IDeA to create over 40 best practice case studies to showcase the work of the programme. These case studies are available on the IDeA website at —  http://www.idea.gov.uk/idk/core/page.do?pageId=7921369 . —  At the time of the conference, an e-mail alert drawing attention to this resource was sent to IDeA members to coincide with the launch of the report. —  Defra continues to ensure that the best practice and messages arising from the pathfinder programme are disseminated. Over the summer, Defra invited the pathfinder authorities to submit suggestions to further promote the pathfinder work at the local level. As a result, some additional projects to disseminate the learning during 08/09 have been agreed with funding from Defra. —  In line with the recommendation in the national report, Defra is in the process of establishing a Defra/Local Government rural policy group. This will be an informal, official-level sounding board for policy discussions on matters of particular importance to local authorities. It will include representatives from the LGA, local authority practitioners, CRC, CLG, Rural Community Action Network, Government Offices and the Regional Development Agencies. The aim is to provide a strong network that will meet initially in early 2009. One of the aims of the sounding board will be to consider the progress of mainstreaming rural needs and interests into local policy-making and delivery. This will include tracking progress on the recommendations in the pathfinder report—recognising ownership of the recommendations at the appropriate level.
—  CONCLUSION
—  20. Defra's policies must recognise the diversity of both the challenges and the possibilities that exist throughout the communities of rural England. Realising this potential means putting more effort into translating the "Big Picture Approach" into policy solutions which have the flexibility to deal with small-scale challenges. (Paragraph 62)	—
—  21. Now that most climate change responsibilities have been removed from Defra, we will expect to see evidence of the Department taking the opportunity to focus more closely on its important rural affairs responsibilities. (Paragraph 63)	—

The English pig industry—1st Report (HC 96, 2008-09), PUBLISHED 13 JANUARY 2009, GOVERNMENT RESPONSE PUBLISHED 13 MARCH 2009 (—2ND SPECIAL REPORT (HC 391, 2008-09))

—  Conclusion/Recommendation	—  Government Response
—  Previous Select Committee inquiry into the English pig industry
—  1. In 1999 the Agriculture Committee predicted that the early introduction in the UK of the ban on stalls and tethers, together with the lack of sufficient support from the retail sector for UK welfare standards, would have a detrimental effect on the English pig industry. Our predecessor Committee's fears appear to have been justified. Since 1999 the size of the English pig herd has reduced by 40%, production of English pig meat has decreased and imports of pig meat have risen rapidly. In the Minister's own words, it is the Government's responsibility to ensure a thriving agricultural industry, and yet Defra appears unable or unwilling to respond whilst the industry diminishes. (Paragraph 14)	—  It has already been pointed out that the Government agrees it has an important role to play as facilitator in helping the pig industry itself to achieve more resilience and competitiveness in the face of rigorous competition within the Single Market. The original UK ban on stalls and tethers in 1999 was achieved through an all-party consensus and, as was given in the evidence to the Committee, Government spent £37 million of public funds from 2000 onwards to help the pig industry to restructure. The Government made it clear in a speech to the NFU AGM in February that it believes everyone involved now has a duty to ensure that there is greater transparency up and down the supply chain so that a fairer deal for all is achieved and producers in particular have the confidence to invest in their own future. —   —  That is why the Task Force is being set up. Its agenda will address many of the priorities highlighted in the Report and it strongly demonstrates the willingness and commitment of the Government to respond positively to the problems of the sector and to do what we can to re-establish a thriving English pig industry. —
—  Feed prices
—  2. The recent increase in the price of animal feed had a severe impact on the cost of production for farmers, a burden that does not appear to be shared with retailers. The pig industry's reliance on imported feed, particularly soya, is an issue that Defra should address, particularly in the light of the current weakness of sterling. Defra should establish a working party with the industry to identify useful research on feed sources that could be undertaken to aid the sustainability of the industry. (Paragraph 24)	—  Feed prices largely reflect the supply and demand situation on the world market. After reaching a peak in March 2008, UK feed wheat prices have fallen by around 40% following the record 2008 harvest. Further reforms to the EU cereals regime agreed in the context of the CAP Health Check, including the abolition of set-aside and the further reduction of the role of intervention will benefit the livestock sector, although the industry will increasingly need to focus on price risk management strategies. —   —  The livestock sector throughout the EU imports a large proportion of its vegetable protein requirements from third countries, in particular North and South America where the climate is better suited to large scale soya production. The supply chain is well established and works well, but Defra is aware of industry concerns that feed imports could be affected by delays in the EU approval regime for GM products (because supplier countries may adopt new GM feed crops before they secure EU import approval, and the EU doesn't allow any unintended trace of non-approved GMOs in conventional imports). In EU discussions Defra has encouraged the Commission to find ways of speeding-up the approval regime without compromising on safety, and there have been signs of some improvement (e.g. the import of a new GM soya variety has been approved more quickly than expected). Defra is also producing an analysis of the potential impact on the livestock sector, should feed imports be disrupted. This is looking at the UK's reliance on imported soya feed and what scope there might be to use alternative feeds in livestock diets. —
—  Competitiveness
—  3. How to improve the English pig industry's competitiveness with its EU counterparts is at the heart of the problem and needs to be tackled head on by producers and processors. As part of its responsibility to ensure a healthy agricultural sector, Defra must work with the industry to identify specific actions that can be taken to improve efficiency and productivity through existing health and welfare strategies, including research into genetics and pig productions systems. However, the pig industry must also consider the difficult question of whether integration of production and processing is necessary for it to compete with EU counterparts. (Paragraph 33)	—  The Government agrees that Defra must continue to work with the English pig industry to identify specific actions that can be taken to improve efficiency and productivity. —   —  Improving the competitiveness of the industry is a key area to be addressed by the Task Force not least through delivering the outcomes listed in Paragraph 6 above. Where lessons can be learnt from industries in other parts of the EU, these will be investigated. Indeed, representatives of two of the largest pig processing companies in the UK are now under Danish and Dutch ownership—and they are represented on the Task Force so their contributions and experience should prove invaluable. —   —  Defra has also been very active in funding research into pig diseases and welfare, environmentally sustainable production and genetics. 137 research projects on pig animal health and welfare and other aspects of pig production and processing have been funded by Defra since 1995. Ten of these projects are either currently in action or were completed in 2008 and eleven were funded, at a cost of £3.4million, specifically on the potential improvement in efficiency through the application of genetics. —   —  Defra and the Scottish Government also work together to co-fund a number of research and development projects to support sustainable development and competitiveness in the UK pig industry. BPEX and a wide range of industry partners participate in projects within the Sustainable Livestock LINK programme. The co-funding of these pre-competitive research projects by Government and industry addresses market failure and ensures that the projects are market focussed. There are currently three projects within this programme which include research to improve diet and health at a cost of just over £2.1 million, split between Defra and industry —   —   —  The Agriculture and Horticulture Development Board (AHDB), through BPEX, is active in ensuring that knowledge from this research is transferred to the industry and especially to individual pig producers through various user friendly means so that there is a return on the taxpayer's investment in R&D. —   —  Over the 2007-13 period, £107 million of Rural Development Programme for England (RDPE) support had been earmarked for the livestock industry, to help it meet challenges relating to competitiveness, nutrient management and animal health and welfare. As well as being eligible for aid under this particular category, pig producers are also able to benefit from the £140 million of RDPE Axis 1 socio-economic core funding which, together with the £107 million livestock package, Regional Development Agencies (RDAs) are delivering on behalf of Defra over the same period. Available evidence suggests that the pig industry has been at the forefront of livestock sector organisations seeking to make full use of these support opportunities. For example, BPEX has secured RDPE funding of its vocational and higher skills training programme from a number of RDAs, starting with Yorkshire Forward. —   —  Also, under Axis 1 of RDPE, BPEX, NPA and Yorkshire Forward are working together on a proposal to deliver a major animal health project, looking at addressing a series of pig diseases that have an economic cost at farm level. The aim will be to deliver to each farm a tailored plan to reduce the impact of selected diseases. Yorkshire Forward are also represented on the Task Force and it is hoped that this project could form a blueprint for other RDA's that have significant pig populations, to follow.
—  Welfare standards
—  4. Whilst English pig farmers are rightly proud of their high welfare standards, there can be no doubt that the early introduction of a ban on stalls and tethers ahead of most of the EU, and without assistance from the Government, placed a heavy financial burden on the industry. Many farmers are still recovering from the capital cost of the outlay necessary to comply with the welfare standards. It appears that the analysis of the cost on businesses likely to be imposed by the animal welfare measures introduced in 1999 significantly underestimated the capital costs to the pig industry. The Government must accept that its decision to introduce welfare legislation many years ahead of most of the EU was a significant factor in driving many farms out of business. The decision has placed English producers at a serious disadvantage to their EU counterparts, as our predecessor the Agriculture Committee predicted in 1999. (Paragraph 43)	—  In 1991, when the UK took the decision to ban tethers and close-confinement stalls for breeding sows by 1999, there were no EU rules in place for pig welfare and therefore no base level that EU Member States agreed to be acceptable against which to judge increases in standards. There was, however, increasingly strong evidence that close-confinement stalls and tethers represented a system for keeping breeding sows that resulted in unacceptably poor animal welfare. That view was later borne out by the EU Commission's Scientific Veterinary Committee in their 1997 report on the welfare of pigs. The UK ban on tethers and close-confinement stalls in 1991 was introduced for these animal welfare reasons and with the overwhelming and cross-party support of Parliament. —   —  The Government agrees that the unilateral decision to ban stalls and tethers in the UK did place a heavy financial burden on the industry, despite the 8-year phase-out period until 1999 that was given to enable the industry to minimise the costs of conversion to alternative systems. Defra has no analyses of the current impact of the UK ban on close-confinement stalls and tethers for breeding sows on production costs. An InterPig study in 2006 showed 12% higher production costs in the UK than the EU average, but it is likely that other factors will have a significant role in relative costs, such as performance of the herd, feed costs, land and labour. —   —  It should be recognised that in those areas in which UK law goes beyond the requirements of EU minimum pig welfare standards, the Government has worked hard to ensure that there will be a level playing field in the future. When the EU pig welfare Directive was revised in 2001, for example, the UK pressed for and succeeded in obtaining an EU ban on close-confinement stalls for breeding sows, but the disappointingly long phase-out period to 2013 was the price that had to be paid to secure the ban. —   —  Since 1991, the Government has considerably strengthened the process by which new legislative requirements of all kinds are assessed for their impact on business, in particular small businesses such as those that largely make up the pig industry. Now, any proposal that imposes costs on business requires an Impact Assessment, which will include an in depth analysis of how and why new policies will impact on business, and the estimated short and long term costs and benefits (economic, social and environmental) of the proposed measure. —   —  This Government's policy has for some years been to seek future improvements in welfare standards at an EU level, rather than take unilateral action. This will help to ensure that our livestock producers are not put at a commercial disadvantage compared with their European counterparts in the future. —
—  5. BPEX has provided compelling evidence that the higher welfare standards of the English pig industry has increased the cost of producing a pig. However, although UK pig farmers receive a premium from retailers for producing higher welfare standard pigs, the farmgate prices do not appear to realistically reflect the increased ongoing production costs that UK farmers have to pay to support higher welfare production systems. (Paragraph 44)	—
—  6. EU counterparts have been able to produce cheaper pig meat for the past ten years and as some of them are now receiving financial assistance to convert housing, English farmers are unlikely to compete on a level playing field even when the EU wide welfare standards are introduced in 2013. In future, when measures on animal welfare are imposed on the livestock industry, Defra must ensure that the Impact Assessment made of those measures takes into account the long and short term costs likely for livestock businesses. (Paragraph 45)	—
—  7. We were surprised to hear that Defra had not supported the pig industry in its request for the agricultural buildings allowance to be retained. We believe that there is a case for pig farmers to be awarded the allowance, based on the high rate of replacement necessary for pig housing. We ask the Government to reconsider this matter and report back to us on its decision. (Paragraph 48)	—  The Government decided to withdraw agricultural and industrial buildings allowances (ABAs and IBAs) gradually, as part of the wider 'Business Tax Reform' package which was implemented in Finance Act 2008. This package included cuts in the basic rate of income tax and the main rate of corporation tax, and the introduction of the valuable, new Annual Investment Allowance (AIA). While it is true that the package (including the phasing-out of ABAs) will affect firms differently, depending on their precise circumstances, overall it is designed to promote investment and growth. IBAs and ABAs are being withdrawn because they were originally introduced in the 1940s, as post-war reconstruction incentives, and that purpose has now been served. There is simply no good economic case for preserving a selective subsidy for some buildings, but not for others (for example, there is no relief available for offices and shops). —   —  The valuable new AIA is, effectively, a 100% allowance of £50,000 a year, for business expenditure on plant or machinery (apart from cars) incurred on or after 1 April 2008 (Corporation Tax) or 6 April 2008 (Income Tax). The AIA is available for all expenditure on plant or machinery, but buildings and fixed structures do not generally fall within the case law meaning of the term 'plant or machinery'. The underlying distinction here is the distinction between the premises in which the a business is carried on, and the plant or machinery with which the business is carried on. However, the pig industry have made the point that many pig buildings are in their design and construction integral to the production process (that is, that they may not simply be 'premises' or 'setting') and that they cannot be used for any other purpose. In response, HMRC has indicated its willingness to listen very carefully to the industry's detailed arguments to see whether there is scope to treat pig structures and other industry assets as "plant or machinery" for the purposes of qualifying for the new AIA. —
—  Retailers' support for the pig industry
—  8. It is the responsibility of retailers to ensure that the labelling on its products is clear and unambiguous, especially when retailers use the qualities of British meat as a marketing tool. The Government should support actively the European Commission's proposals for clearer country of origin, and also welfare labelling. We are encouraged that the Minister believes that Defra and the Food Standards Agency could do more to promote understanding of the differences in labelling, and we note the recent publication of Food Standards Agency guidance on country of origin labelling. We ask that the Department do keep us informed on progress in this area. The pig industry is responsible for raising awareness amongst consumers of its high welfare standards, but the Government has a responsibility to ensure that consumers have access to clear product information through labelling. Defra must bring together the pig industry with the processing, retail, catering and hospitality industries to establish a strategy for the best way of informing the consumer of the choices available. (Paragraph 71)	—  Retailers and manufacturers have improved their labelling in recent years but the Government recognises that consumers are increasingly interested in knowing where their food comes from, particularly meat and meat products. This is why the Government strongly supports the EU Commission's aim to tighten up origin labelling rules in their proposal on the Food Information Regulation, which is currently being discussed in Brussels. During negotiations the UK will be pressing hard for changes that will ensure that consumers have clear information on the country of origin of meat and meat products specifically. —   —  The Government also knows that it will take some time before the new rules will come into effect. So in January the Secretary of State and the Minister for Farming and the Environment met the supermarkets and the Food and Drink Federation, who represent manufacturers, to encourage them to provide clearer and more accurate origin information so that consumers can make an informed choice when buying their food and are more readily able to buy pork, bacon and other pigmeat products that have been raised to higher UK welfare standards. The Department will be meeting the caterers and manufacturers later this month. —   —  The Department will be asking the Task Force to build on the Food Standards Agency guidance on country of origin labelling, make proposals and then implement these throughout the supply chain. —   —   —  This Government supports the work the RSPCA is doing with the pig industry and with supermarkets to find consistent definitions of marketing terms such as free range, outdoor-bred and outdoor-reared. This initiative will help to improve consumer awareness of the husbandry systems of available pork products. —   —  The EU Commission has been charged by the Council of Ministers to assess further the issue of animal welfare labelling and to submit a report to the Council in order to allow an in-depth debate on this subject. The aim is to facilitate the choice of consumers between products obtained with basic welfare standards or with higher standards. The Government awaits the Commission's report with interest. —
—  9. We are disappointed that such a high proportion of imported pig meat does not meet UK welfare standards. It is not possible from the information available to provide a definitive figure, but we believe that consumers would be shocked to hear that as much as 66% of imported pig meat might have been reared in conditions banned in this country. Whilst price might be the number one factor in consumers' choice, consumers have the right to be properly informed of the country of origin and welfare standards when making their choice of product. The responsibility for this, until the Commission implements its welfare labelling scheme, lies with the whole supply chain. (Paragraph 72)	—
—  Carcase balance
—  10. Carcase balance remains an important issue for the industry to tackle as a way of increasing its competitiveness. We believe that producers, processors and retailers could have useful discussions on how to promote different cuts to the consumer and provide more efficient use of the whole carcase. Defra should have a significant role in working with the industry to develop markets for the whole carcase. Defra should continue to support literature which encourages the public sector to use recipes for less popular meat cuts. (Paragraph 80)	—  The Government agrees that promoting the lesser utilised cuts in the pig carcase at different times of the year is an important means of raising the overall value of the carcase and the return to pig producers. Initiatives which highlight to the public the value of lesser known cuts (such as shoulder and belly joints) are welcome—especially at a time when household budgets are tight. Taylor Nelson Survey data showed consumer purchases of pork shoulder roasting joints were up by 75.3% during the week following the broadcast of a Channel 4 programme "Jamie Saves Our Bacon", which equates to an extra 100,000 or so roasting joints. Indeed domestic pork sales were up by 15.8% in volume which shows that this market can be expanded[3]. —   —  In order to continue the momentum generated by the Channel 4 programme the BPEX 'Pigs are Worth it' campaign will encourage a better return on carcase balance, by providing advice to the industry on turning pork shoulders into a variety of interesting cuts which not only taste good but are also good value for money. This is being combined with a concerted consumer marketing and PR campaign supported by retailers to promote the full range of lesser known cuts. —   —  Furthermore Defra will continue to work alongside BPEX to ensure publicity materials on good value cuts are directed towards public sector organizations. Shoulder roasts and collar steaks were recently presented to "The Good Food on the Public Plate" Seminar, attended by Local Education Authorities and NHS Trusts and to the London University Purchasing Alliance (LUPA). Collar steaks are also to be trialled by the Metropolitan Police and also presented to the MOD. Previous trials of collar steaks with some LEAs were successful and it is intended to make this the basis of a case study for other LEAs. Pork forequarter specifications have been prepared and circulated to all caterers with Whitehall contracts which we fully endorse.
—  Regulatory Burden on the pig industry
—  11. It appears that once again UK pig farmers are placed at a disadvantage to their EU counterparts who are receiving financial aid through a variety of schemes to comply with environmental regulations. Defra must review the assistance provided by other EU countries and assess whether it is possible for the UK to provide similar assistance for its pig farmers and report back to the Committee on its decision. The Government must work with the Environment Agency and the industry to ensure that the IPPC, Waste and Nitrates Directives do not place an unfair unmanageable burden on the pig sector. (Paragraph 88)	—  Defra and the Environment Agency (EA) have worked very closely with the Livestock Industry (including the pig sector) to address many of the concerns on environmental regulation and costs. Specifically, some of the steps the Government has taken to assist pig farmers and minimise burdens include: devising a standardised approach which kept permit application charges (at typically about £3,000) some 50% lower than they might otherwise have been. A 2008 Deloittes study of permitting charges has since shown that the average time taken to process an application fully was currently 67.1 hours rather than the 46 hours that were estimated before the permitting process started. This means that the Agency has not covered its costs of permitting the pig sector[4]. The report said that there were a number of reasons contributing to this including time spent in assisting producers in properly completing their applications; —   combining inspection and product assurance regimes for farms designated to take part in the scheme by the EA resulting in annual fees of £1500. This was developed following Defra-brokered discussions between the sector, the Agency and the assurance bodies. Installations not authorised to participate—perhaps because of poor compliance history or other concerns about the operation—are charged £2,386 annually; and —   in line with representations made by industry to Government and following consultations, devising a new charging regime which takes environmental performance into account and postponing its implementation to April 2010 in order to allow industry to prepare. —  Over the course of implementing the IPPC regime, the EA worked very hard to prepare and assist the Livestock industry as a whole. The implementing Regulations set a timetable for existing installations in each industry sector to apply for permits. Because of pressure from its representatives, the intensive livestock sector was placed at the very end of the timetable so that applications had to be made in the period November 2006 to January 2007. The Environment Agency worked extensively with the NFU, the National Pig Association and the British Pig Executive from 2000 onwards to prepare the sector for making those applications, producing guidance, holding workshops and making every effort to ease the burden. —   —  There are a number of potential existing sources of financial support available to farmers which could help with implementation of the rules which apply within Nitrate Vulnerable Zones (NVZs). For example: the England Catchment Sensitive Farming Delivery Initiative is providing grants for farmers with land in a priority catchment for a range of capital items including roofs for slurry stores and for improving yard drainage (clean and foul water separation). There have been two rounds of applications for these grants since April 2007 and subject to funding being available we expect there will be further rounds. —   As noted in the answer to Recommendation 3, funds are available under RDPE for improving the efficiency of nutrient management in the livestock industry. As a general rule support is provided within the framework of a strategic farm plan involving capital investments for modernising farm holdings, structures and equipment together with appropriate skills and knowledge transfer, and other measures that reduce nitrate leaching. —   —  Additionally, business expenditure on slurry storage systems used for the temporary storage of slurry will qualify for plant and machinery capital allowances, including the new Annual Investment Allowance (AIA). As described earlier in the response to Recommendation 7 the AIA is, effectively, a 100% first-year allowance, capped at £50,000 a year, for business expenditure incurred on or after 1 April 2008 (Corporation Tax) or 6 April 2008 (Income Tax) on plant and machinery (other than cars). —   —  Other steps government has taken to help pig farmers prepare for implementation of the NVZ rules and minimise burdens include: —   working with stakeholders and industry to design a package of practical advice and support that includes guidance booklets for farmers, a mass mail out of key information, a technical helpline, a series of workshops and information events, and comprehensive information available on the Defra website. The events have been well attended and additional events are being organised to cope with demand. —   providing templates for record-keeping and publishing software to assist with the various calculations and record keeping requirements. —   providing a three year implementation period for some of the more onerous NVZ rules (e.g. the slurry storage capacity requirement). —   —  Defra and the EA remain engaged with industry stakeholders. Government officials and industry representatives discussed regulatory burdens and other matters of concern at a meeting in February 2009. Reviewing enforcement processes and costs in the pig sector so that they achieve regulatory goals which are affordable to those involved will form a key outcome.
—  Supply Chains
—  12. It is important that all links in the supply chain understand the issues each faces. The OFT must continue to provide clear guidance and advice to the businesses on the issues that can be discussed whilst avoiding breaking competition regulations. Defra must facilitate discussions of the supply chain in England, as it has been possible to do so in Scotland. (Paragraph 101)	—  Defra recognises the efforts made by several supermarkets to commit themselves to British pigmeat supply chains and establish greater transparency and understanding between producer, processor and retailer. The position is still far from ideal and many producers find it hard to plan ahead with confidence. —   —  There have also been some acquisitions and consolidations recently within the industry leading to more vertical integration of the supply chain. The apparent 'divide' between producers and retailers was given in oral evidence to the Committee. The relationship between retailers and producers is primarily a commercial one for them and is not a matter on which the Government would or should be directly involved. However, given the particular problems that have been faced by the industry over a number of years, the time is right for a concerted effort to catalyse greater understanding of the potential mutual benefits from greater collaboration up and down the supply chain and encourage further integration where there are gains to be made. —   —  The Pig Meat Supply Chain Task Force, with its membership drawn from all elements on the chain is expected to look closely at this issue. —   —  As the Committee has recognised, any such forum must be cognisant of the constraints of competition regulations. The OFT will be invited to give a presentation to the Task Force on its guidance on competition issues. Defra will need to explore further with the OFT the practicalities of ensuring that the guidance is followed.
—  The Scottish Pig Sector Task Force
—  13. The Minister for Farming and the Environment must make it a priority to discuss the report of the Pig Sector Task Force with the Scottish Executive's Cabinet Secretary for Rural Affairs and the Environment. The work of the Task Force has indicated that it is possible to organise fruitful discussions between retailers and producer groups to promote the sustainability of the industry. Whilst certain matters fall under competition law, we consider it important that retailers, processors and producers cooperate on issues such as labelling, carcase balance, the threat of disease and the regulatory burden faced by the pig industry. The English pig industry should not be at a disadvantage because other administrations are doing more to tackle the problems of their own pig industry than the rest of the UK. Defra can learn from the Scottish example of how to organise and facilitate such discussions. (Paragraph 110)	—  The Government agrees that in order to promote the sustainability of the pig meat industry there needs to be more resilience and competitiveness achieved by greater co-operation between all sectors of the supply chain. It also agrees with the conclusion that the Government has a central role to play in facilitating this. —   —  As part of setting up the Task Force the Scottish Executive's Cabinet Secretary for Rural Affairs and the Environment was consulted to learn from his experience. Defra is grateful to him for his advice.
—  Public Sector Food Procurement Initiative
—  14. We are surprised that Defra does not lead by example and procure as much of its bacon from British suppliers as it does its pork. We ask that Defra confirms whether or not the bacon it procures from outside the UK is raised to UK welfare standards. Defra should encourage all Government Departments and public sector organisations to buy pig meat which was raised using equivalent welfare standards to those in the UK and submit details to the Committee of how it intends to do this. (Paragraph 118)	—  Defra supports and promotes high animal welfare standards. As a Government department, Defra has to ensure all its procurements are conducted in accordance with the EU public procurement directives and UK public procurement policy. The Directives stress that any requirements asked of a supplier must be relevant to the subject of the contract and therefore animal welfare can be considered where this has a direct affect on the meat being produced. The EU procurement rules also demand that all procurements are conducted in a fair, open and non-discriminatory manner and as such, Defra cannot require that its contractors procure bacon from British suppliers. —   —  In November 2008, Defra published its second report on the proportion of domestically produced food used by Government Departments, hospitals and prisons, which showed that the Department consumed 75% bacon and 100% pork in 2007-8 which was produced from pigs reared in the UK. The report also showed that overall the proportion of UK produced bacon across Government Departments increased from 25% to 29% and for pork from 65% to 74%. —   —  Copies of this report for the period 1 April 2007 to 1 April 2008 and of the first report from July 2006 to 30 June 2007 are on the PSFPI web site at http://www.defra.gov.uk/farm/policy/sustain/procurement/awareness.htm. —   —  Defra is taking action to encourage Government Departments and public sector organisations to procure meat from pigs reared to high standards of animal welfare. For example: The Department issued a notice early in January 2009, which alerted public sector buyers of pork and bacon to the EU ban on sow stalls in 2013 and also highlighted the Efra Select Committee's concern that public bodies were not insisting on higher animal welfare standards. A copy is published on the PSFPI web site at —http://www.defra.gov.uk/farm/policy/sustain/procurement/pdf/psfpi-advice-note081222.pdf. Defra is working with the Office of Government Commerce to consider how we can work within the legal and policy framework to procure pork and bacon that meets high animal welfare standards. The Department aims to provide guidance on this and consult with key stakeholders. —   —  Securing the specification of higher standards for animal welfare in the public procurement of food and catering services will be another key aim of the Task Force. This might best be achieved through the inclusion of a model clause in OGC's recently published food quality standards for the public sector. Defra will however need to be sure that in seeking to promote high standards of animal welfare the risk of legal challenge on the grounds of setting up barriers to trade is not enhanced and this is currently under consideration.
—  Pig-specific diseases
—  15. Defra should continue to contribute to the scanning surveillance programme and to participate in discussions with the British Pig Health and Welfare Council to identify what actions Defra should be taking to tackle pig-specific diseases. In addition to discussing long-term research priorities, the Council should also investigate ways in which the Rural Development Programme for England could be used to support disease control strategies. (Paragraph 122)	—  The Government can confirm that Defra will continue to participate as an observer on the British Pig Health and Welfare Council (BPHWC). The Department strongly supports the BPHWC and values highly its contribution. The Department takes account of its views in setting policy on pig health and welfare, although it will continue to focus expenditure of public money on diseases where there is a clear public interest, particularly zoonoses. The Government believes that the primary responsibility for control of non-zoonotic disease that is not notifiable is for the industry. Defra will continue to fund basic research and work with the industry in tackling the more serious diseases. —   —  Defra will also continue to contribute to the scanning surveillance project, currently costing circa £1.3m per annum. The project aims to identify changes in current disease prevalence or the emergence of new threats. This is a powerful technique only made possible through the investment made by government in funding surveillance and analytical activities. Early identification of new or emerging threats is important in order to protect animal and public health and to minimise the economic, social and environmental damage that can be inflicted by outbreaks of disease. —   —  In addition to increasing the likelihood of the rapid detection of new or emerging threats, the surveillance programme enables significant cost saving for the industry in a number of ways. Close collaboration between the VLA Pig Group and Defra allows issues causing concern at farm level to be considered by experts and quickly highlighted to Defra vets and policy makers when appropriate. Diagnostic work performed as part of this project is subsidised, allowing cases of low productivity or high mortality to be investigated in situations where this may otherwise not be financially feasible. Private veterinary surgeons are able to use the information from such investigations to advise farmers on how to address the problems identified in the aim of improving disease control and increasing productivity. Current submission rates for investigation would be unlikely to be maintained without Defra funding. —   —  Salmonella control remains a major challenge for the UK pig industry. In accordance with EU Zoonoses Regulation 2160/2003, Member States are required to take effective measures to control Salmonella of public health significance. Targets for reduction in Salmonella prevalence in pigs are expected to be set by the European Commission by 2011.Defra will be working closely with industry to implement a National Control Plan for Salmonella once these targets are announced. Defra is supportive of the current industry-led Zoonoses National Control Plan (ZNCP, formerly ZAP) and participates in the steering group for this project. In addition, Defra continue to fund research focussed on Salmonella control and reduction. —   —  Complimentary to the above activities it is key to the resilience and long term sustainability of the pig industry that significant progress is made on reducing the economic impact of endemic and exotic diseases in the pig sector. This will be a key desired outcome of the Task Force. It will be achieved through continuing partnership with the industry through the Defra driven plans and programmes described above as well as collaborative work on local disease control and eradication schemes part funded with the RDAs. If the initiative being developed between Yorkshire Forward, BPEX and the NPA does go ahead and is successful this could provide a model for other RDAs to follow. —
—  Conclusion
—  16. Over the past 10 years the pig industry has faced serious challenges in addition to the usual peaks and troughs of the pig cycle. The industry should be praised for implementing the changes required of it by UK legislation, and for attempting to organise itself and inform the public of the high welfare standards of British pork. However, there is evidence that several outbreaks of disease, together with the implementation of burdensome legislation and unusually high global prices of animal feed have left the industry either unwilling or unable to invest in the production systems necessary to improve efficiency in the face of overseas competition. (Paragraph 123)	—  The Government is grateful to the Efra Committee for its timely Inquiry into the state of the English pig industry. As already indicated, Government accepts the main thrust of the Report that to achieve a sustainable future the resilience and competitiveness of the pig industry in England must improve. This is entirely in harmony with Defra's Departmental Strategic Objective to secure a thriving farming and food sector with an improving net environmental impact. —   —  The Efra Report identifies a number of areas that need to be addressed by government and industry. For the Government these centre around facilitating round table discussions with all parts of the supply chain from farmers to retailers. The Report calls for greater transparency and return to producers that reflects their higher welfare standards and enables them to invest in a long term sustainable future. The recently announced Pig Meat Supply Chain Task Force is the preferred vehicle for delivering this critical facilitation role over the next twelve months. —   —  In response to the Report's more specific conclusions it should be emphasised that the Government has a clear position to support clearer and tighter country of origin labelling and Defra is working closely with the Food Standards Agency to achieve this in the negotiations on the Food Information Regulation (FIR) in Brussels and on increasing uptake of FSA guidelines domestically. —   —  The Committee should be assured that the Department does take seriously its responsibility in seeking to obtain meat from pigs reared to UK standards of animal welfare. The Department is already setting a very good example on pork (100% domestically produced) and are leading the way with BERR on bacon (75% domestically produced). Defra will under the existing Public Sector Food Procurement Initiative continue to monitor progress across Government Departments and is currently working with OGC to develop a model clause for the procurement of pork and bacon to higher animal welfare standards which will aim to provide additional guidance on the appropriate use of quality standards. —   —  The Government fully endorses one of the Report's conclusions that the industry should be praised for implementing the changes required of it by UK legislation, and for attempting to organise itself and inform the public of the high welfare standards of British pigmeat. The Government has made clear its support for the pig industry and believe the measures outlined in this response will make a positive contribution towards improving its resilience and long term sustainability. —
—  17. It is apparent that a portion of the retail industry has undermined the efforts of Government and the pig industry to introduce and implement desirable animal welfare legislation in the UK. Whilst pig farmers have strived to introduce open housing for pigs ahead of most of their EU counterparts at a significant cost to their businesses, some retailers and catering suppliers have continued to import pig meat that does not meet UK statutory welfare standards, which in some cases is labelled ambiguously so that consumers are ill-equipped to make informed choices. The price paid to English farmers for pig meat should properly reflect the cost of producing it to high welfare standards. Retailers should be more mindful of changes in productions costs affecting the industry in future and must be prepared to respond rapidly should producers be faced with the same scale of feed price increases as they were in 2006-07. Otherwise, the whole English pig supply chain is put at risk. In addition, the lack of transparency in the supply chain leads farmers to form the view that they are not getting a fair share. (Paragraph 124)	—
—  18. The pig industry itself must ensure that consumers are aware of the difference in welfare standards between UK-reared meat and some imported pig meat, but the retailing and hospitality industry have a duty to label their products responsibly. The Government must support the Commission's proposals for food labelling changes, and must make clear to the retail and hospitality industries that it expects food to be clearly and unambiguously labelled with country of origin and welfare standard labels. (Paragraph 125)	—
—  19. Defra must ensure that government departments and other public bodies source their pork and bacon from suppliers employing high welfare methods of production. In this respect, Defra must lead by example. (Paragraph 126)	—
—  20. More generally, Defra must use its leverage to bring together the key elements of the pig meat supply chain to address the problems that threaten the sustainability of the English pig meat industry. Defra must discuss with the industry what work it can usefully commission to ensure the future sustainability of the industry. With goodwill and encouragement, we believe many of these could be resolved. Defra must seriously consider, in discussion with the industry, whether England needs to set up its own Pig Sector Task Force to tackle the issues such as labelling, carcase balance, productivity and efficiency facing the entire supply chain. (Paragraph 127)	—
—  21. Alevel playing field between English pig farmers and their EU counterparts is unlikely to develop in 2013 when the EU ban on stalls and tethers is brought into force as several EU countries are assisting their pig farmers financially to make the necessary changes. The Government must ensure that never again are UK farmers placed at such a disadvantage compared to their EU counterparts as a result of unilateral national action. (Paragraph 128)	—

Energy efficiency and fuel poverty—3rd Report (HC 37, 2008-09), PUBLISHED 10 JUNE 2009, GOVERNMENT RESPONSE PUBLISHED OCTOBER 2009 (—COMMAND PAPER CM 7719)

—  Conclusion/Recommendation	—  Government Response
—  Impact of price rises on fuel poverty levels
—  1. Despite a clear statutory target for the Government to eradicate fuel poverty, as far as reasonably practicable, in vulnerable households by 2010 and in all households by 2016, we are witnessing the opposite, with a sustained increase in the numbers of those experiencing fuel poverty. (Paragraph 19) —	—  At regular intervals, the Government has carefully considered the measures required to seek to tackle —  fuel poverty; their technological and practical viability; and the costs of taking such measures. The Government looks at how it can improve existing—and develop new—policies and initiatives to tackle fuel poverty. For example, in the past 12 months alone, the Government has made changes to the Warm Front Scheme and to the Carbon Emissions Reduction Target (CERT), as well as developing the Community Energy Saving Programme (CESP). —   —  Previously, work has been undertaken to examine the policy measures and resources which could be undertaken to tackle fuel poverty. This work has been carried out over a period of time alongside the development of documents including the Energy Review and Energy White Paper. —   —  To monitor progress in meeting the fuel poverty targets, the Government publishes annual progress reports setting out the number of households in fuel poverty, the factors that affect fuel poverty and the measures that have been taken to reduce fuel poverty. In compiling these reports, DECC considers the recommendations made in the annual reports prepared by the Fuel Poverty Advisory Group and includes contributions from other government departments, devolved administrations and key stakeholders on progress in tackling fuel poverty within their respective schemes and localities. The annual progress reports also set out the steps planned to tackle fuel poverty in the next 12 months. —   —  Despite significant action, rising energy prices have had a major detrimental impact on the number of households in fuel poverty. As prices increase, energy efficiency measures that were previously sufficient to remove a household from fuel poverty might no longer be capable of doing so. Also, under the fuel poverty definition, income needs to increase substantially more in absolute terms than the energy price rises to remove a household from fuel poverty. —   —  The Government has taken a number of steps to mitigate the effects of energy price rises since 2005 specific examples include —   —   —  2005 New phase of Warm Front implemented with a budget of over £860 million for 2005-2008. Measures included mainstream insulation, gas and oil central heating, and provision for alternative technology proposals to be evaluated as part of the Scheme Under Energy Efficiency Commitment 2, suppliers were required to focus at least 50% of their energy savings on a Priority Group of low income customers —   —  2006 ¦Housing Health and Safety Rating System and Houses in Multiple Occupation licensing provisions of the Housing Act 2004 came into operation. Statutory Guidance issued by the Department for Communities and Local Government gave advice to local authorities on the contribution that these powers could make to fuel poverty and energy efficiency strategies —   —  2007 Department for Environment, Food and Rural Affairs allocated the Warm Front Scheme just over £800 million for the three year period 2008-2011, following the Government's Comprehensive Spending Review. The Community Energy Efficiency Fund (CEEF) was launched in June 2007, with applicants invited to apply for support via a competitive process for the allocation of the £6.3m funding available in England with 49 projects going ahead The Government announced a third three year supplier obligation phase for CERT, at double the ambition of the previous phase —   —  2008 The Government announced it would make a payment of £100 to households with someone aged over 80, and £50 to households with someone aged over 60 alongside the Winter Fuel Payment for the year 2008-09 Warm Front received an additional £74 million funding as announced in the Home Energy Saving Programme (HESP) and a further £100 million was allocated in the Chancellor's Pre-Budget Report in November Following Budget 2008, the Government secured the individual agreement of the six largest energy suppliers to increase their collective spend on social assistance to £100 million in 2008-09, £125 million in 2009-10 and reaching £150 million by 2010/11 —   —  2009 —  Government has increased its efforts, including those set out in the UK's Low Carbon Transition Plan, published on 15 July. For example Major improvements to the Warm Front delivery contract to provide greater competition and better value for money including an increase to the grant limits for eligible households under Warm Front. This increase to £3,500 or £6,000 where oil or alternative technologies are recommended The launch of the CESP designed to exclusively reach areas of low income, where residents have a higher than average propensity to be in fuel poverty. This new £350 million programme will be delivered through a partnership approach, on a 'whole house', street-by-street basis The CERT has been changed so that, from August 2009, an estimated £1.9 billion will be directed at the low income and elderly priority groups. We are also looking at ways to ensure more help for the most vulnerable within our priority group for the CERT extension, until the end of 2012 Proposal to bring forward new legislation to place social price support on a statutory footing, once the voluntary agreement ends in March 2011 The Government announced it would make a payment of £100 to households with someone aged over 80, and £50 to households with someone aged over 60, alongside the Winter Fuel Payment for the year 2009-10 —
—  2. With the 2010 target date less than 12 months away, we agree with the Department of Energy and Climate Change that this target is likely to be missed. The Government should now explain why it did not review its fuel poverty policies earlier in the light of the upward trend in the number of fuel poor which began in 2005. (Paragraph 20)	—
—  Effectiveness of targeting assistance
—  3. Those charged with tackling fuel poverty will be more effective if they have access to data on a range of variables, including energy efficiency levels of homes and household incomes and fuel costs. However data does not appear to be fully available to all those who require it. We recognise the sensitivities about the use of personal data and support the need for stringent safeguards and clear protocols on its use. However the current position is unnecessarily complicated. Coordinated action by relevant Government departments and agencies could remove some of the barriers quickly, given sufficient priority and political will. DECC should undertake, within 6 months, a comprehensive survey of data needs and current data access arrangements of agencies in both the public and private sectors working on fuel poverty issues. On the basis of this it should put in place within 12 months improvements to enable effective data sharing arrangements between and within agencies such as local councils, Government departments and energy supply companies. (Paragraph 25)	—  The Committee is right to highlight the potential value of data sharing arrangements between agencies to tackle fuel poverty. In order to improve access to data in the context of fuel poverty, work is already underway within and between departments to develop the means of better targeting. —   The Department for Communities and Local Government (CLG) will be undertaking a consultation later this year on extending access to Energy Performance Certificate information to help target energy efficiency offers and support to householders. The Committee may be aware that the Department for Work and Pensions (DWP) and DECC have been working with the big six energy suppliers to explore how an effective data-sharing mechanism could be achieved to help them target the social assistance programmes they offer. If this project is successful, it could potentially form part of a mandated social price offering of the future. To that end, the DWP took powers in the Pensions Act 2008 to make regulations to permit shared data with energy suppliers, so that the suppliers can identify and help the poorest pensioners amongst their customers. It is envisaged that the suppliers will be able to use this data to offer energy efficiency measures to the same households thereby offering a holistic approach to helping vulnerable customers. We want to use this pilot to assess any potential risks and ensure we have the right safeguards in place before we consider wider data-sharing. —  More generally, we agree with the Committee that public services cannot be delivered effectively, efficiently and safely unless services work in partnership with others and this includes sharing personal data where it is right and proportionate to do so. The Government is fully aware of the potential benefits of data sharing, which is why it is taking these steps to improve access to data. However, it is also alert to the risks, particularly in ensuring proportionate sharing of data to meet important data protection and human rights tests. It therefore believes that taking a staged approach seems an appropriate way of mitigating these serious risks. —   —  The Committee may be aware that the Coroners and Justice Bill, introduced to Parliament in January 2009, initially contained a new statutory fast-track procedure for instances when there is a genuine case for removing or modifying an existing legal barrier to data sharing. Such a procedure was recommended by Richard Thomas, the Information Commissioner and Mark Walport, Director of the Welcome Trust in their independent Data Sharing Review. The report was commissioned by the Prime Minister and the Secretary of State for Justice and published in July 2008. —   —  The intention behind the provision was to deliver improved public services through the kinds of inter- and intra- agency sharing envisaged by the Committee. However, as the Committee may be aware, the scope of the power prompted concerns that the power was open to misuse. Whilst that was never the Government's intention, the Justice Secretary removed the clause from the Bill in view of these concerns. The Government is considering further the provisions and, in doing so, will take account of the issues raised by Members of Parliament and interested parties.
—  4. DECC should assess the potential for cost savings from the reduced need to collect and share data on individuals under an area-based approach, while recognising that rolling out such an approach may require improved area profiling to ensure that assistance is prioritised for those households most in need. In addition the Government should urgently evaluate the benefits that could arise from the widespread use of infrared technology which can be quickly used to identify poorly insulated, high energy using properties on a street by street basis. (Paragraph 26)	—
—  Pre-payment meters
—  5. Ofgem has finally conceded that customers, such as pre-payment meter customers and those who cannot benefit from preferential tariffs attached to certain payment methods or dual fuel deals, have not benefited from competition as much as other customers. (Paragraph 28)	—  The Government firmly believes that the regulator should be active in protecting consumers and their interests, whether through the promotion of effective competition or through other, more direct, interventions. We have welcomed the measures developed following Ofgem's probe. —   —  In response to Ofgem's initial report, energy suppliers amended some pricing structures. We have welcomed the measures which have been developed by Ofgem subsequently through consultations with all interested parties, including those to prevent unfair discrimination relating to payment methods. The new licence conditions will improve consumer protection in future in this and in a number of other respects, including improving consumers' understanding of their energy use and costs, reforming debt-blocking processes, and making switching energy suppliers a safer process. —   —  The Government keeps the effectiveness of the overall regulatory framework under review, amending it where necessary. To this end the Government has recently stated its intention to clarify the remit of the regulator in relation to consumer protection at the earliest legislative opportunity. The Government has also proposed to give the regulator some specific additional powers in relation to consumer protection.
—  6. At this stage is not yet possible to judge the full impact of the remedial measures proposed following Ofgem's probe but the regulator must be pro-active and rigorous in protecting customers' interests, particularly those on low incomes. We recommend that the new Energy and Climate Change Committee keeps Ofgem's performance in delivering an effective regulatory regime under review and that DECC reports annually to Parliament on what has been achieved. (Paragraph 29)	—
—  Social tariffs
—  7. Unless a tariff is the best available 'enduring tariff' it cannot be said to be a true social tariff and should not be promoted as such. We are pleased that Ofgem has moved to clarify guidance to energy companies on this. Nevertheless there remains a need for wider dissemination of information to customers on the availability of, and eligibility criteria for, social tariffs. We recommend that Ofgem requires energy supply companies to publicise criteria determining who is eligible for their social tariff. (Paragraph 34)	—  Suppliers agreed at the Fuel Poverty Summit organised by Ofgem in April 2008, to provide greater visibility of their offers on social programmes. Subsequently Ofgem sought advice from key consumer organisations regarding what information suppliers should include on their websites. Following this process, all suppliers now have relevant information on their websites about their social tariffs and programmes. Consumers can also call the Home Heat Helpline which is jointly funded by the big six suppliers to find out about their eligibility for social tariffs as well as other support available from suppliers and Government. —   —  Under the voluntary agreements entered into with Government, energy suppliers committed to spend collectively £100m in 2008-09 rising to £125m in 2009-10 and £150m by 2010-11 on social programmes. Ofgem published a report on suppliers' spend during the first year of the voluntary agreement on 18 August 2009. This showed that suppliers collectively spent £157.3m during 2008-09, exceeding their agreed spend with Government during this period by more than 50%, and that as at 31 March 2009, over one million customer accounts were benefiting from a social tariff. This report also included details of the eligibility criteria for each social tariff. Ofgem will continue to report annually on supplier's social spend for the duration of the voluntary agreement. —   —  The social price support available under the current voluntary agreement with energy suppliers has already made a real difference to the lives of a large number of vulnerable households. But the agreement comes to an end in March 2011. The Government has decided to build on the success of the voluntary agreement and will therefore bring forward new legislation at the earliest opportunity with the aim of placing social price support on a statutory footing when the current voluntary agreement ends in March 2011. As part of this new statutory framework, the Government will ensure there is an increase in the resources available and give suppliers greater guidance and direction on the types of households eligible for future support. —   —  The Government will continue to develop this policy over the coming months, engaging with interested parties and would expect to consult on the detailed arrangements of the scheme in 2010. Subject to further policy development, the Government is minded to focus a large part of the additional resources on those older pensioner households on the lowest incomes. They are at greatest risk of excess winter death and tend to have a high incidence of fuel poverty. —
—  Rising block tariffs
—  8. We welcome Ofgem's work on rising block tariffs and look forward to its conclusions as to whether new forms of tariff have the potential to incentivise customers to reduce their energy usage while not adversely affecting the fuel poor. (Paragraph 38)	—  While there are many potential advantages of rising block tariffs, as the Committee highlights, there are also potential disadvantages which should be taken into account when considering their practical application, in particular their impact on fuel poor households. —   —  The potential for rising block tariffs to have a positive impact on the number of fuel poor households depends on the correlation between fuel poverty and low energy use. However, fuel poor households often tend to have higher energy needs as a consequence of living in less energy efficient homes, using less efficient heating systems to heat their homes, and spending a greater amount of time in the home. Hence the introduction of rising block tariffs could be detrimental and potentially see an increase in the number of households in fuel poverty. —   —  Ultimately, more research is required to gain a better understanding of all the potential advantages and disadvantages of rising block tariffs, particularly with respect to their impacts on fuel poor and ulnerable households. The Government also welcomes Ofgem's work in this area. It is also very interested in the work of the Climate Change Committee, which will include its research into the impacts of rising block tariffs on fuel poverty in its first annual report, to be published in October.
—  Winter Fuel Payment (WFP)
—  9. Improved targeting of the Winter Fuel Payment is essential to redirect resources to where they are needed most. The Government should make the Winter Fuel Payment taxable and end its payment to those subject to higher rate tax. This would provide around £250 million per annum which could be used to provide a revenue stream to bring forward a programme of energy efficiency improvements for fuel poor households and other households with, for example, disabled people who have disproportionately high personal energy needs. Faster progress in improving energy efficiency would reduce pressures to increase the WFP, thus making further savings in the long term. (Paragraph 51)	—  WFPs provide a simply administered way to guarantee older people receive extra income during the winter months when they are particularly vulnerable to the effects of cold. The Government aims to reassure older householders they can afford to heat their homes in winter. The payment is made as a lump sum, usually before Christmas, to ensure that money is available when fuel bills arrive. To tax this payment would add an extra level of complexity and bureaucracy for both individuals and Government. DWP would be unable to tax at source and the individual would need to establish their tax liability with HMRC. —   —  There are measures already in place to target financial help to disabled people. Disability Living Allowance, Attendance Allowance and the disability premiums in the income related benefits have a substantially higher annual value than the WFP and are spread over a 52 week period. Where a disability premium is paid in an income related benefit, a Cold Weather Payment is payable in periods of very cold weather. Together, these payments are designed to meet the extra costs, including heating, for disabled people. —   —  Under the Heat and Energy Saving Strategy, we are proposing ambitious plans to transform our homes by making them more energy efficient. We have set ourselves the ambitious plan of reducing emissions from the domestic building stock to as close to zero as possible by 2050. By making such deep cuts in our emissions from buildings we can expect fuel poor and vulnerable households to benefit by reducing their demand for energy.
—  Maximising benefit take-up
—  10. We welcome the provision of combined energy efficiency and benefits advice since this helps to deliver fuel poverty programmes effectively. The Government should evaluate how successful examples of this approach can be implemented throughout the UK. (Paragraph 54)	—  The Government agrees that programmes combining energy efficiency and benefits advice can bring assistance for those delivering and being assisted by fuel poverty programmes. This approach has been used with a positive impact in schemes such as Warm Front and Warm Zones. —   —  In England, every Warm Front applicant is offered a free confidential Benefit Entitlement Check to help ensure customers are claiming all the benefits that they are entitled to. During 2008/9 just over 78,000 benefit entitlement checks were completed. A new or additional eligible benefit was identified in 45% of cases resulting in an average weekly increase in household income of £31 per applicant. The value of Benefit Entitlement checks within Warm Front will continue to be evaluated. —   —  The Government believes in a 'joined-up' or partnership-based approach to customer needs and is taking active measures to promote benefit advice to older people. For example, the Pensions, Disability and Carer's Service (PDCS) conduct around 13,000 home visits a week for vulnerable customers to ensure they are receiving all benefits and services they are entitled to, such as access to Warm Front. —   —  DWP has also simplified the claim process to make it easier for people to claim their benefits. Claims for Housing Benefit and Council Tax Benefit made over the 'phone with Pension Credit, can now be forwarded directly to the relevant local authority without the need for a signed claim form. DWP continues to look at ways of making further improvements. —   —  The PDCS works closely with local authorities and voluntary organisations and allow local authorities and voluntary organisations to accept claims from people aged 60 or over for Social Security benefits, or a person under age 60 for disability and carers benefits. —   —  Initiated in 2006, the LinkAge Plus Pilots aimed to expand the principles of joined up working. The pilots, financed by DWP, were carried out in eight areas; Devon, Gateshead, Gloucestershire, Lancaster, Leeds, Nottinghamshire, Salford and Tower Hamlets. All the pilots provided advice and information to older people and delivering welfare benefit checks as part of a joined up approach to services for older people. Some of the local pilots such as Gloucestershire and Nottinghamshire offered access to Warm Front grants as part of this approach. —   —   —  An evaluation found that the pilot areas have consistently demonstrated strong benefits for older people through improved access and relevant, tailored services that are popular with local people. Advice on accessing Warm Front grants has been put forward as 'best practice'. In order to embed best practice guidance DWP will be sharing evidence for joining-up services from the LinkAge Plus pilots, via a DVD with all local authorities (including county councils) and providing support at nine regional events to raise the profile of the LinkAge Plus approach by the end of March 2010. This embedding strategy and the associated activity plan will be reviewed and updated every six months starting in December 2009.
—  The Carbon Emissions Reduction Target (CERT)
—  11. CERT is intended to be a carbon emissions reduction programme rather than a vehicle for tackling fuel poverty. Although CERT targets must be delivered in part through a low income "priority group", fuel poor households account for a small proportion of this group. Although we believe the Government should fund programmes to tackle fuel poverty, fuel poor customers must also be able to benefit as much as better off customers from climate change mitigation programmes such as CERT. Programmes to tackle fuel poverty should be additional to, not substitutes for, climate change mitigation programmes. Energy supply companies must continue to make their schemes available to all customers. (Paragraph 64)	—  CERT is proving very successful in delivering on its fundamental objectives—that is saving carbon in the household sector, delivering high numbers of low cost established energy saving measures into households and ensuring that those customers who are least able to afford energy efficiency measures are targeted through a defined Priority Group. Although these households may not necessarily be in fuel poverty, they are arguably at higher risk of being in or falling into fuel poverty, and to this end CERT delivers. Moreover, Priority Group customers have tended to benefit from a higher level of subsidies when compared to subsidies provided to better off customers. Priority Group customers often receive cavity wall and loft insulation where none exists for little or no cost. It is estimated that, because of this, the 40% Priority Group obligation receives 60% of energy supplier investment estimated at a total of £1.9 billion in the current phase now that Government has acted to increase the overall obligation by 20%. —   —  The Government agrees that fuel poor customers must also be able to benefit from energy efficiency measures from climate change mitigation programmes such as CERT. Going forward, the Government is keen to see Priority Group investment targeted where it is needed most. To this end it committed as part of the Low Carbon Transition Plan to an ongoing CERT obligation to December 2012; to a target no less ambitious pro rata than CERT uplifted by 20%; and to fully consider what more can be done to benefit those who are most vulnerable as a contribution to tackling fuel poverty. A consultation on the key design criteria will be published by the end of the calendar year. —
—  DELIVERY OF CERT
—  12. We are concerned that the current CERT scheme appears to allow measures to be counted against suppliers' targets where the actual benefits are not quantified. Simply supplying customers with energy saving lightbulbs and real time display units will not achieve the maximum notional emissions savings, or cost savings to customers. The amendments to CERT must ensure that measures achieve actual reductions in energy usage and that the impact of measures such as real time display devices and advice provision are assessed by the Department of Energy and Climate Change. (Paragraph 67)	—  The Government agrees with the Committee that ensuring CERT delivers actual and quantified carbon and energy savings is critical, not least as part of determining value for money and delivering against carbon budgets. The Government's decision, as part of the CERT amendments, to remove direct mail energy saving light bulbs as eligible measures from 1 January 2010 demonstrates its commitment to this end. This was in recognition of the risk of non-use from the early success in stimulating distribution of such a high number of low energy light bulbs. —   —  The Government has included behavioural measures in CERT, namely home energy advice and real time displays, based on evidence which shows that they offer significant energy saving potential. To achieve the Government's ambitious carbon saving targets, it will be vital to empower consumers to take informed decisions on reducing their energy use. The provision of in-home and face-to face advice should also reinforce the take up of traditional measures. However, given that these are new measures in CERT, the Government has also acted to restrict the promotion of behavioural measures up to 2% of a supplier's carbon saving target. This caps any potential risk to delivery of other measures whilst providing the opportunity to learn from any roll out and specifically from which technologies and which advice has the most energy saving impact. The Government is working with Ofgem, through the governing supplier guidance, to ensure there is statistically significant and independent monitoring of these schemes. It will reflect on these findings as part of its longer term behaviour change strategies.
—  Smart meters
—  13. We support the Government's intention to require the energy supply industry to install smart meters. Although ultimately the consumer will fund this initiative, we believe it could help the fuel poor in helping them modify their usage patterns to their advantage. (Paragraph 74)	—  The Government welcomes the Committee's support of its decision to mandate the installation of electricity and gas smart meters. As the Committee's report noted, the installation of smart meters will bring considerable benefits for consumers. Consumers will have more control over their own energy use and carbon emissions, which could help them save money. Smart meters will also facilitate improvements in the quality of service to customers, as well as an end to estimated bills and quicker and smoother switching between suppliers. —   —  The roll-out of smart meters will be a major national infrastructure programme involving a visit to all homes in Great Britain (approximately 25 million). No other country in the world has yet implemented an electricity and gas smart meter roll-out on this scale. The indicative timetable of completion of work by the end of 2020 is ambitious but realistic. It reflects the substantial programme of work required to put in place the rules, systems and infrastructure needed to support smart meters. This preparation programme, for instance, will need to include market design, detailed rules for meter functionality and interoperability, industry code changes, license modifications and detailed consideration of consumer protection and data handling issues. It is important that time taken to get this preparatory work right, and that there is a sensible time window for the roll-out itself to ensure it can be properly planned, organised and executed. —   —  The Government's consultation on electricity and gas smart meters closed in early August. The consultation covered the delivery model, comprising ownership and installation of smart meters and the related communications, as well as the functionality of smart meters and the roll out to small and medium non-domestic customers. The Government is currently considering consultation responses and will respond in due course.
—  14. However, we believe that the 2020 target is unambitious. The Government must decide urgently on the roll-out model for the programme so that the industry can move ahead as fast as possible. Customers also need to be given clear information on the costs and benefits of smart meters, including advice on how they can use them to monitor and adjust their own energy usage and costs. (Paragraph 75)	—
—  Warm Front
—  15. It is clear that the grant maximum for Warm Front has historically been set too low which has deterred a significant number of applicants from taking up the support available under the scheme. We therefore welcome the recent increase in the grant maxima, however the £6,000 maximum applies only to hard-to-treat properties that are off the gas grid. We recommend that it should be extended to all hard-to-treat properties but this could lead to fewer people benefiting unless overall funding for Warm Front is increased. We therefore recommend that DECC reviews overall funding levels and assesses in 12 months' time whether the levels have been increased sufficiently to fully deal with the problem that puts people off Warm Front help, namely grant levels that did not cover all the costs associated with installing a new high efficiency heating system. (Paragraph 82)	—  The grant maxima set in 2005 of £2,700 or £4,000 (where oil central heating is recommended) were initially adequate to pay for all of the measures required in most households. Over the course of time it became evident that these limits were no longer sufficient to cover all costs, particularly for heating work. —   —  As a result of this, Ministers were very aware of the need to balance a limited budget, to reduce the number of households asked to contribute and a reduction in scale for those still required to contribute, against helping as many households as possible. —   —  DECC and eaga plc, the Scheme Manager, already regularly monitor the number of applicants to the Warm Front Scheme, including those applicants who have been asked to make a contribution for a heating installation and who subsequently decide not to go ahead. It should be noted that the impact of the increased grant maxima has reduced the proportion of applicants required to make a contribution to 1 in 10 where heating measures are recommended. —   —  The increase in grant maxima has led to an increase in the average spend per household and fewer households requested to make a contribution. This will lead to fewer households being helped within the available budget. As a result of changes to the Warm Front contract, the Scheme will benefit from efficiency savings through supply chain liberalisation and reduced installer costs from competition being introduced progressively through the year. These changes are expected to reduce the costs of Warm Front work, which will have a positive impact on the numbers of households assisted and partially offset the impact on numbers of households assisted of the increase in grant maxima. —   —  Warm Front has been allocated significant funds over the current spending period totalling over £950 million for the period 2008-11, including increases announced in autumn 2008. Funding beyond March 2011 will be subject to the normal Government spending review process. —
—  16. We support the expansion of Warm Front to include the installation of low carbon technologies aimed at the difficult to reach households. The Government must ensure that the results of the small-scale pilot programmes are evaluated promptly in order to allow full national roll-out at the earliest opportunity. —  (Paragraph 83)	—  DECC is working closely with eaga and National Energy Action to evaluate the results of small-scale pilot programmes for low carbon technologies which are currently covering solar thermal and air source heat pumps. These pilots monitor the fuel costs, if any, client experience and the cost effectiveness of these technologies taking into account social, environmental and economic factors. These pilots are used to evaluate the potential integration of these technologies into the Warm Front Scheme and to determine if they have a place in assisting in the removal of households from fuel poverty. —   —  If these pilots demonstrate that the technologies are effective options to remove an off-gas household from fuel poverty and reduce carbon emissions then they will be incorporated within Warm Front as soon as it is practicable to do so.
—  17. We recommend that the Government considers whether the target timescales for completion of work under the Warm Front scheme should be reduced to ensure that vulnerable households are not left without heating during winter months. It should also review the scheme's performance against the target of achieving SAP 65 levels and ensure that only measures that achieve this target are deployed. Measures to meet a higher SAP rating should be encouraged. (Paragraph 85)	—  Warm Front has a target to perform the survey on a property within 21 working days following application. Following this survey, and where a heating measure has been recommended, the Scheme has a target to complete work within 120 working days. In practice most heating measures are installed well within this timescale. —   —  Whilst these potential waiting times may seem significant, Warm Front is not intended to be, and cannot act as, an emergency service. Reducing target timescales would carry significant costs, which would inevitably mean the Scheme could reach fewer vulnerable households. At the same time it is recognised that some clients may be in difficulty because their heating system has broken down, and in such cases the Scheme endeavours to install measures or perform repair work as promptly as possible. —   —  Warm Front's main aim is to assist as many vulnerable households with a range of measures to minimise the risk of fuel poverty. To achieve this Warm Front is committed to improving the thermal efficiency of property, through both better insulation and more energy efficient heating systems. This has to be done in the most cost-efficient way possible. —   —  DECC does set targets for assisting the most energy inefficient households for those with an energy efficient rating of below SAP 20. At present 28% of households assisted are below SAP 20 prior to Warm Front's assistance. In 2008-09 the average improvement in household SAP rating as a result of Warm Front assistance was from 38 to 62 points (Energy Performance Certificate Band F to D). —
—  18. We urge the Government to ensure that the cost of bureaucracy is minimised and that the Minister's review include a re-assessment of Warm Front scheme rules to allow the use of local contractors where doing so can improve value for money. (Paragraph 86)	—  A number of changes have recently been made to the Warm Front contract, including the allocation of work to contractors, which is intended to deliver greater value for money. —   —  Under the new contract, up to 35% of work will be allocated to appointed installers at a new, competitively derived, set price. For the remaining 65% of work, Warm Front registered installers operating in that region will be able to bid via an electronic auction to establish the lowest price. This will include all cases where a customer contribution would be required under the fixed prices. In the bidding element, where the lowest bid is within the grant limit, that installer will be chosen to undertake the work. Where a customer contribution is required, individual households will be free to choose between the three lowest bidders and will have access to the installer's performance rating to help inform their decisions. —   —  This new competitive system of choosing installers is expected to reduce installation pricing. In those cases where there is a customer contribution, this new approach will empower the householder to choose the installer to carry out work in their property. This new system will be rolled out across England, beginning in September, with full coverage in place by 1 May 2010. —   —  Alongside a stronger negotiated contract, DECC has recruited an experienced contract manager, whose key responsibility is to ensure a more effective management of the Warm Front contractual arrangements.
—  19. As eaga operates a monopoly in the provision of Warm Front service, customers have no choice but to use the contractors it specifies. The Government must ensure that eaga investigates all complaints and puts in place measures to address any consistently identified problems. (Paragraph 87)	—  The National Audit Office value for money report, published in February 2009, reported that Scheme satisfaction is high, with 86% of households assisted by the Scheme satisfied with the quality of the work done, and only 5%-6% dissatisfied. —   —  At the same time it was recognised that more could be done to improve customer service. Under the new contract Warm Front will be introducing tighter quality controls to increase the standards of customer service that Warm Front provides. Some of the new requirements include strengthening the standards of service required in eaga's contracts with installer subcontractors. —   —  This will include an improved use of eaga's installer performance rating system to ensure installers are pushed to higher standards. Installers who do not meet the standard will see their work allocation reduced, or if necessary, stopped. Customer satisfaction and complaint rates will be an integral part of the contracted service level agreement between DECC and eaga. Customers' expectations of the Scheme will be better managed through clearer and more accessible customer literature. Complaints handling requirements will be improved to make the Warm Front complaints process more accessible and visible for the customer.
—  Decent Homes Standard
—  20. Decent Homes has clearly been an effective vehicle for raising standards in social housing. However, the low level of requirements set for thermal comfort means that significant scope remains for improvement in energy efficiency levels. It is clear that the social sector leads the way in improving SAP ratings, but, given the likelihood of many social tenants being on low incomes, it is important to maintain progress and for future investment programmes to prioritise the improvement of energy efficiency levels. (Paragraph 94)	—  The Government welcomes the Committee's recognition that Decent Homes has been an effective vehicle for raising standards in social housing. It recognises that there is still a need to do more to improve the energy efficiency in social sector homes. As the Committee is aware, the Government's Heat and Energy Saving Strategy committed that the Government will show leadership by ensuring that social housing meets, and where possible exceeds, the aims it is setting for all housing on energy efficiency and low carbon energy. —  The Government is considering, with the Tenant Services Authority, the need to identify aspirational standards and benchmarks for energy savings and emissions reductions in refurbishment, for different property types and how this might be funded. During this process we will assess the cost and feasibility of introducing a SAP based standard as the basis of improved thermal comfort level for social housing. However, there are practical issues regarding the feasibility of achieving a given level of thermal performance across all homes. The Government has already done some work with the Building Research Establishment (BRE) to consider the issue of hard-to-treat dwellings. It may not be appropriate to spend significant sums of money to ensure an individual property achieves a particular SAP rating when the same resource could deliver a bigger benefit for a wider number of people if used differently. —
—  21. We are disappointed that the Government has not, to date, undertaken an assessment of the costs for achieving higher SAP rates for social housing. We recommend that the Department of Energy and Climate Change works with the Department for Communities and Local Government to ensure that an appropriate thermal comfort level is included explicitly as an outcome from the capital investment programme following on from the Decent Homes programme. We do not accept assertions that it is not practical to achieve a SAP 81 level. We recognise that higher SAP levels will not be feasible for all types of construction but that does not mean that policy should set targets at the levels achievable for poorer housing stock. We recommend that Government assesses the cost and feasibility of introducing a SAP 81 standard as the basis of an improved thermal comfort level for all social housing. If this is declared impractical the corollary is the climate change targets are also likely to be impractical. (Paragraph 95)	—
—  Housing Health and Safety Rating System
—  22. In the private rented sector there is a 'split incentive' for taking action on energy efficiency, because the landlord bears the costs of installing measures but the tenant reaps the benefit of reduced energy bills. As a result there is a need for stronger regulatory forces to encourage action in this sector. We are therefore concerned that one of the levers that is available, HHSRS enforcement action, is not being pursued as vigorously as it could be. (Paragraph 99)	—  Department for Communities and Local Government (CLG) officials wrote to all local authority Chief Executives in November 2008 to draw their attention to the Government's package of measures to help households to reduce their fuel bills. The letter also sought to remind local authorities of their statutory duties under Part 1 of the Housing Act 2004 and to encourage the adoption of a more strategic approach to addressing the issues of excess cold through use of the HHSRS. The letter contained a number of sources of support for landlords and set out the approach that local authorities should consider taking where, for whatever reason landlords refused to take advantage of the support. This will include inspection by the local authority as a matter of priority. —   —  Energy efficiency measures that local housing authorities can reasonably require a landlord to install depends upon the deficiencies in each individual dwelling but it is the view of CLG that a high efficiency heating system and loft and cavity wall insulation will be viewed as reasonable, where appropriate. However, in relation to higher cost measures such as the replacement of single glazed windows with double-glazed replacement windows it is DCLGs view that this can only be justified where the condition of an existing window and frame is so poor e.g. rotted and draughty, as to contribute to the hazard. —   —  The Government is committed to undertaking a review of the operation of the HHSRS and CLG are currently considering the aims of this research.
—  23. We recommend that the Government urgently reviews the extent to which local authorities use their powers under the Housing Health and Safety Rating System to tackle excess cold. We further recommend that guidelines are issued in the next six months to all local authorities with housing responsibilities highlighting the importance of using HHSRS provisions to ensure fuel poverty levels in the private rented sector are reduced. (Paragraph 100)	—
—  Hard to treat properties
—  24. CERT's emphasis on cavity wall and loft insulation has been ineffective in helping those living in solid wall properties. We recommend that the Government establish how new technologies, such as air source heat pumps, can be deployed for hard to treat homes. We further recommend that the Government develop a financing model to enable fuel poor households to take advantage of such technologies. There is greater potential for fuel poor households to benefit from community scale schemes. (Paragraph 107)	—  Through its market transformation route, CERT does encourage the early deployment of external and internal lagging. This has played a useful role in helping pull these technologies to market, so that supply chains are stimulated. There are case-studies (with 83,000 homes benefiting since 2002) from which Government can take best practice. Ultimately, CERT needs to balance drawing through more expensive measures, against the total costs of the scheme. As —  part of the CERT phase from April 2011, DECC is considering the role of solid wall insulation in helping deliver our ambition to direct more investment to those most in need. —   —  The Government has also introduced the Community Energy Saving Programme (CESP) which began on 1 September and is intended to target solid wall insulation as part of whole-house treatment in low-income areas. CESP will operate on a basis of cooperation between local authorities, communities and energy companies. —   —  The Government has made progress in establishing new technologies via the expansion of the Warm Front Scheme to include the installation of low carbon technologies (such as air source heat pumps), which will help hard to treat households generate their own low-cost, renewable energy. These technologies are initially being trialled in small-scale pilot programmes through the Warm Front Scheme.
—  25. Local authorities should be required to survey their areas and identify opportunities to retro-fit microgeneration systems in both its housing and business sector. The Department for Communities and Local Government should evaluate the implications for all new housing developments over 50 units in size being required to install a district heating system. (Paragraph 108)	—  The Government is currently considering ways to support local authorities meet their targets for carbon emissions reduction, particularly in the community. Where the local authority has adopted a target for carbon emissions reduction (National Indicator 186) or the promotion of onsite renewable and low carbon energy, they may wish to review opportunities in their social housing stock and, more broadly, consider appropriate forms of microgeneration to promote in communities, consumers and business and other public sector partners, for example small scale wind where average wind speed is high or biomass boilers where the locality is not an air quality management area. —   —   —  The decision by local authorities on whether microgeneration is the right economic decision for existing private homes and businesses could only be made on a case by case basis. For this reason, it may not always make sense for a local authority to review the opportunity for microgeneration based on a survey of all the housing and building stock in its area. However, where local authorities are considering promoting a "whole house" approach to retrofit, for example through "pay you as save" pilots, microgeneration should be considered as part of the solution. —   —  The Government's target for all new homes to be zero carbon from 2016 should encourage developers to think about all relevant technologies. —  Proposals for carbon compliance and allowable solutions were set out in a consultation on zero carbon homes in December 20085. The consultation proposed that low carbon heat imported by a housing development would count towards carbon compliance and that exports of low carbon renewable heat from a new development to other developments would count as an allowable solution in meeting the standard. A statement by the Minister for Housing and Planning in July 20096 confirmed that low carbon heat imported by a housing development from heat networks would count towards carbon compliance. The statement further indicated that, pending further decisions on allowable solutions later this year, exports of low carbon or renewable heat and investments in low and zero carbon community heat infrastructure commanded broad support as allowable solutions. —   —  However, the zero carbon homes policy does not stipulate particular technologies that must be used for carbon compliance or for allowable solutions. This is because different technologies will be appropriate in different situations. For example district heating schemes may not be the most cost effective or environmentally desirable technology in all situations, for example where the heat load and/or density of development is relatively low. —   —  In addition, the Planning Policy Statement (PPS) on climate change7 is clear that local planning authorities should expect a proportion of the energy supply of new development to be secured from decentralised and renewable or lowcarbon energy sources where it is viable. This should not be technology specific, but could include district heating systems where appropriate. —   —  The climate change PPS will be combined with the PPS on renewable energy to create a new combined PPS in 2010. This will support the delivery of Government's ambitions for renewable energy deployment form part of the route-map for delivering zero-carbon homes from 2016.
—  New homes
—  26. We welcome the planned ratchetting up of energy efficiency requirements under Building Regulations aligned to the levels of the Code for Sustainable Homes, but we have concerns about the extent to which these are being enforced in practice. The Department for Communities and Local Government pilot scheme to review this is welcome but the lessons from this need to be disseminated nationally to those responsible for building control functions. The Department should issue guidance to local authorities and other building control bodies urgently reiterating the need for rigorous enforcement of energy efficiency requirements. (Paragraph 112)	—  The Department for Communities and Local Government (CLG) issued a consultation on proposals to raise current energy efficiency levels by 25% under Part L of the Building Regulations on 18 June 2009. The proposals include a number of measures to improve compliance and enforcement, including: —   a design stage as well as an as-constructed energy performance calculation; the option to claim higher performance by adopting Accredited Construction Details along with enhanced quality control; wider use of Competent Person Schemes; and more focussed guidance for renovation work. —   —   —  In addition the consultation contains a strategy for training and dissemination to building control and industry in the run up to the amendment of Part L in 2010 and beyond. —   —  It is recognised that improving compliance and enforcement calls for more than just modifications to Part L, but also change at a procedural level in the way industry and the building control system function. This is why CLG has consulted on proposed changes to the building control system and will be following this up with a programme of reform to make it work more effectively. —   —  In the light of the above CLG considers it would be premature to issue fresh guidance to local authorities and other building control bodies now before the department has had a chance to consider the consultation responses. However, new guidance may eventually form part of the measures that are introduced when Part L is revised in 2010. —
—  Future proposals for energy efficiency programmes - Heat and Energy Saving Strategy Consultation
—  27. To date energy efficiency programmes have not reduced levels of fuel poverty enough to meet the Government's targets. This reflects in part the lack of separately identified policy goals for fuel poverty reduction within energy efficiency programmes. We are concerned that the sublimation of fuel poverty objectives within the climate change mitigation led aims of energy efficiency programmes has led to a lack of focus on achieving the maximum benefit from expenditure on such programmes for the fuel poor. The latest consultation documents reinforce this view since fuel poverty is addressed as a side-issue rather than being interwoven into all policies. (Paragraph 119)	—  Fuel poverty is caused by the inter-relationship of three factors and the Government's fuel poverty policies have been, and continue to be, centred on: —   reducing the demand for energy through improving home energy efficiency; ensuring competitive energy prices through regulating the market; and raising real incomes. —   —  Depending on prevailing circumstances, it may be necessary to focus on one factor more than another, but the Government believes it is necessary to address each component which gives rise to fuel poverty. —   —  On 15 July, the Government published a White Paper, UK Low Carbon Transition Plan setting out how the UK will make the transition to becoming a low carbon country: cutting emissions, maintaining secure energy supplies, maximising economic opportunities, and protecting the most vulnerable. It includes the initial findings of the fuel poverty review, which was launched earlier this year, and sets out how it will address both energy efficiency and target the fuel poor through specific measures: —   By announcing major improvements to the Warm Front contract, which will provide greater competition and therefore better value for money. Increasing the grant limits for eligible households under Warm Front. This increase to £3,500 or £6000 where oil or alternative technologies are recommended will mean many households will not have to contribute payment towards the installation of energy efficiency measures in their homes. It should be noted that the impact of the increased grant maxima has reduced the proportion of applicants required to make a contribution to 1 in 10 where heating measures are recommended. The measures provided are expected to save each household, on average, £350 per year on energy bills. The launch of the Community Energy Saving Programme (CESP) is designed to exclusively reach areas of low income, where residents have a higher than average propensity to be in fuel poverty. This new £350 million programme will be delivered through a partnership approach, on a 'whole house', street-by-street basis; and will help reach more of the most vulnerable. We will be monitoring this programme carefully to learn more about the future of this 'whole house', street-by-street approach. The Carbon Emissions Reduction Target (CERT) has been changed so that, from August 2009, in total an estimated £1.9 billion will be directed at the low income and elderly priority groups. We are also looking at ways to ensure more help for the most vulnerable within our priority group for the CERT extension, until the end of 2012. We also propose to bring forward new legislation to place social price support on a statutory footing, once the voluntary agreement ends in March 2011. The Government is minded to focus a large part of our resources on those older pensioner households on the lowest incomes who are at the greatest risk of excess winter deaths and who tend to have a higher incidence of fuel poverty. We will continue to work across central Government, with local government and local community organisations, energy suppliers and other stakeholders and delivery partners to find better ways of targeting help and support to the fuel poor and these households can benefit from new schemes, such as the Renewable Heat Incentive (RHI), to help reduce energy bills. —   —  We are reviewing the consultation responses and will work to ensure that these concerns are properly addressed as we go forward with the formation of our strategy.
—  28. Despite laudable long-term aims, the consultation documents contain little practical detail and postpone definitive proposals, pending further consultations, summits and the establishment of a Heat Markets Forum. This will only delay the so-called "Great British refurb" and its programme of energy saving measures. We find this surprising given the plethora of previous consultations and calls for evidence, including on metering and billing, the renewable heat incentive and the household energy supplier obligation post-2011. The 2015 target for the insulation of lofts and cavity walls lacks ambition in terms of fuel poverty and meeting the climate change target. We are also extremely concerned at the lack of progress on many of the recommendations we made in our report on Climate change: the "citizen's agenda" in 2007. (Paragraph 120)	—  The recent consultations do not mean that action has not been taken in relation to heat and energy saving. The intention has been to ensure that DECC gains as wide a breadth of opinion as possible to aid its decision-making. For example the aim of the Heat and Energy Saving (HES) Strategy consultation document was to reach the whole of the British population, although DECC acknowledges the need to ensure that fuel poverty is given special attention within this. —   —  The Government has already assisted an ambitious number of households through its existing programmes. Since 2000 Warm Front has assisted over 2 million households with energy saving measures and advice, including half a million households in the last two years alone. Through CERT (and previously the Energy Efficiency Commitment) 6 million homes have been insulted since 2002, 1 million in 2009-09. —   —  DECC is also considering how future arrangements for delivering energy efficiency measures to households could continue to support the fuel poor alongside other households as we develop the Government's proposals for the heat and energy saving "Great British Refurb" post 2012. —   —  DECC is addressing many of the recommendations made by the Committee in 'Climate Change: "The Citizens Agenda"'. For example, we have announced the roll out of smart meters to every home by 2020, showing that we are ensuring that energy demand is 'future proofed', we are also developing proactive services from the Energy Saving Trust. It is recommended that in existing housing stock, where it is not possible to install energy efficiency measures, that alternative technologies should be made available. With this in mind, the HES Strategy consultation document discusses the role of community heating and microgeneration.
—  29. Given the urgency of the issue, and given that the technologies and techniques to achieve high home energy efficiency are now well known, DECC should have set out a detailed action plan on how to deliver domestic energy efficiency (reflecting both climate change and fuel poverty objectives) within its consultation on the Heat and Energy Saving Strategy. The Government should now curtail its consultation process and in the next three months should produce a detailed action plan for home energy efficiency sufficient to achieve its fuel poverty objectives. (Paragraph 121)	—  We have set out clear plans for a number of measures to the end of 2012. For example: —   "Pay as you save" pilots CESP 20% increase in the overall CERT target extension of the CERT obligation, until the end of 2012, and we will be publishing our long term plan in the HES Strategy later this year —   —  It is important that we learn from CESP, and other programmes, how the community approach and targeting of low income areas works in practice for tackling fuel poverty in the future. It would be difficult, and disadvantageous, for the Government to produce detailed action plans for the delivery of home energy efficiency as this obligation has been placed on electricity suppliers to deliver. If we were to produce such plans, it would interfere with the market mechanism that has been put in place. —   —  We are presently considering, in great detail, the post-2012 delivery options in the HES Strategy, making sure that we develop options that mitigate the impacts on the fuel poor.
—  Scale of funding required
—  30. We consider around £4 billion a year over the next seven years to be a realistic estimate of the cost of raising the energy efficiency levels of fuel-poor households to SAP 81, sufficient to remove the majority of households from fuel poverty. This would require nearly a trebling of current funding for energy efficiency programmes directed at fuel poor households. However redirecting other "fuel poverty" programme funding into energy efficiency measures would reduce the need for additional public money. (Paragraph 128)	—  DECC believes that using SAP ratings as a standard, and requiring all fuel poor households to be upgraded to a SAP 81 rating by 2016, ignores the diversity of the UK housing stock, over 40% of which has a SAP rating between 39-54 and of the people who live in them. —   —  It is currently estimated that only 35,000 properties in England meet Band B—SAP 81, and that 1.7 million homes are Band C—SAP 69, 28,000 of which are thought to be fuel poor. The average SAP rating of all homes is 50, according to the 2007 English House Condition Survey (EHCS). —   —  The energy efficiency of a building is one of the three factors that determine fuel poverty (along with prices and household income). The Government has long recognised this and has a package of measures in place to tackle this and the other root causes of fuel poverty. These include Warm Front, CERT and the Decent Homes programmes, primarily addressing the energy efficiency of households, and Winter Fuel and Cold Weather Payments to increase household incomes. It has also pressed energy companies to reduce prices and ensure a competitive market for all consumers, and announced its intention to introduce mandated social price support at the earliest opportunity. —   —  Some homes will be harder to treat than others, requiring a greater level of resources. The Government's proposed energy efficiency policies, including HES, CESP and the Renewable Heat Incentive, will take a house-by-house approach, where the unique circumstances of each property and its occupants are taken into account. —   —  We haven't expressed our level of ambition in the HES consultation in terms of SAP levels. But the sort of measures required to improve hard to treat properties, renewable technologies and solid wall insulation for instance, would be measures that we could expect to get many homes up to the level of SAP 81. —   —  The 2007 EHCS Annual Report was published on 29 September 20099 and, in addition to an assessment of the current performance of the housing stock, models the impact of carrying out a range of cost effective improvements that are recommended by the Energy Performance Certificate (for example, cavity wall, loft and cylinder insulation, upgrading boilers on existing heating systems). The results of this work indicate for example how many properties would reach Band C or higher given the range of improvements covered. The improvements included in the assessment do not cover the higher cost and new carbon reduction technologies (such as solid wall insulation and solar photovoltaic panels) that may be required to achieve good performance in many properties. —
—  Balance of funding responsibilities - energy supply industry and Government roles
—  31. Whilst it is right that energy companies contribute to improving the overall energy efficiency of the UK we believe that policies designed to address fuel affordability should be funded from general taxation. (Paragraph 134)	—  The Government has spent significant sums on policies and programmes to alleviate fuel poverty. Since 2000, it has spent in excess of £20 billion in helping vulnerable households. This includes Warm Front with a committed spend of over £950 million until 2011, the Decent Homes programme which has spent £27 billion so far on improvements to social housing, Winter Fuel Payments worth over £2 billion in 2008-09 when the Government made over 12 million payments to over 8.5 million pensioner households, and Cold Weather Payments which were increased from £8.50 to £25.00 per week for last winter making a total spend of £210 million, with 8.4 million payments made. —   —  However, it believes that suppliers also have a role to play in protecting the most vulnerable households at risk of fuel poverty. Energy companies also recognise the important role they have to play in this context and have already agreed to spend combined sums of £100 million/£125 million/£150 million on social programmes between April 2008 and March 2011. —   —  In announcing the social price support policy in the recent White Paper, DECC's aim is to give the types of vulnerable households receiving help from energy suppliers under the current voluntary arrangements the confidence that similar help will continue after March 2011. It has also announced the intention to create mandated social price support at the earliest opportunity, with increased resources compared to the current voluntary system
—  Awareness of support
—  32. There is a lack of clarity about what companies are spending on CERT and to what extent this expenditure is being recouped from customers. Equally customers are largely unaware of the assistance available to them under the scheme. We called over two years ago for action to clarify information on fuel bills and have been disappointed with the lack of consistent action from the energy supply industry in response to this. (Paragraph 147)	—  The Government is taking a number of steps to ensure consumers are assisted in understanding the support available to them. For instance the Government continues to increase the support available to households through the Energy Saving Trust (EST). The EST provide a holistic one stop shop to consumers not only on avoiding energy waste, but in providing easy access to the full range of supplier and local authority support and subsidies on energy saving measures. —   —  Equally, through the Government's own Act On CO2 campaign we are focused on saving energy in the home and on reducing energy bills and carbon emissions, signposting people to the EST Act on CO2 helpline and highlighting the benefits of the energy saving measures offered under CERT as part of coverage in national television, press, radio and online. —   —  The Government and Ofgem support environmental information being made available to customers. Improved transparency could help generate additional demand for energy efficiency measures and so help contribute to our energy and climate ambitions as well as reduce the costs associated with finding customers under schemes like CERT. However, benefits to any specific household cannot be guaranteed under policies like CERT within its timeframe. —   —  Suppliers are already required to provide a range of information on bills and Ofgem produces a factsheet explaining the costs that make up household energy bills which includes an estimate of the per household cost of environmental programmes. —   —  Suppliers' licences require suppliers to provide consumers with energy efficiency information in a range of formats. This includes providing information about the support that is available. Suppliers often use billing processes as a key means of alerting consumers to the offers available under CERT so that they can generate demand and meet their carbon emission reduction targets more easily. —  Together these measures have helped to set stretching carbon saving obligations on energy suppliers and assisted suppliers in generating demand for the offers available to consumers, seeing all supply companies meet their targets easily to date.
—  33. We recommend that Ofgem requires all energy suppliers to apply improved and consistent standards for the provision of information on bills. Bills must include a clear breakdown of the costs per household of CERT, so as to give every indication of the cost/benefit of this intervention, as well as giving a cost per household of other programmes required by the regulatory regime such as the European Emissions Trading Scheme and the Renewables Obligation. Billing must also provide signposted information to encourage customers to take up home energy assistance available under its CERT scheme. (Paragraph 148)	—
—  34. We recommend that Ofgem requires energy companies to report annually on the expenditure undertaken to meet CERT or its successor programmes. This information should show clearly the proportion of spending funded by both the company and its customers. (Paragraph 149)	—
—  35. It is not clear whether Ofgem has sufficient access to the energy companies' financial information. We received conflicting evidence on this from Ofgem who told us "we do have powers that we use in our energy supply probe exactly to get all the detailed information that we need from companies", yet also that "there are some areas where we are seeking additional powers […] in respect of the wholesale gas and electricity market we want to have additional powers that tackle market abuse". (Paragraph 152) —	—  When conducting its probe, Ofgem had sufficient access to energy companies' information. The statement made regarding additional powers relates not to accessing company information but to Ofgem's request for additional powers to tackle market abuse, the potential for which was identified during the probe. —
—  36. We are concerned that Ofgem has been slow to address failings in some parts of the energy market and has not communicated clearly to customers what steps they and energy companies have taken to ensure prices for all customers are kept as low as possible. (Paragraph 153)	—  The Government continues to believe that the regulator should have the powers it needs to protect consumers in the light of any market developments. In the UK Low Carbon Transition Plan, DECC announced proposals to extend the period in which the regulator can act where it considers that there may have been breaches of licence conditions, and proposals to grant Ofgem further powers to regulate in the wholesale electricity market, through a Market Power Licence Condition. —   —  Ofgem publishes a Quarterly Report on wholesale and retail price movements, and has recently written to suppliers about improving their communication of information on prices. In addition, Ofgem is planning to introduce new obligations on suppliers to ensure direct debit payments are accurately set and clearly explained. The new condition in suppliers' licences will mean they must ensure payment levels are clearly and accurately explained and based on the best available information. Suppliers will also need to be able to justify why they are holding onto credit surpluses built up by a customer. —   —  Following the 2008 probe, Ofgem has developed a number of proposals to improve licence conditions to get a better result for consumers, including proposals on clearer customer bills and statements; tougher rules on direct selling; protection for vulnerable and indebted customers; banning of undue discrimination in payment methods and customer contracts; protection for small business and increased market transparency. Ofgem has published information at each stage, invited views, and has involved a range of consumer organisations in the consultations. —   —  In addition, Ofgem worked with their Consumer Panel to develop some of the proposals, particularly around improvements to consumer information. The Consumer Panel consists of 100 consumers who meet several times a year to help Ofgem develop consumer centred policy. Alongside the Panel, Ofgem also commissioned additional research with elderly consumers, people on particularly low incomes and those with limited literacy skills to test and refine proposals around improved consumer information. —   —  Ofgem has also recently issued its first Consumer Bulletin, which provides updates on its broad range of action to protect consumers.
—  Delivery of a national action plan - an area based approach
—  37. We welcome the Secretary of State for Energy and Climate Change's recognition that energy efficiency proposals have to date been incremental and his support for a comprehensive national approach delivered at a community level. (Paragraph 163)	—  In February 2009, the Government published its Heat and Energy Saving (HES) Strategy for consultation. In that Strategy, we proposed an ambitious goal of offering the UK housing and building stock all cost-effective measures by 2030, plus renewable heat and electricity measures as appropriate. By 2015, we aim to have insulated all lofts and cavity walls will be insulation, where practical. —   —  We have given certainty to allow energy companies to plan action to improve energy efficiency in existing homes by announcing that the Carbon Emissions Reduction Target will continue until the end of 2012. However, we recognise that we may need to look to a more coordinated, community-based approach in the future, which is why the new Community Energy Saving Programme will test the area-based approach by using a house-by-house, street-by-street approach to installing 'whole house' energy efficiency packages, whilst at the same time targeting those who are vulnerable to fuel poverty.
—  38. We regret that there has to date been a lack of ambition in the Government's plans to upgrade the energy efficiency of our existing homes, which is in stark contrast to the clear aims for improving the energy efficiency levels of new homes. We consider that the piecemeal approach to programmes has been a deterrent to setting higher ambitions for energy efficiency of English homes and that the arguments for an area-based approach, focusing first on the areas of most need, are compelling. (Paragraph 164)	—
—  39. Given the experiences already gained under existing schemes such as CEEF and Warm Zones we do not think it is justifiable to wait for the outcomes of CESP before developing detailed proposals on area-based approaches. We therefore recommend that DECC undertake an assessment within the next six months of the costs and benefits of realigning existing programmes into a comprehensive, area-based programme, examining the potential benefits to be had from more efficient targeting and delivery, with improved customer awareness and uptake. This assessment should encompass how area-based approaches could enable integration of energy efficiency with income maximisation and price minimisation measures for the fuel poor. It also needs to address the benefits of integrating energy efficiency and heat generation programmes. (Paragraph 165)	—  The Government has a number of programmes to improve the energy efficiency of existing homes using different approaches which we are keen to maintain. Using a single approach would not be beneficial and could stifle innovative ideas coming forward in the future. —   —  Projects under the Community Energy Efficiency Fund (CEEF) offer energy efficiency and income maximisation measures through a door-by-door, street-by-street approach. They all have 'buy in' at the local level in particular from the local authority who act as the trusted face to the local community and in many cases lead the project. A continuous programme of assessment is undertaken to monitor delivery. —   —  Community Energy Saving Programme (CESP) will utilise a whole house approach to ensure a single, comprehensive method of delivering energy efficiency to a home through a single source i.e. a particular obligated company. CESP also includes an incentive mechanism for delivering maximum area penetration which it is envisaged will be achieved through new and existing local community partnerships between local authorities, energy companies and community groups delivering measures through a street-by-street approach. These partnerships will help to identify synergies with other initiatives which have similar objectives, such as CERT and community based schemes, and ensure the best local solutions are found. The evaluation of CESP, which will begin in 2010 will assess the pros and cons of both the community based and whole house approaches and, while it will not fully address these recommendations, it will provide evidence for consideration as part of HES. —   —  The lessons learnt from CESP will in turn inform the development of a large scale, supplier led, area based model. There is a lot to be learned from the CESP pilots. But we are not just waiting for results. We are working on many fronts, as changes to CERT and Warm Front demonstrate.
—  40. Locally-led programmes can be highly effective in utilising local knowledge, joining together local partners and engaging local residents. Local authorities are well placed to lead on energy efficiency and fuel poverty programmes, with their unique combination of cross-organisational links, democratic mandate to deliver local priorities, contacts with local residents and in-depth understanding of local circumstances on a range of factors such as the condition of housing stock and socio-economic profiles. (Paragraph 166)	—
—  41. We recognise that there is a need to define areas for schemes carefully, including setting the appropriate geographical scale as well as location and therefore support the use of local authorities as coordinators and delivery agents of area-based programmes, and not merely as partners in delivering energy companies' targets. (Paragraph 167)	—
—  42. This approach could enable energy company delivery of CERT programmes to be replaced with a levy on energy companies paid into a central fund. Combined with funding from other programmes this would be distributed to local authorities to fund delivery of the national action plan to upgrade energy efficiency. (Paragraph 168) —	—
—  Refocusing Government priorities
—  43. Fuel poverty has slipped down the list of Government priorities at a time when rising energy prices mean action is most needed. The creation of the Department of Energy and Climate Change provides the opportunity to rectify this but there is little indication that this is yet happening. (Paragraph 171)	—  As the Committee has itself recognised elsewhere in its report, the rise in energy prices was a major factor in the increase in the number of fuel poor households. However, fuel poverty did not become less of a priority for Government, nor was it idle when it saw the number of fuel poor households increasing. The Government has continued to take action and to support this, earlier this year, DECC announced a review of its fuel poverty policies. —   —  Since the fuel poverty review was announced in January this year, the Government has: —   Announced major improvements to the Warm Front delivery contract. These changes will open the Scheme up to greater competition to provide best value for money and improved customer service. Announced increases to the grant limits for eligible households under the Warm Front Scheme. The grant increases of £3,500 (or £6,000 where oil or a new low carbon technology is recommended) will mean that the vast majority of households will not have to contribute payment towards their measures. The Scheme is also being expanded to pilot the installation of low carbon technologies. On average, each recipient has the potential to save over £350 per year on energy bills. The Scheme has assisted two million households since 2000, with over half a million households in the last two years alone. Launch of the Community Energy Saving Programme (CESP) from September 2009. This programme is designed to apply entirely in areas of low income, where households are likely to have a greater than average propensity to be in fuel poverty. This new £350 million programme will improve energy efficiency and lower household fuel bills, and the partnership approach with local authorities and other community representative organisations should help to reach more of the most vulnerable households. Increasing the obligation on energy suppliers through the Carbon Emissions Reduction Target (CERT) so that from August 2009, an estimated £1.9 billion will be directed at energy savings amongst a priority group of low income and elderly households in the period to 2011. For the extension period of CERT to the end of 2012, the Government has also announced that it will be exploring how best to provide help to more of the most vulnerable households within the Priority Group. —   —  The initial findings of the review are integrated in the UK's Low Carbon Transition Plan. This included a proposal to bring forward new legislation at the earliest opportunity with the aim of placing social price support on a statutory footing when the current voluntary agreement ends in March 2011. Under the existing voluntary agreement, energy suppliers will be spending £150 million in 2010-11 on social programmes. Examples of assistance from companies include rebates on annual bills, and social tariffs. Ofgem estimated in December 2008 that 800,000, customer accounts were benefiting from some form of social or discounted tariff, almost double that in March 2008. As part of the proposed statutory framework, the Government will ensure there is an increase in resources available and give suppliers greater guidance and direction on the types of households eligible for future support. Subject to further policy development, the Government is minded to focus a large part of the additional resources on those older pensioner households on the lowest incomes. These households are at greatest risk of excess winter death and tend to have a high incidence of fuel poverty.
—  44. We recommend that the Secretary of State for Energy and Climate Change sets out in the next three months the level of priority his department will give to fuel poverty objectives and how it will work with other Government departments, agencies and private organisations to fully implement its proposals. (Paragraph 172)	—
—  A national plan for energy efficiency
—  45. The Government needs to set out a road-map showing how it intends to meet its fuel poverty targets and identifying the contributions from each of the three elements affecting fuel poverty levels (namely prices, incomes and energy efficiency levels) towards reaching the targets. This strategy should include a costed action plan which identifies the levels of funding required to deliver the programmes needed, together with a timetable for planned phasing of expenditure and identification of key funding sources. Responsibilities of each department should be clearly set out. (Paragraph 177)	—  On 15 July, the Government published a White Paper, "UK Low Carbon Transition Plan" setting out how the UK will make the transition to becoming a low carbon country: cutting emissions, maintaining secure energy supplies, maximising economic opportunities, and protecting the most vulnerable. It includes the initial findings of the fuel poverty review, which was launched earlier this year, and sets out how it will address both energy efficiency and targets the fuel poor through specific measures. The Road Map to 2050 for the Transition Plan will be published in the spring of 2010. This will include consideration of action required to tackling fuel poverty and will build on previous modelling undertaken as part of the policy development process.
—  46. The major factor in derailing the Government's progress towards its 2010 target was the unanticipated and unplanned-for hike in electricity and gas prices. While it is not always possible to accurately forecast price movements it is nevertheless possible to set out a range of likely price scenarios. DECC's action plan therefore needs to be based on a range of scenarios for fuel prices, covering the spectrum from high to low, in the coming years and decades. This should set out specifically how it plans to meet the 2016 target within its fuel price scenarios. (Paragraph 178)	—  DECC has produced a view of the energy price and bill projections until 2020 in the UK Low Carbon Transition Plan. Further details of our assessments for prices and bills with particular emphasis on climate change polices can be found in the Analytical Annex. The Department is doing all that is reasonably practicable to tackle fuel poverty. However, recognition of the likely higher fossil fuel prices was one of the factors underpinning the Government's decision to take powers to introduce mandated social price support.
—  47. We recommend that as part of this plan the DECC sets a target date for improving the English housing stock to a specific level of energy efficiency. This level will be dependent on the modelling of the impact of price rises and income levels on fuel poverty. We recommend that SAP 81 should be adopted wherever practicable, with a minimum SAP level of 65. (Paragraph 179) —	—  The Government's response on SAP levels is outlined in Recommendation 30. —
—  48. Alongside the work on the action plan, we recommend that DECC commission, and report on within 6 months, a review of fuel poverty reduction policies undertaken by similar European countries and assess their effectiveness in a UK context. (Paragraph 180)	—  DECC is aware of a review of fuel poverty reduction policies undertaken across a number of European countries; The Summary Report on European Fuel Poverty and Energy Efficiency (EPEE) was undertaken as part of the Intelligent Energy—Europe (IEE) report European Fuel Poverty and Energy Efficiency.10 The report looks to improve the knowledge and understanding of fuel poverty, evaluate the number of households currently living in fuel poverty in the 5 states which are partners of this project (Belgium, Spain, France, Italy and the UK), and identify operational mechanisms to address fuel poverty. —   —  In order to obtain significant comparisons between the countries involved in the report, the EPEE used common data on Income and Living Conditions survey which constitutes the main tool to draw the picture of poverty and social exclusion on a European scale.

Securing food supplies up to 2050: the challenges faced by the UK—4th Report (HC 213, 2008-09), PUBLISHED 21 JULY 2009, GOVERNMENT RESPONSE PUBLISHED 19 OCTOBER 2009 (—3RD SPECIAL REPORT (HC 1022, 2008-09))

—  Conclusion/Recommendation	—  Government Response
—  The projections made at the FAO food security conference
—  1. At the World Food Security Conference in Rome, it was announced that there was a need to increase food production by 50% by 2030 and double it by 2050. These figures are based on assumptions about population growth and patterns of consumption. It is important to bear in mind that they are projections rather than targets. They are a useful way of focusing attention on food production. However, they should also be used to draw attention to population growth, diet, and waste at all stage of the food chain, and the need for policy responses in these areas. (Paragraph 22) —	—  We are currently analysing the basis of the Food and Agriculture Organisation (FAO) 2030/50 projections. In 2006 FAO produced projections of slowing demand growth. Clearly rising population adds to food demand (although it also adds to labour force), but it is also true that population growth is declining as countries develop and urbanise. FAO data shows that, in the period 1970-2000, world population grew on average by around 1.7% per year. This is expected to fall to 1.0% per year in the period 2000-30, and to 0.5% per year in the period 2030-50. This dampening effect on demand growth is partly offset by rising incomes. Using 2000 as a baseline, FAO projections roughly correspond to the Conference figures, if 2000 is considered the starting point: i.e. 56% over the period 2000-2030 and 87% increase over the period 2000-2050. These projections imply that demand and by implication, food production in the period 2006-2050 would increase by around 70%, and this has been confirmed in this year's OECD-FAO Agricultural Outlook, 2009-2018 and The Resource Outlook to 2050, both published in June 2009.[5] The latter suggests that, compared to the 2005 to 2007 average, food production needs to increase by 70 percent by 2050 to cope with the projected increase in world population and to raise average food consumption to 3130 kcal per person per day by 2050. It should be noted that in the period 2000-2007 food production increased at a faster rate than the projections. The difference between 100% and 70% is not trivial: it is more than the food production of the whole American continent. So claims around food production needing to increase 50/100% need to be treated with care. —   —  Notwithstanding the varying assumptions about population growth and patterns of consumption in the future, it is clear that there will be a significant increase in global food demand over the next 50 years. —   —   —  Increasing sustainable agricultural production and productivity will be important to feed this growing population—not least in Africa where our vision is to see a doubling of agricultural production over the next 20 years in ways that manage natural resources sustainably and are adapted to climate change. —   —  But simply increasing food production will not end hunger. Even when food was at its cheapest in 2000, there were still 800 million people without enough food to eat. There are huge problems in terms of access to food, distribution, and affordability. There is also a significant potential contribution of reducing losses/waste in meeting increased demand. For instance, the 2009 UNEP report: The environmental food crisis estimated that harvest losses and distribution losses and waste add up to approximately 1400 kcal/capita/day or 70% of current final consumption. Put another way, if these global losses were halved we could feed another 1/3 of today's population. —   —  It is therefore important that we complement our work to increase sustainable agricultural production with our work on trade and CAP reform, reducing food waste across the food chain, supporting research and development, looking at how we can ensure better diets and nutrition, and ensuring social protection systems are in place to help vulnerable people who cannot produce or buy enough food to feed themselves and their families. —   —  The Foresight Project on Global Food and Farming Futures is looking comprehensively at all these issues and is due to report in 2010. It will help to ensure the continued high profile of this issue. And Defra has already commissioned research into how we can meet anticipated 2030 food demand in the most environmentally sustainable way, which we hope will inform this work. —
—  2. More work is needed on future patterns of consumption. Doubling production by 2050 may focus the minds of policymakers, but, by itself, it is too broad a projection on which to base a response. We recommend that the Foresight Project on Global Food and Farming Futures, which is due to report in October 2010, provide a clear and accessible breakdown of this projection, encompassing where and at what rate the population increases are likely to take place, and how demand is likely to change. It should indicate the implications of these factors for world production of different food commodities. Defra should determine how it will monitor global food production and demand trends in order further to refine the projections in the future. (Paragraph 23)	—  The Foresight project will undertake a detailed analysis of global food system out to 2050, including population growth and changing patterns of consumption around the world, together with changes in the production and processing of food and the wider food supply chain. It will consider the major challenges faced, the uncertainty associated with them and analyse how they could interact to affect the food system and give rise to future shocks and stresses. —   —  The Foresight project's Lead Expert Group has proposed that there is a need to review the existing global agricultural models and to consider the state of the art in long-run modelling of alternative scenarios. The Chief Scientific Adviser to Defra, Professor Bob Watson, has agreed to fund a series of modelling workshops to explore these issues, bringing together expertise in the current state of global agricultural modelling and exploring potential links with climate change models. —   —  Defra are also studying the basis of the Food and Agriculture Organisations projections to gain a more critical understanding of the various factors and how they vary geographically. We are also considering including demand analysis explicitly within the global availability theme of our Food Security Assessment.
—  Sustainability
—  3. Producing sufficient food is only part of the challenge the world faces, the implications of the way in which it is produced are equally important. The only acceptable form of food production is that which meets the needs of the present without compromising the ability of future generations to meet their needs. Applying this principle to food production requires a fundamental shift in thinking and an open-minded approach to embracing solutions from across the spectrum of production methods. (Paragraph 31)	—  It is clear that the sustainability of food production and consumption is key. In the face of a growing global population it becomes increasingly important that we stop degrading our capacity to produce the food of future generations. Soil quality, water availability and quality, biodiversity and fish stocks are the resources on which future food production depends and we need to recognise that these are finite resources. There will be a decreasing capacity to feed the growth in global food needs by further extending farmland into new areas and by increasing the fish catch. We will need to learn how to produce more food from the resources that we have and in ways that do not diminish these resources. Climate change will have a particular impact, so it is essential that the farming and food industries play their full part in reducing their dependency on fossil fuels and reducing methane and nitrous oxide emissions.
—  The head-in-the-sand approach
—  4. It is clear that maximising food production does not depend on agriculture alone but also on infrastructure-transport systems, as well as food storage. (Paragraph 41)	—  We agree with the Committee's findings, as both effective and sustainable infrastructure and food storage are essential in helping to reduce losses throughout the supply chain. However, while we want farmers to produce as much as possible, there are two conditions: that consumers want what our farmers produce, and that increases in production are achieved sustainably, so as not to jeopardise the ability of future generations to exploit and enjoy our natural resources and landscapes. At a global level food production needs to meet demand, which it currently does. 2008 saw the largest grain harvest the world has ever seen, some 1.79 billion tonnes, with major cereal prices halving from their April 2008 peaks. But regional and local shortages are keeping prices high in some countries. Increasing levels of poverty due to the global financial crisis have pushed the number of people in the world going hungry to over one billion. Simply increasing food production would not address this problem as some regions would continue to have surpluses, others shortages. —   —  Improvements to roads, a basic global-good on which agriculture depends heavily, will enable farmers to access key inputs (such as higher-yielding seed varieties, and fertiliser) more readily and more cheaply, market their produce, and facilitate intra-regional trade to help move produce to areas where there are local shortages. Better water management systems will remove the uncertainty that comes from relying on rain to water crops, particularly as rainfall becomes more unpredictable: in Africa less than 5% of arable land is currently irrigated, compared to one third in South Asia. And access to national electric power systems will reduce the cost of energy to farmers, and stimulate wide-ranging rural development. —   —  Most of the investment in agricultural production will come from the private sector, but investment in global goods will mainly come from governments, with support from donors in developing countries. We very much welcome the agreement reached at the G8 Summit in Italy in July for donors to provide up to $20 billion of agricultural investment in developing countries over the next three years, a significant element of which should be invested in infrastructure.
—  5. Doing nothing to contribute to the world's food supplies would be morally unacceptable: at a time when a fundamental shift in thinking is required, the UK should set an example, not bury its head in the sand. Land-rich countries such as Brazil have great potential to boost global food supplies, but neither their ability to realise this potential, nor a well-functioning global market, can be taken for granted. A healthy domestic agriculture is an essential component of a secure food system in the UK. (Paragraph 47)	—  Meeting global demands for food is partly about increasing production sustainably. However, in addition, the international community also needs to make more efficient use of what is already produced by taking practical steps to reduce post-harvest losses, and by the more effective and sustainable use of inputs including seeds, fertiliser, and water. As noted in the Food Matters report "production of cereals and other food in the UK makes a small but meaningful contribution to overall global food supply". In 2007, UK production of wheat and barley accounted respectively for 2.2% and 3.8% of total global production. In total UK cereals accounted for around 1% of global cereal exports. The UK will continue to work to ensure its agriculture is as efficient and sustainable as possible, and play its full part in contributing to global food security, through bilateral and multilateral engagement with governments and international bodies, the approach we take to our development assistance, and by improving the evidence base for more sustainable and productive agriculture. —   —  The agriculture of developing countries will also need to be made more productive over the coming years. Most of the world's population growth over the next 40 years will take place in developing countries. Many countries in Africa will see their populations treble, and their agricultural systems will need to respond accordingly. But the international response must be holistic, and the UK's greatest impact will be via its influence on international policy, diplomatic initiatives, development programmes and research efforts. These include our contribution to the international partnership to tackle global hunger sustainably through the Global Partnership for Agriculture and Food Security (GPAFS). —   —  Research is vital and we are focusing world-class scientific research efforts on food security through the UK's Research Councils. We are working with BBSRC to establish a new cross-Research Council and Government Department initiative on food security. The Government is also committing, through Dfid, £400m to support and improve international agricultural research, along with contributions to the International Fund for Agricultural Development (IFAD), and the Consultative Group for International Agricultural Research (CGIAR). —   —  As well as increasing production, developing new crop varieties, and introducing new technologies—particularly those relating to climate adaptation—the fundamentals of the world food supply system must be addressed. There must be an early conclusion to the Doha trade talks, to give better access to developing countries products. We will continue to argue for radical reform of the CAP and reject trade protectionism which discourages investment in developing countries. And the practice of some donors to dump surplus food on developing countries under the guise of "food aid" must also be ended, as this undercuts local farmers. The UK government is pushing hard on all these fronts.
—  The self-sufficient approach
—  6. The Commission should investigate further what means would be at its disposal in the unlikely event of a breakdown of the single market. However, the fact that trading relationships are fragile is an argument in favour of spreading the risk by having relationships with multiple countries, working to build strong relationships, and having contingency plans, not an argument in favour of self-sufficiency. (Paragraph 51)	—  The Government is unable to answer on behalf of the EU Commission, but agrees that building strong trade relationships is important. Trade spreads risks to disruption, encourages productivity growth, keeps prices competitive, and increases our supply options for food. The diversity and extent of our food supplies is fundamental to UK availability and access, and reflects the strength of our trading relationships. The Government will continue to pursue trade liberalisation through close working within the EU as a priority. We believe that the successful completion of the World Trade Organisation's Doha Development Agenda as a multilateral trade deal should be reached as soon as possible. In the meantime the EU is pursuing ambitious bilateral trade agreements including with Korea and India. The global recession will be made worse if there is a retreat into protectionism and the UK will use all opportunities to keep global markets open.
—  7. The UK should not aim to be self-sufficient, even in indigenous food stuffs. Total self-sufficiency would make the UK's food supplies less secure rather than more secure. (Paragraph 52)	—  We agree with the Committee's view on self-sufficiency. Food security is fundamentally about availability, affordability and access to nutritious and sustainably produced food. It is not a question of domestic self-sufficiency. The UK is currently 73% self-sufficient in all indigenous foods, a higher proportion than in the 1950s. The UK is also a significant exporter of wheat, lamb, dairy products and breakfast cereals. Even if it were possible, self-sufficiency would not insulate us against disruptions to our domestic supply chain and retail distribution system. It would open up the UK to risks of adverse weather events, crop failure and animal disease outbreaks. We would continue to depend on imported fertilisers, machinery and certain foods for a balanced diet. Similarly, our food chain relies on various forms of energy, much of which is imported, so ensuring our energy security is as much of a priority.
—  Food colonialism or "land-grabbing"
—  8. We welcome the recent report by the UN Food and Agriculture Organisation, the International Fund for Agricultural Development, and the International Institute for Environment and Development on the large-scale acquisition of farmland in sub-Saharan Africa by overseas investors. It is a first step towards exploring the implications of this global trend. We urge the bodies involved to continue their work on the phenomenon, with the aim of providing an accurate picture of the extent of the trend and of developing a set of international guidelines that include provisions for local producers, property rights, sustainable management and transparent rules. We note the involvement of Dfid in the initial study and urge it to continue to provide input to subsequent studies. Defra should report on the implications of the trend for UK food security. (Paragraph 56)	—  In general, investment in developing country agriculture is to be welcomed. Lack of investment in agriculture over the last 25 years has been a contributory cause of declining production and increasing food insecurity. Such investment often brings with it better infrastructure—roads, water, power—employment opportunities, greater economic growth, reductions in poverty levels, and increasing food security. But appropriate controls need to be put in place to ensure that negotiations are conducted fairly, that the rights (both legal and moral) of local people are not infringed, that the food security of the country concerned is not adversely affected, and that deals are conducted in an open and transparent way. That is why we warmly welcome the proposals made by the Government of Japan at the recent G8 summit in Italy to introduce better regulation into the land market and we look forward to working with them over the coming months to reach agreement on an international set of criteria to govern such transactions. —   —  In addition, Defra, in partnership with Chatham House and IIED, are convening relevant government officials to consider the implications that these deals present for UK food security and wider development policy in more detail and establish whether further analysis is necessary, while Foresight will be considering the potential longer term impacts of these deals.
—  The sustainable production approach
—  9. Defra should commission research to establish the reasons for the relatively low level of domestic fruit and vegetable production. This should include a study of the procurement practices of supermarkets, food manufacturers and the food service industry to establish how these practices impact on the problem. Defra's new Council of Food Policy Advisers should consider how the barriers to increased domestic fruit and vegetable production could be removed. (Paragraph 59)	—  We agree with this recommendation. Defra has an ongoing dialogue with the production industry to understand its business drivers and constraints. There is also a regular dialogue with retailers. Following early advice from the Council of Food Policy Advisers (CFPA), who hold the view that production and consumption should be looked at together, Defra held a roundtable meeting of those involved with the fresh produce industry (producers, retailers, consumer interests, R&D institutions etc.) to look at the barriers to both increasing consumption and production of UK fresh produce. As a result of this meeting, Defra is considering setting up a fruit and vegetables task force to take forward some of the issues identified as standing in the way of increasing home-production and consumption, of fruit and vegetables. This needs a sound evidence base, including, perhaps, further research of the kind suggested by the Committee. The possible new task force would link to the CFPA, either via membership or by reporting back on achievements. —   —  Some collaborative R&D in HortLINK has sought to address technical and economic constraints that the industry, including the Horticultural Development Company (HDC), has identified. For example current projects include a range of integrated crop management studies that seek to reduce reliance on chemical pesticide application and which may provide options where existing approvals are likely to be rescinded as well as areas such as water efficiency, increasing shelf life and reducing waste. Defra also has research in place responding to debate about the environmental burdens of importing food into the UK versus national or local production. This includes comparative life cycle assessment of food commodities (including fruit and vegetables) procured for UK consumption through a variety of supply chains as well as research to explore the benefits and trade-offs associated with local food procurement to assess the environmental, economic and social attributes of different supply chains and identify conflicts and barriers to promoting sustainable local food production. —   —  Recognising the influence of consumer demand on local markets, Defra research has also examined factors influencing consumer and food chain purchasing decisions, attitudes and behaviours including drivers and barriers towards purchasing local and regional foods and determined the extent of UK demand for these foods. The research found potential for further growth of local and regional food and drink products, but expansion was impeded by behavioural, structural and institutional factors including poor awareness, restrictions in the supply chain and accessibility by large-scale food trade. Barriers to consumer purchasing included cost, availability and restricted product range. With the increasing popularity of these foods, education of retailers, food service and consumers is needed to promote the availability, accessibility and benefits of local and regional foods to encourage sales and consumption.
—  10. Defra should produce its own estimate of the amount by which consumption of fruit and vegetables would rise if people in the UK followed the Government's five-a-day guidelines. (Paragraph 60)	—  Fruit and vegetable purchases were an average 2.4 kg per person per week in 2007[6], equivalent to consumption of 3.9 portions a day after allowing for wastage. On the basis of this figure, consumption would need to increase by around 30% to reach the 5-a-day target. This would be equivalent to an increase in purchases of 0.7 kg per person per week (assuming no change in the level of wastage), or 2.2 million tonnes per year for the UK as a whole. This compares with a current level of annual production of fruit and vegetables in the UK of 3.0 million tonnes in 2008, and total supplies of fresh fruit and vegetables (which excludes imports of fruit juices and other processed products) of 8.1 million tonnes.[7]
—  11. There is a big difference between aiming to be self-sufficient and aiming to increase production of certain commodities. The UK should aim to increase its production of those fruit and vegetables that are suited to being grown here, particularly where there is evidence of an increase in demand. It should also explore the potential for an increase in cereal production. However, again, we emphasise that it is essential that this increase in production is carried out sustainably. (Paragraph 61)	—  We agree on about encouraging an increase in the production of crops which can be grown in the UK for which there is a market, and to the extent that this can be done without adverse impact on the environment and in the context of the Government's wider environmental strategy, especially agri-environment schemes and cross-compliance. The response to the preceding recommendation refers to potential work to look at the issues bearing on greater production and consumption. We are also looking ahead to consider the potential impact of climate change on crop suitability for UK production. The UK National Strategy for Fruit and Vegetable Producer Organisations incorporates a specific environmental framework and Defra's own R&D work includes many projects looking means for agriculture and horticulture to improve its environmental sustainability. —   —  In most years the UK is already a net exporter of cereals and this has a direct impact on market prices, which reflect the need for our grain to be competitive on export markets. Recent reforms of the CAP, particularly the introduction of decoupling and the removal of compulsory set-aside, mean that UK cereal producers are now much better able to respond to market signals in terms of their planting decisions. This was fully demonstrated last year when UK growers produced the largest ever UK cereals crop of 24.3 million tonnes—despite very difficult harvesting conditions because of the wet weather. Looking to the future, UK cereals production will be determined largely by market demand underpinned by sustainable natural resource management, but the potential for UK producers to increase production in response to domestic demand (for example from the biofuels sector) or for export clearly exists.
—  Meat and dairy production
—  12. UK consumers buying meat and dairy products should be encouraged to consider the environmental, as well as the health, impacts of their choices. To enable consumers to make informed decisions, Defra needs to do more work on what are the most sustainable methods of livestock production, and the balance to be struck between animal welfare, biodiversity, greenhouse gas emissions, and the need to conserve inputs such as water. (Paragraph 65)	—  Consumers have an important role to play in reducing the environmental impact of the food system. They need—and many want—to be able to make informed choices about what they eat. To help with this, Government provides advice to consumers on sustainable food choices, including on the Greener Living pages on DirectGov. As recommended by the Food Matters report, the Food Standards Agency will provide a "one-stop-shop" of consumer information on sustainable diets, nutrition and food safety. —   —  Government information to consumers and others is based on the latest evidence and policy. To inform that evidence base, Defra has commissioned research to assess the environmental impacts of agricultural commodities, and compare the impacts of production under different farming systems (projects IS0205[8] and IS0208[9]). It has also commissioned research to quantify and identify solutions for reducing the impacts of farming on greenhouse gas (GHG) emissions, biodiversity, emissions to air and water, and water use, and to assess tradeoffs between pollutants. With the establishment of demonstration catchments, Defra is taking a more integrated approach to assessing the impacts of multiple interventions on multiple pollutants. This research is generating guidance on how to modify farming systems to reduce their negative environmental impacts, while maintaining or increasing productivity, and also meeting other demands such as animal welfare. —   —   —   —   —   —   —   —   —
—  Fish
—  13. The marine environment is an important source of food. However, the current state of many fish stocks is a serious cause for concern. Defra, the Department of Health and the Food Standard Agency should consider the wisdom of continuing to advise consumers to eat at least two portions of fish a week at a time when the ability of the marine environment to meet this demand is questionable. The fishing industry and the Government have a duty to encourage consumers to try sustainable, less well-known types of fish and shellfish. Defra and the devolved Administrations should produce a study evaluating the potential of sustainable aquaculture off the shores of the UK. (Paragraph 68) —	—  Sustainable fish —  The Government agrees that a significant number of fish stocks are currently in a poor state. This is due to a complex mix of overfishing, high natural mortality (low numbers of fish surviving to a size where they are taken commercially) and other environmental factors. There are serious problems with EU cod stocks and measures have been put in place through annual negotiations under the existing Common Fisheries Policy (CFP) to halt and ultimately reverse this decline. These apply in the Irish Sea, North Sea, Eastern Channel and the West of Scotland. Plans to assist the recovery of Northern Hake, Western Channel sole, North Sea plaice and sole and West of Scotland herring stocks have also been introduced. —   —   —  The recent release of the film on sustainable fisheries, "The end of the line" (based on Charles Clover's book) and subsequent media coverage has raised the public profile of sustainability issues in the seafood industry and the marine environment more generally. The Government recognises the difficulties in providing for increasing consumer demands for healthy food options whilst ensuring sustainable use of fisheries resources. This issue forms part of our current online discussion on Food 2030 which will inform our future food strategy (see recommendation 18) . —   —  The Food Standards Agency has recently reviewed its advice on fish consumption, working with a range of stakeholders and partners, including other Government Departments notably Defra, Department of Health and Scottish Government. This reflects the Agency's commitment to take sustainability into account in policy making, and also responds to earlier comments from stakeholders that such a review would be timely. The evidence for the health benefits of fish consumption remains clear, but revised advice for consumers will set this more firmly in the wider sustainability context. In particular, this will offer practical advice to assist individual consumers in making informed, sustainable choices, highlight the wide range of seafood available, and offer advice on preparing less well known types. It will also provide links to other sources of information for those wishing to investigate the background in more detail. The revised advice was published via the FSA websites in September 2009. —   —  The Sea Fish Industry Authority (or "Seafish"), a non-departmental public body and sponsored by the four UK Fisheries Administrations, provides advice and training to the seafood supply chain on a range of environmental and sustainability issues. http://www.seafish.org/sea/sustainability.asp. —   —  Aquaculture —  Defra recognises the concerns, raised by The Marine Conservation Society, that current conversion rates are unfavourable for the most commonly produced fish from aquaculture and that some environmental concerns remain. Defra is working with the Centre for Environment, Fisheries and Aquaculture Science (CEFAS) to support development of new techniques to improve productivity and sustainability of aquaculture production in the UK. —   —  The Government recognises that aquaculture has an important part to play in meeting the needs of UK consumers for a sustainable supply of fish and seafood. In 2006 aquaculture accounted for 42% of worldwide fish production. About 93% of aquaculture production occurs in Asia. More than 60% of production takes place in freshwater. In the coming decades aquaculture could become the greatest source of increased fish and shellfish production required to bridge the gap between the diminishing supply from wild resources and significantly increased demand for secure food for UK consumers and particularly in helping address the protein nutrition needs of the poorer countries in Africa and Asia. —   —  A recent study commissioned by Defra explored the potential for aquaculture to contribute to the future security of food and non-food products and services in the UK and specifically England. The report suggested that there was scope to increase production but recognized a number of constraints, including technical and geographical constraints, from reviewing England's marine and freshwater resources. —   —  The Scottish Government believes that there remains significant scope for sustainable growth of both its finfish and shellfish aquaculture, as set out in A Fresh Start: The Renewed Strategic Framework for Scottish Aquaculture. A number of projects are also underway looking at the production of algae for biomass/renewable energy generation and for food production, including as part of integrated poly-culture systems in which algae absorbs excess nutrients associated with finfish production. The Scottish Government is actively considering how offshore salmon farming can be supported and developed. —   —  There is currently no offshore aquaculture/mariculture industry established in Wales. The importance of inshore aquaculture production has increased substantially in Wales in recent years. It is felt that there is a potential to expand this activity and further contribute to food supplies, therefore reducing pressures on other wild stocks which are under increasing pressure. However, the diversity of aquaculture products that exist in Wales (mussels, oysters, bass farming etc) is not necessarily reflected in other parts of the UK, for instance in Scotland where aquaculture is very much centred on salmon farming. WAG would welcome the inclusion of aquaculture considerations into a new CFP and possibly enhanced EC support in the form of financial assistance outside of the European Fisheries Fund (EFF). Land based aquaculture is increasing used to produce saltwater species such as sea bass and Wales is at the forefront of closed system aquaculture development, using the latest re-circulation technology. Wales continues to attract investment which is presently backed by the EFF to develop its aquaculture industry. —   —  The Department for Agriculture and Rural Development (DARD) is responsible for the licensing of all fish farms in Northern Ireland. The majority of marine aquaculture is located within Northern Ireland's five sea loughs i.e. Lough Foyle, Larne Lough, Belfast Lough, Strangford Lough and Carlingford Lough. This consists mainly of the bottom culture of mussels and the trestle culture of Pacific oysters. There are also two licensed salmon farm sites off the Co Antrim coast. As in Wales, aquaculture development in Northern Ireland may attract financial support under the EFF. —   —  The four UK administrations will consider the possibility of a joint UK study evaluating the potential of sustainable aquaculture off the shores of the UK.
—  The environmental impact of increased population
—  14. Defra should produce a study setting out the volume of particular commodities that the UK would be capable of producing under different scenarios and the impact that this production would have on the environment. This study into "The UK's Agricultural Potential" should include work on the most sustainable methods of both arable and livestock production. (Paragraph 70)	—  The environmental impacts of increasing production are important and complex and it is not possible to encompass this in a single study. Defra has commissioned research to assess the environmental impacts of agricultural commodities, and compare the impacts of production under different farming systems (projects IS0205[10] and IS0208[11]). It has also commissioned research to quantify and identify solutions for reducing the impacts of farming on greenhouse gas (GHG) emissions, biodiversity, emissions to air and water, and water use, and to assess trade-offs between pollutants, which necessarily consider the impacts on animal welfare. With the establishment of demonstration catchments, Defra is taking a more integrated approach to assessing the impacts of multiple interventions on multiple pollutants. This research is generating guidance on how to modify farming systems to reduce their negative environmental impacts, while maintaining or increasing productivity. —   —  The Foresight Project on Global Food and Farming Futures has also commissioned a small number of regional case studies, one of which will explore the potential of the UK, as a representative north-west European country, to raise productivity together with the challenges and impacts of doing so.
—  Local and home production
—  15. We welcome the increasing enthusiasm among consumers for buying food that is local to a particular area of the UK, and also for growing their own food. In terms of overall production, these trends are a small contribution to a huge challenge, but they are a way of reconnecting people with food production and have an important part to play in encouraging the sort of changes in consumer behaviour that will be necessary for a sustainable system of food production. The role of local and home production, and of educating children about food, should be incorporated in Defra's vision and strategy for food. When it has been established that there is an unmet demand for allotments in a local authority area, the Government should require the local authority to publish, within three years, a plan setting out how it proposes to meet the demand. (Paragraph 74)	—  Reconnection with food —  Food Matters reported in 2008 that "people have become more interested in food production and provenance". However, it is clear that there is still a way to go to reconnect consumers with products, place, nature and process, and to reconnect producers with their market. —   —  It was also reported in Food Matters that action was needed to actively engage with consumers. Considerable work is underway to define a sustainable diet and to gain an understanding of consumer attitudes and potential for moving towards behaviours supporting it. The Council of Food Policy Advisers has defined this as a priority for their attention in their first report, which was published on 14 September. Reconnection is likely to be a key part of moving people towards pro-environmental behaviours. —   —  An interest in reconnecting with food is apparent from the number of local food initiatives that exist as well as surveys of purchases of food with particular "ethical" credentials, e.g. local, organic, free-range. The Food Matters report expressed clear support of local initiatives to engage people in food which Defra endorses. Defra is supporting an action-based research project looking at the role of community food projects in enabling and encouraging behaviour change The project will see the community-led development of a closed-loop waste system, in which food waste will be collected, composted, using a "Rocket" composter and used to grow fruit and vegetables on a housing estate. The project will explore the ways in which the adoption of pro-environmental behaviours may be encouraged amongst hard to reach groups. —   —  Locally produced food —  We recognize that there is growing public enthusiasm for locally-produced food and food with a clear regional provenance. This offers an opportunity to our producers. The marketing of regional and local food can bring economic and social benefits for producers and consumers. Because there are fewer middlemen, it allows farmers and small producers to retain a higher proportion of the end price of their produce. It also increases consumer choice and raises awareness and interest in local food by helping to improve consumers' understanding of the rural economy and food production. Over the last 6 years we have helped to facilitate local sourcing by providing funding to support a range of measures to help regional and local food producers overcome barriers to market. Examples include "meet the buyer" events aimed at retailers and the food service sector; support for farmers' markets and farm shops; and the encouragement of food hubs and shared distribution facilities. Support for the sector in England continues, at a regional level, by the Regional Development Agencies (RDAs) for activities linked to the promotion of quality regional and local food. RDAs are also responsible for the delivery of part of the Defra's Rural Development Programme for England (RDPE). Funding is available under this Programme for improving the competitiveness of a wide range of rural businesses, which could include regional and local food producers. —   —  Home production —  We agree that the role of local and home production, and of educating children about food, should be incorporated in the Government's vision and strategy for food. —   —  Defra has supported the Eat Seasonably campaign,[12] which included a "Grow your own" element. It encourages people to eat locally in season fruit and vegetables as it generally requires less energy to produce food that is relying on natural sunlight and temperatures to grow and seasonal food tends to cost people less as production and distribution costs are lower. Consumer research tells us that eating more fruit and vegetables when they are seasonally available is a simple but significant step towards a more sustainable diet for mainstream consumers. The 'Grow Your Own' phase of the campaign launched in March with a focus on making it easy for people to grow their own fruit and vegetables by providing simple step by step instructions and linking to partners' websites who provide support in a variety of ways, e.g. by helping people get support. —   —  An independent evaluation of the campaign is currently underway. It and other work underway internally to map the evidence base for the benefits of domestic food growing, community gardens and allotments will inform the extent and specifics that are incorporated into the Government's vision and strategy for food. —   —  Allotments —  In light of the increased public interest in local and home grown there has been a corresponding interest in allotments and their use, as well as a wider interest in the use of public and other land which could, in the right circumstances, be made available for local food growing. There are some excellent examples of local authorities demonstrating innovative approaches to making land available to grow in order to meet demand, as well as continuing to provide statutory allotments. —   —   Growing in the Community, the good practice guide for local authority allotment officers, aims to assist them in their statutory duty to provide allotments. The most recent version of Growing in the Community, published in March 2008, is going to be made available online shortly, to ensure that it reaches a wider audience. Government has recently commissioned the Federation of City Farms and Community Gardens to produce an update to Growing in the Community, which will be focused on how local authorities can contribute towards meeting the growing demand for allotments, by identifying good practice in minimising the time people who wish to rent an allotment have to wait before they can do so. —   —  Local authorities are already expected to consider how needs are best met in their Local Development Frameworks (LDF)—Planning Policy Guidance Note 17 (Open Space, Sport and Recreation) states that local authorities should undertake robust assessments of existing and future needs of their communities for open space, sports and recreational facilities, which includes allotments. These should form the starting point for establishing an effective strategy for open space, sport and recreation and underpinning evidence for preparing appropriate policies in documents within LDFs. —   —  Legislation does not lay down minimum standards or a required nature or extent of allotment garden provision. The Government considers it appropriate that each local authority should decide for itself what proportion of its resources to devote to these purposes. Allotment authorities therefore have room to exercise discretion about the level of and timescale for provision of allotment gardens and facilities on site. Recognising the finite availability of open space in some urban areas, and the competing demands on such land for a wide range of amenity uses, including parks, allotments, natural and semi-natural habitats, outdoor sports facilities and play areas for children and teenagers and the clear benefits they provide, PPG17 requires local authorities to set locally derived standards for the provision of different types of open space in their area taking account of local circumstances. —   —  Under the Smallholdings and Allotments Act 1908 there is a duty on local authorities to provide allotments where they perceive a demand for them in their area. Where an allotments authority is of the opinion that there is a demand for allotments in its area, section 23 of the 1908 Act puts the authority under a duty to provide a sufficient number of allotments and to let them to persons residing in its area who want them. —   —  Given the powers that exist, the Government does not support this part of the recommendation. —
—  The role of Defra
—  16. Defra's approach to the security of food supplies must take place in the context of the European Union. However, we believe that there is still scope for Defra to develop its own food policy and that the clearer this policy and the stronger Defra's leadership, the more chance the UK has of shaping the direction of any emerging EU policy on this issue. (Paragraph 78)	—  The UK Food Security Assessment recognises the importance of both EU and global trade to UK food security, and provides an innovative and integrated new way to look at food security, which could be applied more widely across Europe. As such, Defra intends to promote the assessment with the new European Parliament, Commissioners and other Member States as good practice, while also raising the profile of Foresight project to help catalyse interest and support. —   —  Defra, in partnership with BIS and DfID will also continue to stress the importance of open trade flows and efficient markets in agricultural produce in underpinning global food security, and press for continued reform of CAP and support for a successful conclusion to the Doha Development Agreement.
—  17. It is beyond the scope of this inquiry to assess the impact of the new EU pesticides legislation on the security of food supplies. However, we note with concern that the Government's Chief Scientific Adviser does not believe that it is an evidence-based policy. Defra should press for the EU to agree that future changes of this nature must not be approved by the Council of Ministers or the European Parliament until a full evidence-based evaluation of the proposals has been undertaken. (Paragraph 79)	—  The Government agrees that this legislative proposal should have been accompanied by a full impact assessment by the Commission and argued strongly for this throughout the negotiations. The UK published its own impact assessments at various stages of the negotiations to demonstrate to others what the impacts might be. The Government supports most of the Regulation, but does not believe that the provision for initial assessment of compounds based on hazard criteria rather than risk assessment (particularly for potential endocrine disruptors where agreed definitions do not yet exist) has been shown to be proportionate. The Government will be discussing how a derogation from this provision can be used for essential crop protection purposes in the UK where the risk assessment for the use of a compound is acceptable. In any future revisions of the Regulation, the Government will continue to press for an evidence-based policy.
—  Defra's progress so far
—  18. The vision and strategy for food, for which Defra was assigned responsibility in the Cabinet Office's Food Matters report, must provide a long-term framework for the UK food and farming industries. It should commit the UK to increasing production of those commodities which are best suited to being produced here, provided that this can be done in a sustainable way. Defra must recognise that calling for more domestic food production is one thing, but it cannot order that this be done. It must, however, lay out clearly what role it has in helping the UK food and farming industries to achieve this objective. The vision and strategy cannot be expected to supply all the answers, but it must supply clear direction and indicate what further work is needed and the deadline for its completion. Cross-party consensus on the vision and strategy is essential. (Paragraph 85) —	—  We agree with the Committee's recommendation that the vision and strategy should set a clear goal for a sustainable food system, shared with organisations in the food industry, and that it should be accompanied by an action plan setting out what Government, the food industry and consumers need to do in order to achieve that goal. An online discussion to gather views from a range of stakeholders and consumers on the strategy on the future of food to 2030 (Food 2030) was launched on 10 August and is available at http://sandbox.defra.gov.uk/food2030. The discussion closes on 16 October and comments will be analysed and fed into the development of the final strategy.
—  Assessing the risks
—  19. We welcome the fact that Defra is undertaking a comprehensive assessment of the risks to the security of the UK's food supplies. This work should be used as the basis for monitoring and managing risks, and should be regularly updated. Together with the vision and strategy for food, it should inform food policy decisions across all departments. It should also be used as a basis for contingency planning. The European Commission should undertake its own assessment of the risks to the security of food supplies in the EU. (Paragraph 86)	—  In August 2009, Defra published a detailed assessment of UK food security as part of a package of documents on the future of food. The papers: 'UK Food Security Assessment: Our approach', 'UK Food Security Assessment: Detailed Analysis' and 'UK Food Security: Summary' describe the Government's approach to monitoring a complex issue and ensuring the UK maintains a high level of food security, drawing on a full analytical assessment. The papers set out what food security is, the challenges and risks facing UK food security, our current assessment of the state of our food supplies, and how we plan to continue to deliver sufficient, safe and nutritious food for all in the UK. These documents have been the product of our discussions with stakeholders over the past year, are intended as a practical tool for policy and decision makers, and will be subject to review as evidence needs and sources develop. —   —  The Food Security Assessment contains indicators on energy reliability, the diversity of our oil and gas imports, retailer and cereal stock levels, the diversity of our food industry, business continuity planning, the viability of large manufacturers, and the capacity of our strategic road network, that will be used to inform contingency planning. Defra also uses the national risk assessment capability (which identifies risks to the UK as a whole over a five year period, and assesses their likelihood and impact) to form the basis for decisions about emergency preparedness and about capability planning. —   —  The UK's new Food Security Assessment recognises the importance of both EU and global trade to UK food security, and could be applied more widely across Europe. We are unable to answer for the European Commission, but we intend to promote the assessment with the new European Parliament, Commissioners and other Member States as an example of good practice.
—  The structure for delivering food policy
—  20. We believe that both the Food Strategy Task Force and the Cabinet Sub-Committee on Food could benefit from input from the food sector. They should set out how they intend to involve members of the sector in their deliberations. (Paragraph 89)	—  We agree that there are advantages from engaging with the food sector, and the Government will continue to do so. There are a range of existing mechanisms in place for this engagement, including within individual departments and with established groups, including the Council of Food Policy Advisers. Where appropriate, stakeholders views are shared between departments at these cross-Whitehall groups and relevant information and outputs shared with stakeholders. —   —  Following the publication of the One year on report, the role of the Food Strategy Task Force will now be revised. In the light of the outcome, the group will consider the best way to engage with members of the food sector. This will not replace the need for individual departments to continue to engage on policy specific concerns. —   —   —  The results of this engagement with the food sector, whether by individual departments or mechanisms such as the Council of Food Policy Advisers, are a valuable input to the Cabinet Sub-Committee on Food.
—  21. Defra should use its review of its relationships with the food sector to consider how it can encourage the wider food sector to interact with the Council of Food Policy Advisers. (Paragraph 92)	—  The Council of Food Policy Advisors has engaged and continues to engage widely with a range of stakeholders, from charities, to industry, to government departments. Defra also draws attention to the activities of the Council through its regular contact with stakeholders. The Council are happy to take suggestions from Defra on key stakeholders, although they also maintain a degree of distance and independence. In setting their agenda and priorities they will continue to invite a range of food sector stakeholders to discuss views at meetings and are open to comments and suggestions via the website. A selection of those met with to date can be found below: —   —  Martin Haworth (NFU) —  Joanne Denny-Finch (IGD) —  Andrew Sharpe (Thanet Earth/Fresca Group) —  Nigel Jenney (Fresh Produce Consortium) —  Tony Byrne / Allan Edwards (Compass Group) —  Tony Lowe (Fareshare) —  Justin King (Sainsbury's) —  English Apples and Pear Board —  Food and Drink Federation Executive Board
—  22. We extend a cautious welcome to the new groups working on food policy. The composition of the Food Strategy Task Force and the Cabinet Sub-Committee on Food means that they have the potential to improve co-ordination across Government. However, the Task Force and the Sub-Committee must be used as a way of facilitating action, rather than a substitute for it. To this end, as much information as possible about the groups' decisions and the work resulting from them should be published on the internet. The Government should make use of modern, IT-based solutions as a way of engaging with consumers and the food and farming industries. The Council of Food Policy Advisers is already setting a good example. The Task Force should aim to publish more information about its work and the Sub-Committee should consider whether it can disclose any, even very basic, information—if not about its work, then at least about any work set in train as a result of its deliberations. (Paragraph 93)	—  The on-line consultation on the future of food (Food 2030), launched on 10 August, is a new way for us to engage with our stakeholders. We have also recently refreshed the Defra website as a portal for accessing information on food policy. We will continue to look at new ways of engaging, including making use of IT-based solutions, as we look to restructure the Food Strategy Task Force. The new group will consider the best approach. —   —  In common with other Cabinet Committees, the Prime Minister has published the terms of reference and membership of the Cabinet Sub-Committee on Food. Announcements about government action in relation to the food sector will be made in the usual way.
—  23. Defra's vision for the UK food and farming industries is still being formulated. We are encouraged by the signs that Defra has begun to recognise the importance of UK production, as well as trade, in securing food supplies. It is essential that it develops and articulates this vision. Clear leadership from Defra is crucial to the security of the UK's food supplies because it will encourage the food and farming industries, and consumers, to respond in a co-ordinated way to the challenges posed by a growing global population, climate change, and increasingly scarce resources. (Paragraph 94)	—  We agree with the Committee's recommendation. The aims of developing a vision and strategy for food are to define what we mean by a sustainable and secure food system, set a roadmap to achieving our goal, and to build buy-in with stakeholders to help improve delivery of existing and future policies. The benefits of this will be to give stakeholders a clear indication of Government's thinking on sustainable food, demonstrate leadership on the big challenges in the food system, and to bring together our policies for a sustainable and secure food system.
—  Targets for production
—  24. Targets are a crude and, in most cases, impractical way of increasing food production. We see no point in Defra adopting production targets for particular commodities. Instead, Defra should concentrate on helping to build capacity within the food and farming industries so that they are well placed to respond to market signals. However, if the global or national situation with regard to food were to worsen significantly, and the market did fail to deliver supplies of certain food stuffs, the possibility that the Government may need to consider production targets, and Government-held stocks of particular commodities, should not be ruled out altogether. (Paragraph 97)	—  We agree that production targets would not be helpful. Direct support for production may have a role in times of crisis, but the surpluses created by European production subsidies demonstrated the drawbacks. We want to see a British farming sector that is competitive, and producing food that consumers want, in a way that is sustainable, so as not to jeopardise the ability of future generations to exploit and enjoy our natural resources and landscapes. —   —  Capacity building has to be focused on improving productivity and competitiveness so the farming and food industries are flexible and can respond quickly to satisfy market demands. We are working with the farming industry on improving its skills levels, particularly business skills. —   —  National and global stock levels are monitored in the UK food security assessment. Business continuity planning across the supply chain is also a key factor in ensuring continuous food supplies to consumers. Part of the Food Strategy Task Force is currently reviewing, as part of its work on global food markets, the arguments in respect of Government-held stocks. We are also working to identity whether further measures might be necessary to bolster the competitiveness and resilience of the industry.
—  The Common Agricultural Policy
—  25. We do not consider that the interests of food security would be served by a return to direct production subsides under the CAP, although, again, if the global situation with regard to food supplies were to worsen significantly, the possibility of some form of direct production subsidy should not be excluded altogether. The CAP is a way of rewarding farmers for the provision of environmental services. However, the focus of the post-2013 CAP should be on sustainable food production, rather than land management by itself. Europe has a responsibility to contribute to global food supplies and the EU must ensure that European countries are in a position to respond to increased demand. We are disappointed that the Lisbon Treaty did not address the out-of-date nature of European agricultural obligations and reflect the increasing importance of sustainability. The principles of the new CAP should be reflected in future amendments of EU treaties. (Paragraph 106)	—  The Government agrees that it is vital to increase food production globally, and that this must be in an environmentally sustainable way to avoid storing up bigger problems in the future. The Government also agrees that food security interests would not be served by a return to direct production subsidies, and nor do we envisage a time when there would be a need to reconsider them; direct production subsidies exacerbate food security concerns by distorting markets and undermining the ability of other countries to produce and trade agricultural goods. Instead, a competitive and sustainable agricultural sector is crucial for global, European and UK food security, one which is driven by a free and open global market providing a diverse supply with access to safe, quality, and nutritional food. We want to see the CAP reformed to deliver this, rewarding farmers for the provision of societal benefits, particularly environmental outcomes that are not otherwise delivered through the market. Environmental protection was mandated by the Treaty establishing the European Community with the addition of a provision (Treaty of Amsterdam, 1997) that it be incorporated into all other policies, including the CAP, and there are existing schemes under Pillar 2 of CAP that are designed to encourage farmers to adopt environmentally beneficial land management practices, which underpin the long term sustainability of EU natural resources. There are signs that progress is being made, and these sorts of targeted programmes need to be continued and strengthened as CAP is reformed.
—  Research and development
—  26. UK scientific research is crucial to the security of food supplies. Without adequately structured, funded and focused research, the challenge of producing more food and producing it sustainably will not be met. Concentrating on developing a strong research base in the UK could also have a beneficial impact on global food security. The Government should encourage UK research institutes and universities to build more links with research centres that are working on food and farming worldwide, particularly in developing countries. (Paragraph 112)	—  The UK has world-class facilities and resources which underpin agri-food research, and which bring benefit not only to the UK but internationally in addressing food security challenges. The national capability includes major facilities and centres of expertise at Research Council and Government institutes, as well as in the university and private sectors. The Government recognises that continuing to capitalise on the excellence of the UK's research base will require a strategic and coordinated approach to sustaining and developing this essential infrastructure. Also important will be to further strengthen links between UK research institutes, academia and business, both within the UK and with European and international partners. The Government has several funding mechanisms to facilitate this, including LINK programmes, Technology Strategy Board initiatives, and strategic partnerships between DFID and the Research Councils. UK organisations also participate strongly in the EU Framework Programmes, which address not only food production, manufacture and safety but also health-related issues such as obesity. For example, in the EU Framework 6 Programme theme on Food Safety and Quality, the UK was represented on 121 approved project contracts. —   —  Defra also has a strong growing collaboration with China on environmentally sustainable agriculture including development of a UK-China Food Security Action Plan to accelerate bilateral cooperation on food security though research collaboration, improving food quality and food safety and promoting agricultural trade, and through joint cooperation in agriculture and fisheries in Africa. —
—  The research budget
—  27. More money needs to be spent on public-sector food and farming research in the UK. The long-term nature of returns from research means that this money needs to be committed without delay. We urge Defra, the Government's Chief Scientific Adviser, and the BBSRC to continue to make the case for increased investment in food and farming research, using new structures such as the Food Research Sub-Group to convey their arguments in a co-ordinated and coherent way. (Paragraph 118)	—  The Government agrees the need to reprioritise investment in agri-food research in order to strengthen its impact on policy goals and the longer term vision for a more sustainable food system. The range of activities and programmes to achieve this will be brought together in a new cross-government food research and innovation strategy, to be published later in the year. The Food Research sub-Group of the Food Strategy Task Force is leading the development of this, under the chairmanship of the Government's Chief Scientific Adviser. The BBSRC is leading the development of plans for coordination of current research through a new cross council multi-disciplinary programme in Food Security with Defra, DfID and other key partners.
—  The focus of the research
—  28. The focus of public sector food and farming research should be on increasing production sustainably and on realising benefits to the consumer and to the environment across the whole of the food chain. Defra should develop a long-term strategic research agenda, overseen by its Chief Scientific Adviser, rather than allowing its research priorities to be determined wholly or largely by policy teams. Such an approach must reflect both the potential of UK agriculture, and the threats it faces from pests, diseases and climate change. (Paragraph 120)	—  Through the vision sub-group of the Food Strategy Taskforce, the Government is strengthening its approach to food policy, including by developing a shared understanding of its goals and priorities for the food system. The overall government vision for a more sustainable food system identified what an economically, environmentally and socially sustainable food system should look like in 2030. It builds on four established strategic policy objectives for food, which are to secure: —   fair prices, choice, access to food and food security through promotion of open and competitive markets; continuous improvement in food safety; changes needed to deliver healthier diets; and a more environmentally sustainable food chain. —  Investment in science and technology has a key role to play in ensuring a secure, sustainable and healthy food supply, and is integral to all aspects of the vision. A joined-up approach on research and innovation is vital, to underpin coherent policy making, to maximise the contribution of UK research in addressing domestic and global goals, and to help reap the opportunities of vast global markets. The Government will publish a new cross-government food research and innovation strategy in the autumn, providing enhanced focus on food security research and a framework for collaboration between key funders and other stakeholders. —   —  Defra under the lead of its Chief Scientific Advisor is in the process of reviewing its long term evidence investment strategy for all policy areas, including food. This review covers the full range of Defra's investment in economics, social and natural science including in-house expert staff , external expert advice and contracted monitoring and surveillance, and R&D, taking full account of existing knowledge and of data gathering and research funded by other UK and international funders. Its aim is to ensure that Defra invests in evidence in the most cost-effective way to:- deliver robust and timely evidence to support the development, appraisal, delivery and evaluation of policy. Support the delivery of Defra's departmental priorities and reflect the strategic needs of the whole Defra network; Address future opportunities and threats; Deliver the required internal skills; and Support key external capabilities. —   —  Recognising the need for innovation and innovative approaches, the strategy will drive best practice in the procurement and use of evidence and prioritise our investments so as to get the biggest impact now and for the future.
—  29. It is not within the scope of this report to offer a detailed assessment of the role of GM technology in securing food supplies up to 2050 and beyond. However, we believe that the potential of GM technology in the context of sustainable food production should be explored further. Defra has a role to play not only in commissioning some of the research, but in gaining public trust through the provision of comprehensible information, based on evidence. It should make an effort to "negotiate a ceasefire" on the destruction of GM crop trials so that more facts can be established. (Paragraph 123)	—  The Government agrees that the potential of GM technology in the context of sustainable food production should be explored further. Safety must remain our top priority in relation to GM technology. Whilst we are satisfied that the current regulatory system is robust and does ensure safety, we must continue to ensure it adapts to keep pace with changes in the technology and its use. —   —  The identification of potential solutions to sustainable food production challenges must be 'needs' led. Whilst GM will not be the answer to all the challenges we face, as long as safety is ensured, potential GM solutions should be considered. For example, the Government has funded a range of research, some of which is GM, to develop ways to combat the potato cyst nematode, a widespread pest that has a significant impact on yields. DFID is already supporting research on GM crops, as part of its broader funding of agricultural research, to benefit poor farmers in developing countries and help achieve food security. An example is the development of Bt brassicas (cabbages) which are resistant to a major pest, the diamond back moth. The use of Bt brassicas have the potential to increase food production and the incomes of many small holder farmers who grow them . They could also have a positive environmental impact by reducing the use of pesticides which farmers now use to control the moth. —   —  The Government will continue to be led by science when assessing the safety of GM technologies. As well as communicating the science of the possible risks of such products, there is a need to understand and communicate their potential benefits and the concerns some sections of the public hold. The FSA is taking forward a programme of consumer engagement. This will provide an opportunity to discuss with consumers their understanding of GM, what it might bring in terms of risks and benefits, and what information can be provided to enable consumers to make informed choices. —   —  Research utilising GM technologies to build our understanding of plants or to produce potentially beneficial GM products must be allowed to proceed without the threat of vandalism. The actions of a very small minority must not be allowed to hamper efforts to better understand these technologies or to act as an unreasonable block on fundamental research and potentially useful innovation. The Government will seek to facilitate the hosting of such research trials at suitable sites that can provide greater security if required (including, if appropriate, through funding of security costs for eligible grants by BBSRC), and will continue to work with the police to ensure that, whilst peaceful protest can proceed, property is protected and those who engage in criminal activity are prosecuted. In line with this the BBSRC and Defra have recently funded the security arrangements, as part of the broader project costs, for a re-run of the University of Leeds nematode-resistant potato research trial.
—  Translational services and research
—  30. It is essential that, once research has been carried out, its benefits can be realised by people working in the food and farming sectors. The extent to which this was identified as a failing in the present system is a serious cause for concern. In conjunction with the BBSRC, Defra should set out what more it intends to do to address this failing. There is a case for the reinstatement of a public-sector provider of advice on best practice, similar to the old ADAS system, to co-ordinate and build on existing translational services. It should act as an agricultural equivalent of Business Link. (Paragraph 126)	—  The Government agrees the importance of efficiently translating research outputs into practical use. It recognises too the complexity of the issues and challenges involved. —   —  Food and farming comprise a diverse range of sectors, with differing profiles of business size and varying levels of expertise in accessing and applying new technologies and innovations. Translational services need to consider research outputs in relation to products, processes, technologies and knowledge, and tailored to the specific circumstances and challenges faced by each sector, and indeed by individual companies. —   —  Industry bodies will often have a key contribution to make, given their understanding of the companies and issues in their sector, and of the most effective means of relaying information and advice. —   —  Proposals for strengthening translational services will need to take account of the existing landscape of relevant services and organisations, including the Agriculture and Horticulture Development Board, the LINK programme, Farming Futures and future contributions planned by the Technology Strategy Board, among others. A Business Link- type service for agriculture to contribute to improving the efficiency and effectiveness of translational services is an interesting idea that the Government will consider further with stakeholder bodies, alongside other possible solutions. It is unlikely however that there will be any "one size fits all" approach, and affordability is clearly one factor. —   —  The public/private Food Research Partnership (FRP), established by the Government Chief Scientific Adviser and bringing together senior representatives of the public sector (including Defra and BBSRC), academics, NGOs and industry from across food and agriculture, is currently looking at these issues and possible solutions. A number of aspects will be considered, including the balance of roles between the public and private sectors. —
—  Skills
—  31. We emphasise the urgency of addressing the potential gaps in food and farming skills. We are particularly concerned about the applied sciences. We believe that there is already sufficient evidence for Defra to reintroduce a studentship scheme based on the scheme formerly run by MAFF, with the aim of encouraging more young people to acquire the skills that will help the UK and the world to produce more food, more sustainably. We recommend that Defra reintroduce such a scheme. (Paragraph 130)	—  The Government recognises the importance of maintaining a range of strategically important areas of expertise in the UK in order to tackle the challenges surrounding food security. The Council of Food Policy Advisors has already identified skills as a key issue to consider and will be gathering evidence and considering solutions, alongside key stakeholders, over the next few months. —   —  The Food Research Partnership under Professor John Beddington brings together the key funders and research providers, both public and private, in order to understand high-level skills needs better, and how to address any emerging vulnerability in the supply of expertise which research providers and employers need. A subgroup looking specifically at skills issues has been convened and will be reporting to the Food Research Partnership in September 2009. BBSRC as the lead organisation with responsibility for funding post-graduate training in this area already provides a number of mechanisms to allow academia, industry and the Levy Bodies to work together on collaborative training—such as pump-priming for short-course professional development, Knowledge Transfer Partnerships (with the Technology Strategy Board), and CASE PhD studentships. A consultation on the new BBSRC-led initiative, Advanced Training Partnerships, will be launched in the Autumn with the aim of funding consortia of research training providers, employers, the agricultural colleges, and other bodies, to ensure that emerging areas of vulnerability are identified and addressed in partnership. —   —  As part of the development of Defra's next Evidence Investment Strategy and workforce planning, we are considering how we ensure the right balance of skills and disciplines in the department, including the supply of skilled personnel to Defra. As part of the strategy we are also considering how we can encourage more interactions between academia and government. —   —  Skills improvement is also a core element of the Government's vision for farming, establishing an industry which has all the appropriate skills to be fully competitive in the marketplace and have less impact on the environment. Hilary Benn hosted an agri-skills roundtable meeting at the Royal Agricultural College in early April 2009, bringing together a range of stakeholders from across the farming industry and the public sector. One of the critical areas for skills development is improving business skills to increase farms' profitability and competitiveness. The industry-led Agri-Skills Forum is now developing an action plan for how the industry and Government can work to further raise farming skills levels. In September 2009, Government also launched the new Diploma for 14-19 year olds in Environmental and Land-Based Studies. This will help young people learn about the role of the countryside and may help them into careers in agriculture. —   —
—  The food chain
—  32. Defra should set out how it plans to address the perceived weaknesses in its understanding of the food supply chain and what measures it intends to take to ensure that dialogue with the food industry leads to action. As a first step, it should arrange for more of its officials to undertake work placements in different sectors of the food and farming industries so that they can experience the problems, challenges and possibilities at first hand. (Paragraph 131)	—  Defra is committed to making interchange available to people at all levels throughout the organisation, as there are potentially great benefits both to the individual and the department. Typical types of interchange to develop the skills of staff include: secondment (both inwards and outwards); loans to other departments and legal traineeship. In addition, Defra's HR policies allow for attachments of less than 3 months to undertake short-term projects; twinning of two people at similar levels in different organisations to meet regularly to learn from and support each other, where experience is needed in a relevant subject; and "buddying", whereby regular meetings with someone at a similar level in a different but linked organisation can be organised for mutual benefit and support. A recent example of interchange was a secondment to the Food and Drink Federation of a Defra member of the SCS for the period of one year. However, these types of interchange require that officials actively seek out these opportunities - as the benefits to the official in question need to be balanced by that individual with their domestic arrangements and potential loss of career opportunities within the Department during their period of absence. —   —  In addition to promoting the opportunity for interchange to its staff, Defra meets regularly with the food industry and its trade associations to explore issues of mutual interest, commissions social, economic and scientific evidence from its in-house food specialists (which includes economic, statistical and scientific staff), and the Defra Food Policy Unit arranges a programme of visits to the food industry each year for Ministers, members of the Council of Food Policy Advisors and officials. This programme will continue for the foreseeable future.
—  33. Food must be affordable to the consumer, but its prices must also make it worthwhile to produce in the first place. An agricultural system must be profitable to be healthy. Defra should initiate work to establish whether the different agricultural sectors are currently sufficiently profitable to enable them to invest, and therefore improve productivity in the long term. (Paragraph 133)	—  Defra already collects detailed data on the profitability, economic performance and financial health of farm businesses in England through the annual Farm Business Survey. This enables comparison of the profitability of key agricultural and horticultural sectors and farm sizes in the different regions in England. The data show a wide variation in economic performance across farms and within farm types. This shows there is scope for the low performers to considerably improve, via increased output, reduced costs or both. This might mean increasing scale, but not necessarily—within any farm size band, the range in performance between the best and the worst is considerable—suggesting that many businesses can considerably improve performance without having to increase their size. —   —  One of the key outcomes of this data collection and analysis is the distribution of performance across farms, with the most efficient being profitable and able to invest, but with the gap between them and the rest widening over time. We need to understand the characteristics of those farms at the frontier of efficiency and what we can do to help improve those who are under-performing. We recently held a workshop and a discussion document on this is planned for this Autumn on what Government, industry and other players can do to improve the resilience and competitiveness of the sector.
—  34. Strong relationships in the food chain are an important element of securing food supplies over the long term. Defra should consider applying the principle of the Pig Meat Supply Chain Task Force to other sectors where necessary. (Paragraph 134)	—  Government agrees that supply chain co-operation can provide an important contribution to securing food supplies in the longer term. As stated in our response to the Committee's report on The English Pig Industry, relationships between retailers and producers are primarily commercial ones for them to determine, and this is not a matter in which government should normally intervene. However, we accept there is an important role for government to play in fostering greater transparency up and down the supply chain, and acting as a catalyst to encourage greater collaboration where there are challenges to be faced which would benefit from a more co-ordinated or integrated approach. —   —  The Pig Meat Supply Chain Task Force, set up by Government earlier this year, aims to improve the resilience of the pig meat supply chain through increased collaboration and achieving best practice throughout the chain. In order to ensure the initiative would deliver tangible benefits, it was agreed at the outset that the Task Force would be set up for a limited time period, initially of a year, and would be strongly focussed on the successful delivery of outcomes and outputs. The success of the Task Force will be measured against the delivery of relevant goals identified by the four subgroups, which are focussing on labelling, procurement, environmental regulation and herd health, and agreed by the Task Force. To date good progress is being made against the agreed goals of all the subgroups. —   —  The principle of supporting and fostering strong supply chain relationships is also already in evidence through other government initiatives, such as the Dairy Supply Chain Forum which provides a framework within which the different parts of the dairy sector can come together to discuss challenges facing the industry and develop collaborative solutions to those challenges. At the most recent meeting in June 2009, it was agreed that a new Horizon Scanning Working Group would be established to help identify those challenges and issues affecting sector confidence at present, and help develop possible solutions. —   —  As outlined in response to the Committee's recommendation on the need for increased UK production and consumption of fruit and vegetables, Defra is also considering establishing a fruit and vegetables task force which will begin to take forward some of the issues identified which stand in the way of this. —   —  There are no plans as yet to replicate the above examples in other commodity sectors. However we are already seeing the value of such initiatives in improving supply chain relationships and would be open to supporting other sectors in developing their own Task Forces, where there are specific improvements to be made. —
—  35. Defra should monitor the supply chain infrastructure in the short-term to ensure that potentially damaging trends are identified and addressed before they affect the UK's abilities to secure its food supplies in the long term. (Paragraph 135)	—  We have published on 10 August 2009 a package of material on the future of our food system. This includes our work on Food Security, for which indicators covering global availability and food chain resilience have been developed. Additionally, a consultation on a set of indicators Defra is developing for a sustainable food system has also been published. The aim of this developing work is to produce a suite of indicators which will measure progress towards a sustainable food system. These include indicators for economic and performance, to ensure that potentially damaging trends are identified. When complete, these indicators will form a companion to the UK food security assessment. The framework of proposed indicators is based around seven themes: Economic performance and resilience Skills and innovation Eco-efficiency Essential resources A healthy and well managed ecosystem Healthy and informed consumers A safe food supply.
—  Conclusion
—  36. We are broadly satisfied that Defra is beginning to move in the right direction. However, there is a great deal still to do. The scale and importance of the challenge is such that we recommend that Defra publish a supplement to its Departmental Annual Report, detailing what it is doing to ensure the long-term security of the UK's food supplies, both through trade and domestic production. (Paragraph 137)	—  We welcome the Committee's view on our progress and agree that there is much work to do. —  We published the first assessment of UK's food security on 10 August 2009. This sets out our detailed assessment of the resilience of the UK food system to risks and challenges and suggested areas where further actions may need to be taken. We also set out our approach and the actions we are already taking to face the challenge of meeting our future food security. However, it is clear that given these future challenges, we will need to continue to assess and manage the risks to food security on an on-going basis. —   —  We will review the most significant risks under each of the six themes on a regular basis, drawing in any new insights from wider horizon-scanning and scenario-based approaches, such as those used in the Foresight study. We will use this information to look at what the risks might be in five and ten years time, and further ahead to 2050. —   —  We will keep the indicators under review and revise them or develop them as necessary, for examples as new evidence becomes available. It is intended that the UK Food Security Assessment will be a working tool for decision-makers, including Government, business and other individuals and organisations, and we will continue to make updated information available in order to help inform decision-making and prioritise action. In the immediate future, the Assessment will also feed into the cross-Government vision and strategy for food, to be developed later this year. This will set out action required from Government, business and other actors to ensure future security and sustainability of our food system. —   —  Progress in strengthening our food security will be monitored through Defra's own performance management system. We have as a Departmental Strategic Outcome (DSO) a sustainable, secure and healthy food system, and our progress on delivering DSOs is set out in our Departmental Report. It is logical that we would include a section within this to report on food security, which is an important element of delivering our DSO.
—  37. Securing food supplies is a vast subject and there are many aspects that we have not been able to cover in this report. We regard this as the first in a series of food-related inquiries to be undertaken by this Committee. It is likely that our subsequent work will focus on some of the solutions to the challenges we have outlined. We would welcome feedback and suggestions for future work. We propose to hold a public discussion to enable people to respond to the report and to the Government's reply, and to shape the direction of future inquiries on this subject. (Paragraph 138)	—  We agree that this is an important and wide-ranging topic and would welcome further contributions from the Committee. The UK Food Security Assessment shows that the UK is doing well in many areas which make up a secure and sustainable food system, such as a diverse food supply and a strong distribution system. —   —  The main challenge will be to meet increasing and changing demand - a global need—while ensuring the sustainability of our food system so that it continues to be secure in the medium and long-term. We need to find ways to reduce environmental impacts of food production, including climate change, water and biodiversity impacts. Globally, a changing climate will pose considerable challenges to agriculture, including falling crop yields in many areas, particularly developing regions, and significant decreases in water availability. Defra, in partnership with DH and FSA, is currently hosting an online discussion[13] on these and other food related issues as part of our consultation to develop a food strategy for 2030, and has already received a number of comments from members of the public, food businesses and other interested organisations.

Ofwat Price Review 2009—5th Report (HC 554, 2008-09), PUBLISHED 22 JULY 2009, GOVERNMENT RESPONSE PUBLISHED 19 OCTOBER 2009 (—4TH SPECIAL REPORT (HC 1023, 2008-09))

—  Conclusion/Recommendation	—  Government Response
—  KEY CHALLENGES FOR PR 09
—  1. The challenge for Ofwat is to balance the requirement for sustainable water supplies, delivered by water companies able to pay for necessary environmental improvements, with bills that are affordable for consumers. This must be delivered against the background of the current economic recession and the predicted impacts of climate change. (Paragraph 13)	—  The Government agrees with this recommendation. When Ofwat began the process in 2007 customers were put at the heart of the 2009 price review (PR09)—well before the current economic recession occurred. Ofwat also identified that it would be a priority for the companies to address the potential impacts of climate change. —   —  Ofwat is clear that the price limits it sets should allow companies to supply water and sewerage services and make necessary drinking water quality and environmental improvements. The draft determination does this—the price limits will allow all companies to meet all their obligations in a sustainable way, putting in place more than 99 per cent of the national environment programme, delivering required improvements to drinking water supplies, providing a secure water supply system and maintaining networks in a condition to deliver a quality service now and in the future. —   —  Ofwat's draft determination also contributes to the affordability objective as under its proposals bills will be steady and, in some cases, lower on average across England and Wales by the end of the price review period.
—  2. The Government's decisions on implementing the Cave and Walker reviews' recommendations and the content of the Flood and Water Management Bill will still be unresolved when Ofwat comes to make its final determinations for this price review. The uncertainty generated may affect the companies' ability to raise money on the capital markets. Despite the 'change protocol' mechanism, we conclude that Defra should set out the probable timing of its full responses to the Cave and Walker reviews; and to what extent and how the regulation of the water industry will be altered by the Flood and Water Management Bill. (Paragraph 15)	—  The Government is sympathetic to this recommendation but would note that we have not seen any evidence that uncertainty around the proposals in the Cave and Walker Reviews, or the Flood and Water Management Bill which we have published in draft, are affecting companies' ability to raise money on the capital markets. —   —  Ideally, Ofwat's final determination of water price limits would take full account of the recommendations that the Government proposes to take forward from the Cave and Walker Reviews and the proposals in the Flood and Water Management Bill. However, this is not possible given that Ofwat will issue final determinations in late November. —   —  The Government and Welsh Assembly Government issued a joint consultation paper on the implementation of the Cave Review's recommendations on 17 September. The consultation will run for three months until the end of the year and the Government will then consider the responses received in early 2010, with a view to introducing any necessary reforms into legislation at the earliest opportunity. —  The final report of the Walker Review is now expected in November. The Government will consider the timing and process for taking forward its response to the final Walker recommendations once these have been published.
—  TRANSPARENCY AND BURDEN OF PROCESS
—  3. We recognise that economic regulation of a monopoly utility will be complicated and welcome the improvements in transparency in this price review. We commend Ofwat and the companies' determination to place more information in the public domain and recognise that Ofwat will need to publish a series of guidance and information as the process develops through consultation and discussion. Nevertheless, the current regime's complexity risks hampering the regulator's wish to increase transparency. We recommend that Ofwat and Defra seek ways to rationalise, and make more comprehensible, the process to companies. We further recommend that Ofwat and Defra consider what further information relating to the price review can be placed in the public domain, and ensure that such information is comprehensible and comprehensive. The volume of a submission is no substitute for the quality of its content. (Paragraph 20)	—  The Government agrees with this recommendation. Ofwat is committed to improving the effectiveness and value of price-setting information. Ofwat's formal review of the 2009 price review process will take place sometime in 2010, depending on any appeals to the Competition Commission following final determinations. This review will consider issues around transparency, the provision of information and the comprehensibility of the process. Defra will contribute to this review. —   —  PR09 is the most transparent price review so far. The only information not placed in the public domain is that which relates to national security or to matters that are commercially confidential, such as Ofwat's view on the costs of putting in place solutions to individual and identifiable problems. —
—  CONSUMER ENGAGEMENT
—  4. We recommend that Ofwat require companies to demonstrate how consultation with their consumers has informed their business plans. We further recommend that it be a condition for Ofwat's approval of a company's business plan that the company demonstrate that its plan is understood by the majority of its consumers. (Paragraph 22)	—  The Government agrees with this recommendation. Ofwat expects companies to show clear evidence of having consulted with their customers and taken account of their views in developing business plans. —  Ofwat's current approach to price setting is not to approve a business plan as such, but rather to take a view of each company's proposals. Nevertheless, for future price reviews, Ofwat will ask companies to set out how they have consulted with customers and how this has informed their business plans. —   —  Business plans submitted for the purpose of setting price limits necessarily contain complex and sensitive technical material that a typical water customer is unlikely to understand. For this reason, for PR09, Ofwat asked each company to develop and publish a summary of its business plan set out in a way that would allow customers to understand its proposals and their implications. We were pleased that CCWater built on this approach by providing feedback to each company on the public summaries and offering advice on how these could be improved. For the next price review Ofwat will develop this by providing companies with examples of accepted good practice and formalise the role of CCWater, as the customer representative, in providing companies with advice on producing business plan summaries that the majority of customers can understand. —
—  A SUSTAINABLE WATER POLICY
—  5. We recommend that Defra sets out how it envisages delivery of Future Water's objectives will impact on the industry and the regulator. Water customers will be part of the delivery mechanism of Future Water, particularly in relation to reducing water demand. Defra should include in its analysis the role played by water customers and the likely impact upon them. (Paragraph 25)	—  Future Water is a cross-Government strategy that looks ahead to 2030 and we are working closely with our key delivery partners, including Ofwat and the water companies, to take forward the action points set out in the strategy. Implementation of Future Water can be tailored to local circumstances, and can be achieved in many different ways. Innovation and scientific advances over the next two decades are also likely to make new solutions available. Consequently estimating the impact of Future Water on the industry and Ofwat, including how much the strategy will cost or where these costs will fall, would be a premature exercise at this time. However, where policy direction and action are more certain there have been, and will continue to be, relevant individual impact assessments to accompany consultations and announcements. Value for money, affordability and environmental impact are key criteria in choosing suitable implementation.
—  ENVIRONMENTAL PROCESS
—  6. We recommend that Defra explore the potential for derogations to implementation of the EU Water Framework Directive's requirements to enable the phasing of environmental improvements and their related costs, where the near-term burden of these on customers would be severe. (Paragraph 33)	—  The Government agrees with this recommendation. The Environment Agency concluded their six month consultation on the draft River Basin Management Plans on 22 June. The plans were developed in line with Ministerial guidance which supported utilising the three planning periods to achieve the objectives of the Directive, based on extensive cost effective analysis that had been undertaken as a part of the Collaborative Research Programme. Due to the uncertainty associated with classification results, source apportionment and the effectiveness of measures, a longer-term adaptive approach to river basin planning should be more effective and cost effective than an unphased approach, given the current state of knowledge. —   —  The draft plans contained a range of measures that would enable us to work towards our objectives but to do so in a proportionate way. The Environment Agency is currently in the process of preparing the final plans for approval by Ministers. —   —  Ofwat has also been working closely with the Environment Agency on the application of the disproportionate cost assessment under the Water Framework Directive. This work has looked closely at the possibility for deferring schemes which would place a heavy near-term burden on customers with little benefit in return. Final decisions on this will be made by Ministers when the final versions of the River Basin Management Plans are announced later this year. In the meantime Ofwat's draft determinations reflect the joint work with Environment Agency.
—  7. We further recommend that Defra provide clear guidance to Ofwat as to the application of cost benefit analysis and Ofwat's guidance to the companies needs to be clear and unambiguous. (Paragraph 34)	—  Defra sets the policy or regulatory framework for Ofwat, the independent economic regulator for the water and sewerage industry. Like Defra and other Ministerial and non-Ministerial departments, Ofwat is guided by HMT's Green Book on the economic assessment of spending and investment and the application of cost benefit analysis. This sets the general framework for economic analysis within government. Defra does not provide further guidance to Ofwat specifically on cost benefit analysis (CBA) as it is a principle of the framework that those with the responsibility for incurring the expenditure also have the responsibility for appraising it. —   —  Defra also believes that further generic guidance to Ofwat would not be helpful but the Department stands ready to help Ofwat interpret specific requirements in relation to the implementation of water policies, such as the consideration of the costs of carbon or the environmental benefits of water status improvements. It is recognised that in addition to providing information of the costs and benefits of policies (to develop or aid the implementation of policies) there is a role for CBA in making the costs and benefits of water company investments transparent to customers. —   —  Defra agrees that guidance from Ofwat to companies on CBA should be clear and unambiguous, referencing the Green Book and associated guidance. The large number of water companies and the large number of projects undertaken by companies mean that certain generic guidance is likely to be needed in terms of ensuring a level playing field and for comparative purposes. However, this should not be so specific as to be to the detriment of encouraging innovation nor be counter to arms-length regulation and getting companies to own their plans. Water and sewerage companies should be undertaking CBA to inform their own decision-making and planning. Defra stands ready to assist Ofwat in interpreting how CBA should be applied in individual cases, or over the longer term in relation to specific types of projects. —   —  Ofwat's guidance to companies on the CBA to accompany their business plan proposals was set out in "Setting Price Limits for 2010-15: Framework and Approach" and in the detailed guidance note referred to in that document. Ofwat will review any lessons to be learned from the use of CBA with external stakeholders after final determinations as part of its review of PR09.
—  8. Ofwat and Defra have so far failed to make the argument that regional variations in the costs customers must bear for environmental investment are fair and appropriate. We have found it hard to see how alternative charging mechanisms for infrastructure investment could be made to work effectively without significant changes to the current underlying regional charging regime. Defra must therefore examine how changes might be made to the way water industry investment is paid for when it is directly and expressly for the purpose of improving environmental standards for national benefit. (Paragraph 40)	—  The question of how environmental improvements with national benefits should be paid for is one of the issues being examined in the Walker Review and Defra will subsequently examine and respond to her final recommendations. Defra and Ofwat agree with Anna Walker's view (paragraph 3.3.18) that "the arguments as to whether environmental improvements should be paid for by the local water customer, the national water customer or the taxpayer are complex." —  Subject to seeing Anna Walker's final recommendation on this, the Government notes with interest her interim recommendation (paragraph 3.6.2) that "the review team is minded to recommend that, in the long term, the net benefits are likely to be limited of moving to a national or taxpayer charging for some environmental benefits".
—  CLIMATE CHANGE MITIGATION
—  9. Defra should assess the impact of new requirements for water companies to improve water quality and conservation to ensure that only policies with net positive environmental outcomes are adopted. Ofwat should require the water companies to set out the carbon impact of their business plans and the measures they will put in place to mitigate any increases. (Paragraph 42)	—  The Government supports this recommendation. The Environment Agency has climate proofed the measures that are being proposed in the first River Basin Management Plans to ensure there are no proposals that do not provide positive environmental benefits. The Environment Agency is also engaged in developing European guidance on the integration of climate change considerations throughout the river basin planning process for cycles two and three and this is expected to be published this winter. —   —  As part of PR09, companies were required by Ofwat to set out the carbon implications of their business plans. Operational carbon from companies' day-to-day activities and the embedded carbon resulting from the activities and materials associated with building projects were specified at a project level. This data was applied using the shadow price of carbon (now superseded by the non-traded price of carbon) within CBA to allow carbon to influence investment decisions. This requirement was applied to all new investments and included proposals to reduce emissions. —   —  Since 2007 Ofwat has taken a proactive stance on greenhouse gas accounting. In consultation with the water industry Ofwat has set operational carbon accounting reporting requirements. Ofwat has now collected annual operational carbon emissions data from 2007/08 and 2008/09. Through this process Ofwat has seen a significant increase in the effort and attention that companies pay to carbon accounting. This has helped to set the context for the current price review.
—  CLIMATE CHANGE ADAPTATION
—  10. Climate change is predicted to have a significant impact on water availability throughout the country. The management of water resources will have to take climate change into consideration. We welcome Defra's proposal that Ofwat and water companies be considered as priorities for early reporting on how they will adapt to climate change. However, Defra should consider if changes are needed to the regulatory regime to ensure that water companies have incentives to take early action to adapt to climate change. We further recommend that the Flood and Water Management Bill should place an explicit requirement on water companies and Ofwat to exercise their functions with regard to the adaptation objectives of the Climate Change Act 2008. (Paragraph 46)	—  As the Committee notes, climate change is expected to have a significant impact on water resources, and therefore the future availability of water for public supply. That is why the Government used its powers to direct companies to include the best available evidence of climate change on both supply and demand to inform their Water Resources Management Plans, which informs the supply-demand aspect of the price review process. The first set of plans were informed by the UKCIP 2002 scenarios. Future plans, and annual reviews of published plans, will need to be informed by recently published UKCP09 scenarios (or subsequent scenarios in later planning rounds). The Government will be considering whether to require future plans to have a longer planning horizon than the 25 years currently used, and direct companies accordingly for the next set of plans. —   —  The Government has recently consulted on its strategy for using the Secretary of State's power under the Climate Change Act 2008 to require public sector organisations to report on the risks to their functions presented by climate change, and their proposals for adapting to those risks. Once reports are received and published organisations are required under the Act to have regard to its findings in exercising their functions. Ofwat and the water companies, being part of our national infrastructure, are identified in the consultation as being priority organisations, and so are likely to be directed to report to the Secretary of State by November 2011. The Government will be laying its final strategy for using the power before Parliament by 26 November this year, including the final list of organisations that will be required to report as a matter of priority. —   —  Ofwat has proposed a notified item to deal with the impact of climate change on water resources. This could lead to an interim determination on companies' price limits before the next price review (PR14), once the implications of UKCP09 are understood.
—  WATER EFFICIENCY
—  11. We recommended in our report on Energy efficiency and fuel poverty published earlier this year that energy efficiency targets be set for existing homes, delivered through an area-based approach, focusing first on the areas of most need. Funding for this would come from Government schemes such as Warm Front as well as the Carbon Emissions Reduction Target (CERT) activity funded by energy supply companies. This is a model whose merits could usefully be considered for the water industry. (Paragraph 55)	—  The Government agrees that water efficiency can be a useful mechanism to address affordability and that models such as Warm Front and the Carbon Emissions Reduction Target should be considered as possible models for the delivery of water efficiency. The interim Walker Review (chapter 10) makes a series of proposals regarding water efficiency including the introduction of a statutory requirement for all water companies to implement a water efficiency scheme targeted at defined low-income customers and closer alignment with energy schemes. The Walker Review has consulted on these proposals and interim recommendations and, subject to seeing the final report, we are minded to accept this recommendation to consider the merits of these energy models for the water sector.
—  12. We are not convinced that the mechanisms in the price review are sufficient to promote the increases in water efficiency necessary to ensure that water demand can continue to be met in periods of water scarcity. We consider that there are models from the energy sector that could usefully be adapted for water supply and Ofwat should assess how best practice in achieving improvements in energy efficiency can be applied to the water sector. We recommend that Ofwat and Defra explore more extensive water efficiency obligations, either by placing limits on volumes sold or a (CERT style) measures based approach. Ofwat should benchmark the performance of the UK industry in delivering sustainable water management on an international basis. (Paragraph 56)	—  The Government agrees that there are opportunities for water efficiency to play a more prominent role in meeting the supply-demand balance provided it can be delivered in a cost effective way. The interim report of the Walker Review (chapter 10) makes a series of proposals regarding water efficiency including the introduction of a statutory requirement for all water companies to implement a water efficiency scheme targeted at defined low-income customers and closer alignment with energy schemes. Subject to seeing the final report, we are minded to accept the Committee's recommendations to explore alternative water efficiency obligations and international benchmarking of sustainable water management. —  There is also a statutory requirement for water companies in England and Wales to prepare Water Resources Management Plans. These contain companies' plans for balancing water supply and demand under both normal and critical period conditions over the period up to 2035. Each company plans to balance water supply and demand such that the risk that it will have to impose restrictions on consumers' water use (such as hosepipe bans) is no greater than the risk stated in its target level of service. —   —  Each company's plan is subject to public consultation. The Secretary of State has powers to order an inquiry or a hearing if he considers that a company has not responded satisfactorily to comments raised during the consultation. He also has powers to direct companies to make changes to their plans. This process is designed to make sure that each company will have sufficient water to meet its customers' demands under its target level of service. Ofwat will make provision in price limits for each company to balance water supply and demand, consistent with its Water Resources Management Plan. —   —  With specific regard to water efficiency, Ofwat is introducing targets for the period 2009/10 to 2014/15. It developed these targets in conjunction with the Ministerial-led Water Saving Group, and it consulted stakeholders before confirming the targets' structure and levels. Ofwat has also introduced a revenue correction mechanism, which provides a modest incentive for water companies to outperform their water efficiency targets, selling less water to their customers than we assumed when setting price limits.
—  PUBLIC FUNDING FOR SUPPORTING WATER CUSTOMERS
—  13. We welcome the contribution that the Walker interim report has made to the debate on how to improve affordability of water bills for all customers and look forward to the Government's response. Central to this response must be adoption of a firm definition of water affordability to be used by all relevant agencies together with strategy for improving the monitoring and reporting of water affordability. (Paragraph 64)	—  The Government also welcomes Anna Walker's contribution on the important issue of water affordability and looks forward to seeing her final recommendations. However, there are a number of practical difficulties around agreeing any definition of water affordability and the Government is not convinced that the use of a firm definition of water affordability by relevant agencies would be practical or useful. —   —  Unlike the need to maintain a property at a particular temperature, there is no consensus on the volume of water that an individual needs for essential everyday use. Even if there was, it would require near universal metering to enable this to be provided in a way that takes account of income and water use (and most households are currently unmetered and their bills fixed). Further, unlike energy costs, the cost of a block of water varies across the country. In addition, average energy bills are up to three times higher than average water bills and people can have their energy supplies disconnected for non-payment. —   —  Agreeing what measure of household income to use in any affordability measure would also present problems. There are many definitions, including gross income, net or disposable income, and income before or after housing costs. Depending on which measure is used could dramatically alter the number of households that could be identified as having water affordability problems. —   —  The Government agrees that improved arrangements for monitoring and reporting water affordability are needed. Subject to seeing Anna Walker's final report, we are minded to accept her recommendation (paragraph 8.25.3) that "the review team feels that a requirement on Ofwat, working with CCWater, to publish an annual report on affordability and debt will stimulate innovation in companies and could set benchmarks for assistance schemes and levels. Where it is not clear that it is possible to solve the affordability problems within the current regulatory framework, Ofwat should provide advice to the Secretary of State for Environment, Food and Rural Affairs and Welsh Ministers on what action is necessary and why."
—  ADDRESSING AFFORDABILITY THROUGH TARIFF STRUCTURES
—  14. Ofwat argues that it has gone as far as it is prepared to go without Parliament sanctioning the further use of cross-subsidies to support customers struggling to pay water bills. Ofwat's remit should be strengthened to enable it to require water companies to adopt more progressive methods of tackling water affordability for all customers. Defra needs to set out how Ofwat can be equipped with the necessary tools to implement this. (Paragraph 68)	—  The Government's response to this recommendation is partly covered in its response to recommendation 33 on the role and remit of Ofwat. —   —  Government policy is that poverty is tackled through the general tax and benefits system, and not targeted on particular bills. The role of benefits and tax credits is to provide support and protection for people unable to work (either temporarily or permanently) or retired. Cost of living expenses within benefit rates take account of a wide spectrum of household outgoings, including water costs, and are increased annually by the rate of inflation.
—  15. There is a need for innovative solutions and the water sector can learn from the energy sector on how to support vulnerable customers. In particular water companies need to be far more pro-active in disseminating information on the availability of support schemes for vulnerable customers and in providing advice on water efficiency. (Paragraph 69)	—  The Government agrees with this recommendation. All water companies distribute information on water efficiency to their customers, usually with their bills. Defra and Ofwat also expect companies to promote the assistance available to vulnerable customers. The interim Walker Review (paragraph 11.8.2) makes proposals for other information that should be provided to customers, either through bills or by other means. This includes information on tariff choices, availability of assistance and eligibility for WaterSure and guidance on where to find further information. The Walker Review is inviting views on this interim recommendation which, subject to seeing the final recommendation, the Government is minded to accept. We are also minded to support the emerging recommendation (paragraph 11.8.3) that "companies assess and improve their communications with harder-to-reach customers to ensure that essential information is available to all, and that Ofwat reports on this activity."
—  16. We endorse policies which encourage the greater use of sustainable drainage since this can have both environmental and economic benefits. Customers who install such drainage systems should share the benefits, through lower tariffs, of reduced costs from lower volumes of surface water run-off generated. We recommend that Defra explores how individual households can be informed about sustainable drainage systems and encouraged to install them. The costs for highway drainage, that water customers currently bear, should be shared with local taxpayers who benefit from the service. (Paragraph 71)	—  The Government strongly agrees that customers and companies should be encouraged to behave sustainably. Reducing rainwater run-off to public sewers will reduce the risks of surface water flooding and sewer flooding. —  There is already an incentive to household customers to make arrangements so that no surface water from their property drains to the sewerage system: each sewerage company offers a rebate of surface water drainage charges to any customers who can show their house is not connected to a public sewer. —   —  Further incentives to household customers to reduce rainwater run-off (so that only part of the property drains to the sewer) may be problematic. Four companies have introduced charges for surface water drainage for non-household customers based on site area. Under this system customers are incentivised to reduce the area of their property that drains to the sewerage system as the charge they pay is calculated based on the size of that area. This encourages the use of permeable surfaces and technologies such as sustainable urban drainage systems or soakaways. This type of system would be more difficult to implement for households, as the size of household premises does not vary widely and it would be difficult to show how the costs vary for individual households which partially drain to the sewer. —   —  Annual highway drainage charges total around £700 million and currently account for about £25 of each household bill in England and Wales. We recognise that there is currently no incentive for highway authorities to install sustainable drainage systems because the cost of highway drainage is met by water customers. The Walker Review is considering whether it would be more in line with the "polluter pays" principle if highway drainage charges were paid by highway authorities. However, the cost of highway drainage would still have to be met and any transfer of highway drainage charges to highway authorities would place a cost on local authorities. The Government will consider this further in light of Anna Walker's final recommendation on this issue.
—  METERING
—  17. Given the stage we are currently at in the price review timetable, it is frustrating that, despite clear support in Anna Walker's interim report for charging based on volume, the Government's initial response on metering may not appear until the autumn. (Paragraph 79)	—  The Government said in Future Water that we believe that near universal metering will be needed in areas of water stress by 2030. Currently around 36 per cent of household in England and Wales are metered. Ofwat's draft determinations of water price limits provide for household meter penetration to increase to 49 per cent by 2014/15, or to 56 per cent in water scarce areas. —   —  The interim Walker Review has said (paragraph 5.7.2) that it believes that compulsory metering is justified and should be actively encouraged by the regulator for high discretionary water use, where the true value of water is high and where levels of metering are already high (and is inviting views on what percentage of metering should trigger compulsory metering). The Government will issue a full response to Anna Walker's recommendations once her final report is published.
—  18. We consider that metering can have an impact on water demand, but it should not be adopted as a substitute for a robust water efficiency policy. Before investment is diverted to metering there must be a robust empirical case to demonstrate that the costs do not outweigh the benefits and that demand especially in water-stressed areas cannot be reduced more cost effectively through sustainable water use management. We recommend that the Government set out at the earliest opportunity (ie before Walker produces her final report in the autumn) the evidence that metering reduces consumption in the long term; and reduces consumption by a sufficient amount to offset the additional costs associated with having a meter. (Paragraph 80)	—  The Government agrees that metering is not a panacea but should be seen as part of a programme of measures designed to reduce demand for water where water is scarce, alongside a robust water efficiency policy. We also agree with the need for robust cost-benefit analysis to demonstrate that the benefits of metering outweigh the costs. —   —  Defra does not collect evidence on the costs and benefits of metering. The interim report of the Walker review has collated available evidence on the costs and benefits of metering, including the effects of metering on the demand for water. This is set out in Chapter 5 and Annex E of the report. The interim report has asked respondents for any further evidence for consideration for the final report. The interim report concludes that the evidence points to a demand reduction of around 10 per cent from the introduction of measured charging and notes that there is uncertainty around these estimates. —   —  The evidence is therefore not totally conclusive on the effect of metering on demand for water. However, the interim report also points out the importance of ensuring that any cost benefit analysis takes into account all the costs and benefits including, but not limited to, the potential impacts on reduced demand for water.
—  BAD DEBT
—  19. A more accurate picture is needed of which customers are in debt to enable differentiation between those who can't pay and those who won't pay. (Paragraph 86)	—  The Government agrees that further information is needed in order to understand which customers genuinely struggle to pay their bills ("can't pays") and which are choosing not to pay even though they could afford to do so ("won't pays"). It is important to balance a firm approach to deliberate "won't pay" customers against a supportive stance to the "can't pays". However, the distinction between the two groups is not always clear as there is often also a "struggling to pay therefore prioritising debt" category in which "can't pays" and "won't pays" are the same. —   —  There are currently various limitations on companies which make such differentiation very difficult. For example, water companies are legally required to supply all household customers. They cannot choose who to supply, introduce contracts which can then be terminated, or impose terms and conditions on which supply is dependent. —   —  Companies are beginning to collect more information on their customer base (for example, by purchasing data from credit reference agencies and by individual home visits), so they can better understand their individual debtor's circumstances.
—  20. We recommend that Ofwat require water companies to disclose more information on bad debts levels, such as where debt is attached to vacant properties. We recommend a mechanism whereby property owners have to inform water companies on vacating a property so that the standing charge is no longer applied. —  (Paragraph 87)	—  Ofwat already collects detailed information from companies on bad debt levels including the amount of debt written off and the costs associated with collecting debt. Ofwat plans to review the range of information it collects and publishes following the 2009 price review. Information from the companies suggests that debt attached to tenanted properties is a more significant problem, particularly short-term lets where occupancy frequently changes. —  We agree that property owners should inform water companies on vacating a property in order to ensure that companies have accurate and up-to-date billing information. Ofwat set out its recommendations to companies on how best to charge for vacant properties in 2006. In many cases the standing charge will still be applied, particularly for measured customers, for example to reflect the surface water and highway drainage service which is still being provided.
—  21. We support a named person being identified as responsible for a property's water charges, so that legal redress can more easily be sought for outstanding debt. (Paragraph 88)	—  We agree that a named person responsible for a property's water charges would allow more effective recovery of charges, including the use of the court system to recover outstanding debts from customers that are able to pay. Companies have told Ofwat that billing in the name of "the occupier" is rarely successful. A named person would allow companies to obtain accurate occupancy information and would enable them to recover a higher proportion of charges and make it easier to pursue the named person in the event of non-payment of a water bill. This would help to reduce costs overall to other bill-paying customers. —   —  Anna Walker's interim recommendation (paragraph 9.9.1) proposes that "as a priority, the Water Industry Act 1991 should be amended to clarify and widen the definition of who is responsible for paying the water bill, through a definition of 'liable person' along the lines of that used in Council Tax legislation; and ensure that water companies have named customers." Subject to seeing the final recommendations of the Walker Review, the Government is minded to accept this recommendation.
—  22. Companies should look at billing schemes which suit low income customers, for example to enable payments to be spread evenly over a year. (Paragraph 89)	—  The Government agrees with this recommendation. When Ofwat approves companies' schemes of charges each year, it makes sure that all companies offer a reasonable range of payment options, which must include the option to pay in accessible locations, at frequent intervals for no additional charge. —   —  All companies offer a variety of payment frequencies to make sure that customers, including low income customers, can find a payment method which suits them. The exact range will vary between companies, although will typically include paying the bill in instalments such as monthly, fortnightly or weekly, or in full at the beginning of the charging year. Many companies will also consider special arrangements at the request of the individual customer. —   —  More innovative billing schemes could help low income customers to budget better in order to pay their bills. The Walker Review is looking at whether more needs to be done.
—  SURFACE WATER DRAINAGE CHARGING
—  23. The level of anger surrounding this issue illustrates the importance of companies having sufficient information about their customers and taking account of their needs when implementing changes in charging policy. This will be something companies need to take more account of in future as changes to implement recommendations made by the Cave and Walker reviews will need to be clearly explained to consumers and their implementation undertaken carefully. (Paragraph 95)	—  Ofwat agrees that companies implementing new charging systems should take account of the impact on their customers and manage that impact appropriately. This did not happen in the case of one water company—United Utilities—and this led to the high level of public anger seen over the last year. —  Each company is responsible for how it deals with its own customers, and for proposing its own charges. Ofwat has worked hard with United Utilities this year to ensure that the affected customers have seen less of an impact while the issue is resolved. Ofwat looks forward to receiving the company's proposals for charging next year, which are expected to be more acceptable to customers and to take better account of the impact on customers with large site areas but small rateable values. —   —  Ofwat approve charges in line with its duties and having regard to the Secretary of State's guidance. Ofwat do not consider that allowing a tariff that takes account of organisations' ability to pay to be in line with its duties. —   —  There have been problems for churches, community amateur sports clubs and other voluntary groups following the switch to site area charging for surface water drainage. The Secretary of State announced on 28 September that the Government will legislate to allow water companies to operate concessionary schemes for these groups. —
—  24. We consider that Ofwat should have intervened earlier and harder on this issue. It is not sufficient for the regulator to lay the blame with a company for poor communication while not attempting to help clarify action that water companies needed to take. (Paragraph 96)	—
—  25. Ofwat must now develop a clear protocol to guide all water companies to ensure that a fair and affordable charging regime can be introduced throughout England which properly reflects community based organisations' ability to pay for water services. (Paragraph 97)	—
—  FINANCING
—  26. The regulatory regime, and prospective changes in the regime, contributes to the cost of capital for water companies because it influences lenders' assessment of regulatory risk, which in turn might affect lenders' assessment of the financial risk implicit in the companies' gearing. For the period covered by PR 09, the regulatory risk may be rising due to uncertainties due to the outcome of the Cave and Walker reviews, and the content of the draft Flood and Water Management Bill. (Paragraph 107)	—  The Government recognises that the regulatory regime, and prospective changes to the regime, can affect the risk associated with water companies. As previously mentioned, we have not seen any evidence that uncertainty around the proposals in the Cave and Walker Reviews, and the Flood and Water Management Bill, are affecting companies' ability to raise money on the capital markets and impacting negatively on companies gearing. —   —  However, we recognise the Committee's concern and will be keeping issues around water company financeability under review. On 3 September, Defra and HMT agreed with Ofwat that a group consisting of Defra, Welsh Assembly Government. Ofwat, Water UK, and a number of water and sewerage companies (a mix of highly geared, publically listed companies plus a water only company including Welsh Water) should be established to discuss implementation of the recommendations in the Cave Review and possible impacts on financeability. —   —   —
—  PROTECTION OF CRITICAL INFRASTRUCTURE
—  27. The protection of critical infrastructure has different beneficiaries and the costs should be distributed according to those who stand to benefit. Some protection clearly provides an improved service to water customers, who should bear the cost. Other measures, though, are intended to allow water companies to continue to meet their service delivery obligations, and thereby benefit the companies. In practice the distinction might be a difficult one to make. Nevertheless, Ofwat should critically assess what measures it allows companies to pass on to their customers, to ensure that the companies bear the costs of those investments which are essentially part of 'doing business'. (Paragraph 110)	—  Ofwat requires that investments in the protection of infrastructure result in a measurable step-change in levels of service delivered to consumers. Ofwat's guidance to companies on resilience, published in June 2008, sets out the basis for justifying projects on cost benefit grounds. It requires that "the decisive factor in company decision making should be the effect of societal and environmental impacts on water consumers". —   —  As a result companies cannot make the case for increased resilience, financed by water customers, based primarily on private costs. This approach prevents companies from unjustifiably de-risking their activities at consumers' expense. —   —  Ofwat will review its approach to resilience, as part of its overall consideration of climate change, and develop it further in collaboration with the Environment Agency and other key stakeholders. Infrastructure resilience is an important part of long-term service sustainability and, as such, will be considered in the context of a changing climate and other long-term drivers.
—  COMPETITION
—  28. The Government response to the Cave Review, published in the Budget 2009 provided little information about the Government's views. The Government needs to provide a full response to the Cave report which explains: (Paragraph 128) What forms of competition are being considered, for which sectors and to what timetable; The potential risks of introducing each form of competition and how those risks will be managed; How Professor Cave's 'trust and verify' approach will work and what the Government's measure of success will be (before moving to the next stage of competition); What procedures will be used to reverse competition should the approach fail to achieve the required benefits; How competition will affect regional differences in water pricing and investment; The Government's view on how different forms of competition will influence the cost of capital for companies, and How the approach to competition promotes sustainable water management..	—  The Government has recently issued a consultation paper on the implementation of the reforms recommended in the Cave Review, which also provides a response on each of the recommendations. A copy is available via the Defra web site: www.defra.gov.uk/corporate/consult/cave-review/. —   —  It identifies which forms of competition are being considered for which sectors and also discusses the potential risks and issues associated with each of the reforms and how these will be managed, including the risk on financing. —   —  The Cave Review proposed a step-by-step approach to reform. The Government proposes to follow this approach in implementing Cave's recommendations. A phased approach is also necessary because most of the recommendations made by Cave are likely to require new primary legislation. This phased approach will follow the Cave Review's "trust and verify" principles by ensuring that the benefits outweigh the costs. —
—  29. The first stage of competition will apply to business customers, as in Scotland. As the domestic consumer will not gain from retail competition, they should not be expected to contribute towards the higher cost of capital that will result from non-domestic retail competition. (Paragraph 129)	—  The extent to which regulatory and/or legislative changes contribute to a higher cost of capital for companies will depend on whether these changes materially impact on the creditworthiness of companies. Whether such reforms have a material impact on creditworthiness will, amongst other things, depend on the consequential risk to revenues and the proportion of revenues at increased risk. —   —  Water companies' retail activities represent a relatively small proportion of assets and revenues. Collectively they are estimated to account for around 11 to 14 per cent of a company's value chain. Due to the small proportion of revenues associated with non-household retail competition, the Government does not believe that retail competition reforms, including retail separation, would result in material increases in the cost of capital for the industry and customers, be they household or non-household customers. —   —  The Government fully recognises that household customers must be protected from additional costs resulting from the creation of an effective retail market for non-household customers. Our recent consultation on the implementation of the Cave recommendations seeks views on how the Government can continue to ensure that customers remain adequately protected following these reforms. The Government will continue to engage with the Consumer Council for Water (CCWater) and other consumer groups as it develops its proposals.
—  30. We recommend that Defra and Ofwat fully involve consumers (through CC Water and others) in the discussion around the introduction of competition. Before such a major change is introduced consumers should be fully aware of the possible risks and the hoped for benefits. (Paragraph 130) —   —	—  A key priority for the Government is the protection of consumers. Competition is not an end in itself but a means to secure a better deal for consumers and the environment than could be offered through existing purely regulatory approaches. CCWater and other consumer groups have provided important input into the Cave Review and the development of its recommendations and their input will be an important part of the current consultation on implementation. The Government will continue to work with CCWater in discussions around the development of competition in the water sector to ensure that consumers are fully aware of the risks and benefits.
—  31. Defra should consider how competition can be introduced in different regions, including taking into account Welsh consumers apparent contentment with the Welsh Water model. Ofwat should not impose competition on Welsh Water if this goes against the wishes of consumers. (Paragraph 131)	—  The Government agrees with this recommendation. We recognise that competition could take different forms in different geographic areas. This was also noted in the Cave Review. Water policy in Wales is devolved and the Government would not want to impose competition on consumers against their will, either in England or in Wales. As the Cave Review notes, there is not presently a strong case at present for extending retail competition to household customers and Cave therefore recommends that competition only be extended to non-household customers. —
—  INNOVATION
—  32. We welcome Professor Cave's suggestions for promoting innovation, although it is not clear to us that competition will be the route to greater innovation in areas such as sustainable water management. (Paragraph 137)	—  The Government agrees with the Cave Review's assessment that more successful innovation outcomes in the water sector would be beneficial, which may require more spending on Research and Development activity. The Government also supports the Cave Review's wider diagnosis of the barriers to innovation such as fragmented spending, lack of co-ordination and a shared long term vision. —   —  Competition and market mechanisms can play an important role in encouraging innovation throughout the value chain. However, there will be some activities or segments of the value chain where competition and market mechanisms can be expected to have a lesser effect on innovation outcomes, for example because of the natural monopoly nature of the activity and the particular reforms proposed. This is part of the justification for a mix of recommendations from the Cave Review, including the creation of a new water Research and Development fund.
—  CONCLUSION
—  33. We recommend that Defra undertake a fundamental review of Ofwat's role and remit to enable it to effectively regulate a future water industry where the value of water and waste water will have a crucial role in determining water companies' charging regimes. If competition is going to be introduced and water efficiency and water demand management are going to become more important, the regulatory regime should be amended. We recommend that Defra set out a timetable for review of the current regulatory approach in relation to those parts of the industry that are likely to be affected first by the introduction of competition. The timetable should allow any recommended changes to be introduced before the next price review. (Paragraph 144)	—  The principle of independent economic regulation was established for most utilities at the time of privatisation (in 1989 in the case of the water industry). For monopoly providers in particular, the case for regulation is clear: the absence of competition will lead to excess profits and drive up prices. It has been calculated by Ofwat that economic regulation saves water bill payers £110 per annum. —   —  The Government recognises that there is a question about whether a system of economic regulation that was set up to extract maximum efficiencies post privatisation is appropriate in the more complex world of today, with social and environmental issues assuming a greater profile, and fundamental challenges about the fitness for purpose and quality of infrastructure, particularly in the face of climate change. —   —  We will keep the issue of Ofwat's role and responsibilities under review and in light of wider Government consideration of the role and responsibilities of economic regulators.
—  34. Providing households with water and waste water services is likely to remain a monopoly activity for the foreseeable future and it is essential that the current mechanism works robustly for millions of customers. The review should therefore consider how the regulatory regime accommodates both competitive and non-competitive parts of the industry operating in tandem. (Paragraph 145)	—
—  35. We recommend that the regulatory review examines how lessons from energy sector regulation can be applied to the water sector, so that a framework that incentivises companies to encourage their customers to be more water efficient can be adopted. (Paragraph 146)	—

Draft Flood and Water Management Bill—6th Report (HC 555, 2008-09), PUBLISHED 23 SEPTEMBER 2009, GOVERNMENT RESPONSE PUBLISHED 19 NOVEMBER 2009 (—PART OF TAKING FORWARD THE DRAFT FLOOD AND WATER MANAGEMENT BILL, THE GOVERNMENT RESPONSE TO PRE-LEGISLATIVE SCRUTINY AND PUBLIC CONSULTATION (CM 7741))

Recommendation	Government Response
OVERVIEW OF THE BILL
1. The draft Bill addresses 16 of the Pitt Review's recommendations that require legislation but falls short of providing a Bill which also consolidates our principal Water Acts. We recommend that Defra continue working to produce the comprehensive legislation that the Government has agreed is highly desirable, even if this delays the Bill until the next Parliament. (Paragraph 9)	The Department still retains the ambition for unified legislation on floods, as proposed by Sir Michael Pitt, and on water, but we do not want to delay changes that will improve protection of lives and property. That is why Government is pressing ahead with this legislation. The terrible damage to homes and lives caused by flooding in 2007 has not been and must not be forgotten. As both Sir Michael Pitt and the Committee recognised in their responses to the 2007 floods, there are gaps in legislation which need to be plugged before such floods occur again: "about two thirds of the summer 2007 flooding was caused by surface water flooding, often after intense heavy rainfall overwhelmed drainage systems. No organisation currently has responsibility for surface water flooding, at either the national or local level. This lack of responsibility must be addressed by Government… There also needs to be a stronger requirement on local authorities to insist developers install SUDs on new development… The Government needs to resolve these issues as a matter of urgency to enable the current house-building and eco-towns programmes to incorporate maximum use of SUDs." Flooding, Fifth Report of Session 2007-08, EFRA Committee (May 2008) The Department agrees with this statement from the Committee and does not believe that a desire for the undoubted benefit of a simple and consistent statute book should lead to any delay to achieving the outcomes sought by the Committee, and so many other people across the country. As the Committee recognises, there are obvious timing constraints in the current Session and many competing priorities. In developing the Bill for this Session, Government has focused on those areas where action is needed most urgently. Government will continue to develop policy in areas where thinking is currently less developed, or where it is not yet able to take a final view (e.g. the independent policy reviews by Professor Martin Cave and Anna Walker). Government will bring forward this legislation as soon as Parliamentary time allows. Government has also decided to implement the EU Floods Directive through regulations made under the European Communities Act 1972. This is for two reasons. Firstly, Government needs to transposes the Directive as soon as possible as it is due to be done this month; inclusion in the Bill would delay it at least until late Spring next year. Secondly, it provides more space in the Bill to make those other urgent changes necessary to floods legislation and to enable consolidation to happen sooner. The UK Government will start the process of consolidation as soon as possible. Government intends to consolidate legislation on reservoirs alongside the Flood and Water Management Bill. Government also intends to consolidate provisions on flood and coastal erosion risk management in the Land Drainage Act 1991, Coast Protection Act 1949, Water Resources Act 1991 and Environment Act 1995 (all as amended by the Flood and Water Management Bill), with new flood and coastal erosion risk management provisions in the Bill and the regulations implementing the EU Floods Directive, as soon as possible after the latter becomes law. To support this, the Flood and Water Management Bill contains a measure to make changes to these and other Acts dealing with floods and water through regulations to ensure consistency and correct errors.
2. The Bill has been drafted against the background that climate change will have an effect on both the availability of water and likelihood of more extreme weather events. We recommend that Defra work with the Environment Agency and the relevant bodies to ensure that the Bill's provisions properly reflect the recently updated climate change scenarios. (Paragraph 12)	The Department agrees that it is important that the Bill's provisions properly reflect the recently updated climate change scenarios. The provisions of the Bill are flexible enough for authorities to adapt to the wide range of future climate scenarios both modelled for the impact assessments, and those recently updated and set out in UKCP09. In terms of how the relevant authorities will operate on the ground, their objectives will be determined by the respective national strategies in England and Wales. The Secretary of State will have the power to shape the national strategy for England, ensuring it reflects the latest climate change scenarios and can be updated to allow for new projections to be taken into account too as they are updated in future. Welsh Ministers will be responsible for developing the national strategy for Wales. They will ensure that UKCP09 is fully reflected in it and that it allows future updates to be reflected. It has not been possible to update the impact assessments accompanying the Bill in this respect in time for publication. Additional studies are underway to produce the parameters relevant to flood and coastal erosion risk management (such as fluvial flows) from the information in the projections. Much of the data for the most relevant impact assessment, on local flood risk, is based on studies which were well on the way to completion by the time the data from the new projections was available. However, the range of values for updated projections is not significantly different from the previous projections (the key change being the ease of studying local impacts and additional information on probabilities), and so our impact assessments are broadly consistent with the new projections. Thus, both the impact assessments and the legislation now being brought forward remain appropriate.
3. The Department's pick and mix approach over what ultimately might be in the Bill means that the process of pre-legislative scrutiny is inevitably undermined. We recommend that if the Government proceed to develop a truly comprehensive piece of water legislation that the Committee be given a further opportunity to scrutinise those parts of the Bill which are still very much work in progress. (Paragraph 16)	As the Committee recognises, the Department is committed to engaging with the pre-legislative scrutiny process, doing so "enthusiastically" on this enquiry. Except for the provision on surface water drainage charges, the Committee has been able to scrutinise draft clauses embodying all policies being taken forward in the current Bill or, in the case of the EU Floods Directive, through regulations under Section 2(2) of the European Communities Act 1972. Future handling and timing of the remaining legislation is currently unclear. However, many of the remaining provisions were included in the draft Bill, while other policy areas are being, or will be, consulted on further. These consultations, as with the current one on the Cave Review on Competition and Innovation in Water Markets, may also include draft clauses. However, Government will consider carefully the Committee's recommendations on this issue.
4. With the Queen's speech now scheduled for 18 November, a comprehensive flood and water management Bill is unlikely to be enacted before the next general election, due to the lack of Parliamentary time. Despite many flood and water issues being inter-related and requiring coordinated action, Defra may have no alternative but to consider introducing a slimmed-down Bill that covers only the most important issues. If Defra pursues a slimmed-down Bill it will lose this once in a Parliament opportunity to comprehensively and thoroughly address current water and flooding issues. We recommend the Government adhere to Sir Michael Pitt's recommendation for a proper consolidating Bill. However, if Defra finds it has no alternative but to introduce a slimmed-down Bill, it should consult stakeholders as soon as possible on which provisions should be included. (Paragraph 17)	Government agrees with the Committee on the importance of consulting with stakeholders on the contents of the final Bill. Throughout the consultation period and since, Government has continued to consult a range of stakeholders on issues covered in the Bill. As well as assessing the evidence to the Committee forming the basis of this report, the Department received 642 responses for England to the public consultation on the draft Bill. In addition, both the Department and the Welsh Assembly Government hold regular formal and informal meetings with stakeholders in the water and floods sectors. This has allowed us to gauge the strength of opinion and argument on the urgency and readiness of competing provisions for a Bill of limited size. Government has included most of the key stakeholders' priority measures that the Committee have picked out, where policy is developed enough for their inclusion in the Bill. At the heart of the Bill are provisions for flood and coastal erosion risk management setting out: new roles and responsibilities; enhanced reservoir safety; the designation of flood management assets; and the encouragement of sustainable drainage systems. Further provisions address the more urgent issues on the water side: enabling the introduction of concessionary schemes for surface water drainage charges; the better management of non-essential uses of water; appropriate regulation of large infrastructure projects; and arrangements to protect customers in the event of a water company's insolvency. To help the Department develop the Bill, representatives of Ofwat, the Environment Agency, the Welsh Assembly Government, the Better Regulation Executive, Her Majesty's Treasury, and the Department for Communities and Local Government sit on the Project Board. Collectively this group represents a wide range of interests. Our response to recommendation 1 above, sets out how we plan to implement Sir Michael Pitt's recommendation for a single unified set of legislation on floods.
5. The inevitable uncertainty caused by a 'work in progress' draft Bill could have an impact on Ofwat's final price review 2009 price determinations. We recommend that at the earliest opportunity (even during the remaining part of the Summer recess) Defra make clear its intentions. If it opts for a slimmed down Bill we recommend that rapid consultation with the Environment Agency and the industry about what must be in and what could be left out of the legislation. Our view remains that such an approach inevitably means that the 'left out' sections may have to wait years for a further legislative opportunity to the detriment of properly addressing Sir Michael Pitt's recommendations. (Paragraph 18)	Government has not wished to pre-empt the results of public consultation, collective Cabinet decisions or the Queen's Speech in setting out the size and shape of the Bill. However, as mentioned above, both the Environment Agency and Ofwat remain closely involved with our work, including as part of the Project Board and Executive Panel for the Bill's development. Government has taken on the views of both organisations and others in deciding on the Bill's focused contents in what is a shortened Parliamentary Session. The UK Government set out its plans for legislation in this Session in the draft legislative programme published as part of 'Building Britain's Future' on 29 June. Inevitably, any further legislation will have to compete against other urgent priorities for Parliamentary time. Government recognise that the EFRA Select Committee and others will continue to make the case for further flood and water legislation.
6. The adoption of a river catchment based planning approach means that close co-operation will have to be achieved between legislative bodies both north and south of the border and in Wales. We recommend that, in light of the fact that each legislature has a different approach to water matters, Defra urgently assess how harmonisation of the measures can be achieved. Given the Welsh Assembly's involvement in developing this draft Bill we believe that there is merit in the Welsh Affairs Select Committee examining their position on this matter at the earliest opportunity. (Paragraph 20)	River catchment based planning is not a new approach to flood and coastal erosion risk management. Flood Risk Management Plans have already been developed on a catchment basis, with full co-operation from authorities on both sides of the borders with Wales and Scotland. The Welsh Assembly Government and the Department worked closely together to develop the draft and prevent introducing barriers to effective systems, while respecting the role and responsibilities of both Governments. As the Committee rightly states, the Welsh Assembly Government worked closely with the Department throughout the preparation of the draft Flood and Water Management Bill and has continued to do so in developing the final Bill. In many cases policy for England and Wales has harmonised, with movement on both sides. Where appropriate the functions of the operating authorities in England and Wales are aligned to ensure consistent operation on both sides of the border. Examples of this are the arrangements for reservoir safety, sustainable drainage and drought measures. Co-operation between the relevant authorities is built into the provisions contained within the Bill and both Governments will continue to work together in implementing the changes. It is of course for the Welsh Affairs Select Committee to decide whether to examine the legislation, but it is worth noting that the National Assembly for Wales Sustainability Committee examined the draft Bill. Its report was published in early August giving the Assembly Government good time to consider the valuable input of the Committee in the drafting of the Bill. The Scottish Government has introduced its own legislation which received Royal Assent earlier this year.
FLOOD AND COASTAL EROSION RISK MANAGEMENT
7. We recommend that Defra redraft Clause 12 to clarify the roles of the different tiers of local authorities and their responsibilities, while allowing the flexibility for pragmatic local solutions and partnerships. We further recommend that the Bill include an order making power, under which the Secretary of State may alter the tasks to be undertaken by local authorities, following full consultation with interested bodies. (Paragraph 24)	The Department believes the revised Bill clarifies local authority roles and responsibilities and that accompanying guidance will help the public and stakeholders understand them. The Department believes the ability of local authorities to delegate will provide adequate flexibility for local authorities to develop local solutions and partnerships that reflect their particular circumstances. The Department has included a power for the roles and responsibilities for local authorities to be adjusted through secondary legislation. National guidance published by the Environment Agency in England and by the Welsh Assembly Government in Wales will support local roles further. However, in England they will be fully in line with the UK Government's response to Sir Michael Pitt's Review. That made it clear new partnership arrangements in England were needed to bring together county, unitary and district authorities, the Environment Agency, water companies and sewerage undertakers and other players including internal drainage boards to work together to secure effective and consistent management of local flood risk in their areas. Government expects these organisations to work together to decide the best arrangements for delivery on an area by area basis, taking account of their current roles and capacities. County and unitary authorities will lead these partnerships, taking responsibility for ensuring that all relevant partners are engaged in developing a local strategy for flood risk management and securing progress in its implementation. This will build on their leadership role in local area agreements, and will allow them to develop centres of engineering and flood risk expertise perhaps alongside their existing highways functions, providing support to other partners and promoting collaboration across the whole area. District councils have a key role with their land use planning functions in ensuring effective strategic flood risk assessments guide future development. They will also continue to be responsible for the management of ordinary watercourses (as will internal drainage boards where they exist) within the flood risk management strategy established for the area. They will also take on work on the strategy and other functions, as agreed locally. The new partnership arrangements will support greater collaboration between local authorities in flood risk assessment and development of management plans, and sharing expertise, supporting strategic engagement with the Environment Agency and water companies. The Bill provides that the Environment Agency must consult on the national guidance for England before it is put in place.
8. Clarity on the form of the National Flood and Coastal Erosion Risk Management strategy should be clearly provided on the face of the Bill; or through an order making power subject to the affirmative Parliamentary procedure. We further recommend that the Bill provides for the strategy being reported to Parliament. (Paragraph 27)	The Department accepts these recommendations and has included the minimum content of the strategy on the face of the Bill and has also provided for the Secretary of State to guide the Environment Agency on additional material in the national strategy for England or accompanying guidance. The Department has also provided for the strategy to be approved by the Secretary of State and then to be reported to Parliament. The national strategy for Wales will be prepared by the Welsh Ministers and will be laid before the National Assembly for Wales.
9. We recommend that Defra publish now details of how the strategy will be prepared, scrutinised and how, and over what cycle, it will be reviewed. (Paragraph 28)	The Department will set out its proposals for the preparation, scrutiny and review of the strategy in a short factsheet which will be published shortly after the publication of the Bill. The Environment Agency will be responsible for preparing the strategy for England but in doing so they will need to work closely with local authorities, internal drainage boards and other organisations such as water companies to ensure that the strategy provides an overview of all forms of flooding at the national level. The Bill provides for the strategy to be consulted on publicly before it is put in place and Government sees a particular role for regional flood and coastal committees in ensuring that the strategy adequately reflects the range of different risks and priorities within their areas. Following approval by the Secretary of State, reporting the strategy to Parliament will provide a further opportunity for scrutiny. The strategy itself will set out review timescales which are likely to reflect a range of external influences such as the maps, assessments and plans produced for the Floods Directive, the spending review cycle and the timing of completion of documents such as shoreline management plans and catchment flood management plans.
10. We are concerned that the draft Bill establishes a rigid vertical structure, which potentially precludes pragmatic cross-boundary area-based approaches that accommodate local people's views and knowledge. We are concerned that local people do not have a seat at the table and the Bill's proposals will dilute the ability of an articulate community to influence decision making. (Paragraph 34)	The Bill will put local authorities, the representatives of their local communities, squarely at the heart of local flood risk management. The Bill therefore strengthens the direct democratic accountability for local flood risk management and puts the responsibility in the hands of bodies used to bringing together a wide range of partners, through local area agreements for example. There is inevitably scope for tension between this role for local authorities and the need for a large scale (e.g. catchment) perspective on flood and coastal erosion risk. Furthermore, circumstances will be very different across the country. Government therefore want to avoid a prescriptive and bureaucratic approach. Government has considered carefully suggestions that statutory local flood risk management boards or groups should be established. The legislation we are bringing forward would certainly allow such models, but we do not wish to prescribe them to the exclusion of others. Others suggested that we should not define which authority should have the responsibility of ensuring that a strategy was put in place and leave that to local discretion. Again, many models are possible—including a district council with particular capabilities doing much of the work for the local strategy, for example. However, Sir Michael Pitt's report was very clear about the benefits of clear local responsibilities residing in one place and we agree. We believe that the Bill provides a pragmatic and highly flexible approach by clearly making county and unitary authorities responsible for leadership on local flood risk in their area, but enabling them and other risk management authorities to enter into arrangements for nearly all aspects of flood and coastal erosion risk management for which they are collectively responsible. This is supported by the requirements for delivery authorities to co-operate and act consistently with local and national strategies and guidance and for others to provide information and have regard to the strategies. The guidance accompanying the national strategies will focus particularly on the local partnerships and should help ensure that best use is made of the knowledge and expertise from all local partners (particularly those with practical experience in the area, such as district councils and internal drainage boards where they exist). It might also set out possible models and arrangements for local partnerships based on the experiences of those authorities that have already established groups for similar purposes such as coastal groups. However, it will be for the authorities in the local area to agree the best arrangements for them, taking account of their existing roles and capacities. Cross-boundary, catchment or sub-catchment groups will certainly not be precluded by the Bill. The local strategy will provide a vehicle for formalising these arrangements, for setting out how risks will be managed within the area and for identifying how this will be co-ordinated with wider activities. Both the national and local strategies will evolve over time, and will be informed by a range of plans (such as shoreline management plans, catchment management plans and surface water management plans) and assessments (such as strategic flood risk assessments) which will have been consulted on individually within the relevant areas. These will provide communities with an opportunity to influence all significant decisions. The Environment Agency will largely be responsible for determining the management of flooding from main rivers and the sea, as they are now, to ensure that wider considerations across administrative boundaries are reflected. Similarly, regional flood and coastal committees and local authorities will continue to be able to raise funding locally to take forward projects that are identified as viable but are not sufficiently high priority to be funded from national budgets. The Bill will ensure that public consultations are held for both the local and national strategies. This, together with the enhanced scrutiny arrangements for local authorities to explore management of all sources of flood risk within the area should also help ensure that communities are able to influence flood risk management in their locality.
11. Subject to any concerns on national security grounds, the national flood risk management strategy should be published in full to guide the many organisations and bodies who will need to refer to it. Similarly we see no reason for local authority plans not to be published. (Paragraph 37)	The Department accepts this recommendation. Both the local and national strategies will be publicly available and accessible. Where there are particular national security concerns some information may need to be omitted from the published strategies, but this is unlikely to be significant.
12. The provisions in Clause 22 provide the Environment Agency and local authorities with a broad power over potentially a wide range of public bodies and private individuals. We acknowledge the concerns raised by Ofwat and accept that there could be an impact on customers' bills. A balance must be struck between providing those with responsibility for flood and coastal erosion risk management with the necessary tools to do that job and ensuring that those bodies do not place undue obligations on the water companies or others. We recommend that Defra clarifies how this power is expected to be exercised and in what circumstances it would not be applied. (Paragraph 40)	The powers and responsibilities provided to the Environment Agency and local authorities have been carefully considered. The duty to act consistently with the local and national strategies applies only to those organisations undertaking a flood or coastal erosion risk management function. Other organisations (such as planning authorities) will be required to 'have regard' to the flood and coastal erosion risk management requirements. That is they will need to consider the flood and coastal erosion risk management requirements, but are not bound by them if they can demonstrate that they are outweighed by other considerations. On water companies' flood risk management functions, the Department has concluded that they should be subject to a duty to act consistently with the national strategy and, in view of Ofwat's and the Committee's comments, to have regard to the local strategies. The Bill will also require organisations to co-operate and provide pertinent information. Guidance on how different partners should work together to develop and deliver the local flood risk management strategies will be provided by the Environment Agency in England and the Welsh Ministers in Wales alongside the national strategies. The Department will continue to work with Ofwat to ensure water companies contribute to local strategies and the delivery of objectives, and that the national strategy and duty to co-operate are considered as part of the periodic review of price limits. At the local level, the ability of local authority scrutiny committees to hold water companies and others to account should also help to ensure all partners contribute to effective flood risk management.
13. Defra must explain how the national plan will relate to local spatial planning. Local authorities are already responsible for the spatial planning process, and this Bill also gives them a remit for flood and coastal erosion risk management planning. Authorities will have to fit the two together and synchronise the cycles for revising and updating their plans. (Paragraph 42)	Many of the components to ensure that spatial planning in England reflects flood and coastal erosion risk are already in place through Planning Policy Statement 25 (PPS25) or proposed in the supplement on draft planning policy on development and coastal change, which was published for consultation on 20 July 2009. Local authorities in England are obliged to consider all sources of flooding in formulating their strategic flood risk assessments, and should therefore already be considering the effects of local flood risk as part of the process of ensuring that their local development documents and proposals are 'sound'. However, in practice few are currently able to do this due to a lack of information on local flood risk. The production of surface water management plans is also anticipated by PPS25, and synergies between the strategic flood risk assessment and surface water management plan are already being explored. The Department anticipates that the strategic flood risk assessment will provide an initial base from which the local authorities can develop their plans for managing flood risk. There are comparable arrangements in Wales, through Planning Policy Wales and Technical Advice Note 15, though the production of equivalents to strategic flood risk assessments and surface water management plans is not formalised. The relevant national strategy will set out principles and approaches for flood risk management and will be accompanied by guidance which planners will have to 'have regard to'. There may be some constraints on the timing of the production of local authority plans resulting from the implementation of the Floods Directive, but as far as possible we intend that they will have flexibility to align the timescale for reviewing plans to local spatial planning cycles. The lead local flood authority will take the lead role at county level in shaping surface water risk assessments, working in partnership with the local planning authorities. This will ensure close tie in between risk assessments and the development of local flood risk strategies.
14. We commend the water industry and Environment Agency for initiating work to improve data sharing. We recommend that Defra consider whether guidance on data sharing, including the safeguards that should be in place, should be provided for in secondary legislation. (Paragraph 45)	The Department agrees that there is a need for guidance on data sharing. In England, this will be given by the Environment Agency alongside the national strategy, but we do not currently consider that this needs to be in secondary legislation. The Bill provides that organisations exercising flood and coastal erosion risk management functions will need to act consistently with the strategies and accompanying guidance (others will have to 'have regard' to them). Both the Environment Agency and lead local flood authority will have the power to require information from various authorities listed in the Bill and such information will need to be provided in the form or manner and time period specified in the request. The duty to co-operate which is to be introduced on risk management authorities will also allow for and require data-sharing. Taken together, these provisions should ensure that data is shared appropriately. The Welsh Assembly Government will work with the Department and the Environment Agency on the guidance with the aim of developing a consistent approach across England and Wales.
15. We do not consider the protections referred to in the consultation document to be sufficient. We recommend that Defra include provisions that establish appeal mechanisms against the powers of the Environment Agency and local authorities set out in Clauses 34 to 49. Such mechanisms must provide for an independent court or tribunal to decide appeals. (Paragraph 49)	The Department accepts this recommendation and is providing for appeals for relevant parts of the Bill. Where the Bill proposes modifications to existing powers there will already be appeal mechanisms in place and the Bill includes provision for these to be consolidated and made more consistent. Provisions to establish appeal mechanisms will be included for those parts of the Bill that provide new powers to the Environment Agency and local authorities. In nearly all cases the details will be defined through secondary legislation and Government are considering the role that independent courts or tribunals should play, but in some cases it is likely that other mechanisms (such as determination by the Secretary of State or Welsh Ministers) will provide a more proportionate and effective approach.
16. We recommend that Defra make clear to the European Commission the benefits of including the provisions of the Directive in comprehensive legislation and seek assurances that the UK will not be subject to infraction proceedings before the Bill passes into law. (Paragraph 52)	The Department does not accept this recommendation, and it does not believe that such assurances would be available from the Commission, particularly in the light of the long delay to transposition envisaged by the Committee. The Department has laid regulations before Parliament for the Directive's timely transposition which are consistent with the Bill and believe this represents the most pragmatic way forward.
17. We consider that the local authority proposal for catchment area flood management boards, similar to Regional Flood Defence Committees, has much to recommend it. We recommend that Defra explore this approach with local authorities and bring forward provisions that would enable the creation of catchment area flood management boards. The Bill should require decision making bodies to explain how they have taken into account any advice from regional advisory bodies, or their reasons for rejecting it. (Paragraph 55)	The Department partially accepts this recommendation but is anxious to avoid prescriptive, inflexible and overly bureaucratic approaches. The Department are also concerned to avoid a duplication of the role of the regional flood and coastal committees, which as proposed and widely supported, would already provide regional committees with representation from local authorities and other bodies for the purposes of supporting local flood and coastal risk management delivery and scrutiny. The Department believes that enabling authorities to enter into arrangements provides sufficient flexibility for issues to be dealt with on a catchment basis where appropriate and that voluntary partnerships and groups (such as the existing coastal groups for shoreline management plans) can provide an efficient and effective vehicle for strategic and coordinated planning across different responsibilities. The duty to consult on strategies will mean that decision making bodies will need to be able to explain how advice from regional and other bodies including regional flood and coastal committees has been taken into account in these decisions.
DESIGNATION OF FEATURES
18. We are concerned that bodies that would be able to designate "things" appear unsure about their scope or scale. The purpose of the provisions is not in question but there needs to be greater clarity about what could be designated, how the designating authorities would coordinate with one another and how differences of opinion between designating authorities would be resolved. (Paragraph 59)	The Department is pleased that the Committee does not call the purpose of the provisions in to question. The Bill now has a clearer definition but it remains relatively broad because of the significant variety of features that can affect flood risk, for which there is no single definition and for which there is very little protection enshrined in existing legislation. The Department appreciates that the Committee will have heard a number of explanations from witnesses about what a third party asset might be. We think this is to be expected. Different operating authorities may well identify different types of feature relevant to their own flood risk management functions, which will vary, and reflect the different types of risk and physical landscapes that exist in their areas. The Department believes that the duty to co-operate will help avoid disagreements between operating authorities in designating features. Furthermore, the operating authority must have flood or coastal erosion risk management functions in respect of the risk which may be affected by the feature; the feature must not already be designated; and the operating authority must notify any other designating authority with an interest. The duty on the lead local flood authority to keep a register of assets in its area and the record keeping of other authorities, such as the Environment Agency's National Flood and Coast Defence Database, should enable authorities to keep track of what has been designated and what is of importance to their flood and coastal management strategies. Local authorities will also have the discretion under the Bill to enter into arrangements with others. This would allow for greater co-ordination across an area, for instance, if authorities wanted to set up a single designating unit for an area.
19. Provisions providing safeguards and appeals should be included in the Bill. The lack of such provisions in the draft Bill is a serious deficiency. The legislation would confer substantial powers on designating authorities and the checks and balances should have been available for this Committee to scrutinise and for stakeholders to comment upon. We recommend that Clause 95 be amended to exclude the Minister from the list of bodies that could consider appeals in relation to Part 2. (Paragraph 62)	On work powers, safeguards are provided in the existing legislation and will apply to the revised and additional provisions in the Bill. The only exception to this would be an urgent need for an authority to take remedial action on a designated feature. This would be when there is an immediate risk which would mean it is unsafe to serve a period of notice. Both owners of features and persons subject to enforcement proceedings (if different) will be given notice and the opportunity to make representations ahead of further action being taken by the responsible authority. For example, the owner of a feature may make representations in respect of a 'provisional designation notice' and may appeal a subsequent 'designation notice'. Appeals are also provided for where an owner is refused consent to alter, remove or replace a feature, refused a request to cancel a designation, or is in receipt of an enforcement notice. The Department accepts the importance of safeguards and is proposing that authorities must give notice of the intention to enter land, make it clear why access is necessary and to include similar provisions to those already enshrined in the Water Resources Act 1991 in the event of damage being caused to an individual's property. The Bill provides for the appeals mechanism to be defined in secondary legislation because the arrangements for the appeals process are essentially administrative and process-oriented and as such are unlikely to be controversial. The Department does not want to prescribe such procedural detail on the face of the Bill itself it considers the appeals mechanism to be an integral part of the decision making process, particulars of which may also be prescribed by secondary legislation. By making use of regulations, we will have the opportunity to reflect changing circumstances, especially if any particulars of the notices were to be changed, with a minimum of bureaucracy and without recourse to primary legislation. We do, however, intend for the secondary legislation to be made under the affirmative resolution procedure. Above all, we are committed to giving individuals every opportunity to make representations and raise an appeal at all stages of designation. The regulations must give the power to consider the appeal to a court or tribunal, or to the Secretary of State or Welsh Ministers as appropriate. They must also set out how the person might appeal and the procedure for doing so. However, in some circumstances, there may be more appropriate ways of achieving this than through a court or tribunal. The reference to the Minister is therefore necessary to enable him to delegate this function to some other independent body or person, acting as a court or tribunal.
RESERVOIRS
20. Defra should examine including a provision to establish a low-cost initial assessment of smaller reservoirs. Reservoirs adjudged to be low risk under such a system could be exempted from the panoply of inspections and procedures currently set out in Part 3 of the draft Bill. (Paragraph 66)	The Department accepts this recommendation. The Department has reviewed the provisions to ensure that the burdens of registration and assessment, particularly for reservoirs being brought into the regulatory regime, are minimised. We will only require owners or undertakers to provide readily available information. It was always intended that the regulatory regime would be risk-based and the requirements for inspection, monitoring and supervision should only apply to the high risk reservoirs. We are also providing for exemptions to be made if there are types of structure for which relaxed requirements can be justified.
21. Defra should consider whether the existing COMAH regulations might be extended to include reservoirs. (Paragraph 68)	The Department has considered whether the control of major accident hazards regulations could be appropriately extended to include reservoirs. Aspects of the Bill's provisions are similar to the control of major accident hazards model (such as the preparation, responsibility and review of off-site plans), but the particular requirements for reservoirs and synergies with wider flood and coastal risk management, are such that bespoke provisions are warranted.
22. Defra should examine with the insurance industry the scope for synergies between the needs of insurance companies and the risk management aims of the draft Bill, to minimise any additional cost for reservoir owners. (Paragraph 70)	The Department accepts this recommendation and has continued discussions with the insurance industry. Insurance companies have reiterated their commitment to providing current levels of cover to reservoir owners and their appointed engineers and agents. They have expressed severe reservations at the feasibility of further extension of such liability insurance. The Department will be specifying what is required but will allow owners to arrange for the inspections. This enables owners to take advantage of any synergies that are available.
23. Offences that are set out on the face of the Bill should be as clear as possible. We recommend that Defra review the offences under Part 3 within a year of the Bill being enacted to ensure that they are appropriate, enforceable and if necessary amended in the light of experience. (Paragraph 72)	The Department has reviewed these offences in the light of the Committee's recommendations. We are now providing for civil sanctions in respect of the power to require information from private persons. The Department otherwise believes that the offences proposed are appropriate, proportionate and enforceable, but will keep their implementation under review.
SUSTAINABLE DRAINAGE
24. These Clauses provide a starting point to resolve the long-standing difficulties associated with the introduction and management of SUDS. The wide-spread implementation of SUDS is a critical part of future water management and therefore we welcome Defra's work in taking SUDS forward. However, the current provisions leave several questions unanswered on: the capacity of SUDS, the transfer of approval powers, funding arrangements for the adoption and maintenance of SUDS, and the potential for retro-fitting SUDS. (Paragraph 77)	Government recognises that sustainable drainage systems (SUDS) are not a panacea to surface water flooding, and the Bill makes no attempt to present SUDS as the sole solution to this type of flooding. The Bill does, however, recognise the importance of SUDS as part of the wider flood risk management strategy and that they should be a part of all new-build drainage designs. The Bill also recognises that SUDS play an important role in improving water quality and overall amenity. SUDS can incorporate a wide range of drainage techniques. The new proposals for approval of drainage systems, along with the publication of National Standards, will help deliver the best sustainable drainage solution possible. No formal delegation functions were set out in the original Bill, and we do not feel that legislation is required to enable the SUDS Approving Body to delegate to organisations which may be better-placed to deliver on SUDS. However, the SUDS Approving Body will retain overall responsibility and liability for decisions on what drainage proposals are approved. SUDS capital costs will be covered in the costs of new developments. The costs of SUDS are not expected to exceed the costs of conventional drainage and in many cases they will be less than those of conventional drainage since SUDS structures tend to be simple surface features (e.g. ponds, swales or permeable paving), as opposed to the traditional hard-engineered, below-ground solutions. The costs of administering the SUDS adoption process will be met by fees. We are exploring the appropriate mechanisms and fee structures in discussion with other Government departments. SUDS maintenance is a long term issue. SUDS are expected to have lifetimes lasting decades. We have assumed they will last 30-50 years and the number of SUDS to be maintained will rise gradually as new developments using SUDS are built. In the medium term, the expected savings of over £50 million from the transfer of private sewers to water companies, together with savings from better local flood risk management, are expected to more than cover the rising costs of maintaining adopted SUDS. We recognise that longer term funding must be in place from around 2018, and are considering a number of options to address the funding of SUDS maintenance in the long term. The Bill does not focus on retro-fitting, but instead on incorporating SUDS in new developments and redevelopments. We hope that increasing numbers of SUDS in new building developments will also encourage local authorities, householders and sewerage companies to retro-fit as SUDS methods, materials, techniques and awareness improve. One of the barriers to retro-fitting SUDS is that there have not been clear adoption arrangements in place for SUDS in the public domain. However, the Flood and Water Management Bill provides for the SUDS approving body to adopt SUDS. As a further incentive, householders who use SUDS and do not need a connection to surface water sewer receive a rebate on their surface water charges. Site area charging for surface water drainage for non-household customers, which has been introduced by four of the ten water companies in England and Wales, also provides a direct financial incentive to install SUDS to reduce the site area liable to charges.
25. The Government should ensure that the legislative framework provides sufficient incentives for households and businesses to install rainwater harvesting and grey water systems; and also prevents further erosion of permeable surfaces. (Paragraph 78)	The new requirement for approval of all drainage in all new developments and redevelopments will ensure that homeowners and developers incorporate SUDS and manage surface water runoff effectively. The National Standards will set out a range of SUDS options, including rainwater harvesting and the use of permeable, rather than hard-paved, surfaces. Best practice, clear requirements, examples and guidance will help understanding and delivery of SUDS. These measures will strengthen Department for Communities and Local Government policy incorporating permeable paving within permitted development rights. On grey water systems, SUDS are designed to deal with surface water. Grey water systems, which relate to foul waste, fall outside the scope of the Bill. The Code for Sustainable Homes did, though, establish a series of performance levels and standards for new homes, including a set of minimum performance levels for water use. Higher levels of the code encourage higher performance in key resource efficiency areas, of which water is one. The upper level of the Code (5/6) has a performance target of 82 litres per person per day; for which some use of grey or rain water will be required to meet the standard, using normal fittings. However, grey water recycling technology is not sufficiently well developed for mainstream installation.
FLOODING ISSUES CONSULTED ON BUT NOT INCLUDED IN DRAFT CLAUSES
26. The relationship between IDBs and local authorities remains crucial to effective local flood risk management. Defra's proposals are a blunt instrument if the intention is to enhance IDBs' environmental protection role and give local authorities greater say over the work of IDBs. While we accept the importance of IDBs working with local authorities to deliver local flood and coastal erosion risk management strategies, it is vital that IDBs' experience and expertise in preserving high quality agricultural land is maintained. Defra should consult with local authorities to establish whether the statutory framework governing IDBs provides sufficient flexibility to enable them to work effectively. (Paragraph 84)	Following further discussions with local authorities, internal drainage boards and the Environment Agency, we do not propose to move responsibility for supervision of internal drainage boards from the Environment Agency to local authorities at the current time. The focus of the Bill introduced to Parliament is on flood and coastal erosion risk management and we will be seeking to make any wider reforms to internal drainage boards through subsequent legislation. The Department believes that the proposed legislative framework provides ample flexibility for local authorities and other partners to work effectively to manage local flood risk. The requirement for all operating authorities to act consistently with the local and national strategies and co-operate with each other, together with the ability for authorities to enter into agreements for others to take on roles and tasks as part of developing and applying their strategies will be particularly important. Guidance will set out and reinforce the opportunities for working in this way.
27. There is a compelling argument that those who cause flooding should bear some responsibility for their actions, or failure to act. We recommend that Defra should include provisions in the Bill to encompass causing flooding as a statutory nuisance. Those provisions should provide the necessary protection for householders, while not creating an overly proscriptive regime for the farming community. Defra should ensure farmers and landowners have clear guidance and advice on the practicalities of minimising flood risk from their land. (Paragraph 87)	There is evidence that land management practices and land use change can increase runoff at a local level, causing flood damage in certain circumstances. Those affected by runoff flooding do already have recourse to civil nuisance proceedings. Whilst we believe there are strong arguments for changes to legislation to make it easier to tackle runoff flooding, there are other solutions that need to be considered alongside the option of a new statutory nuisance. These options include the Common Agricultural Policy schemes cross-compliance requirements and extension of the remit of the agricultural land tribunals. Currently, we have no evidence that measures under the Common Agricultural Policy may be insufficient to address this. However, the Department will consider further whether it would be appropriate to introduce a new statutory nuisance or other measures to require farmers to change management practices where it is clear that these are responsible for localised flooding. We are continuing work to determine the best approach. We will also issue a factsheet to help victims of runoff flooding better understand how they can tackle the issue. The Department is currently conducting research on the extent to which land management practices affect runoff. At present there is not sufficient evidence available to justify restricting land management practices for the purposes of managing runoff at catchment level. This could change in future, and the Department will continue to work on this issue. The Welsh Assembly Government is looking at a similar issue.
28. We recommend that Defra provide clear guidance on the obligations and responsibilities of riparian owners and provide practical advice on how they can meet their responsibilities for the maintenance of watercourses, rather than leaving these to emerge only through case law. (Paragraph 88)	The Department agrees that it is important to ensure riparian owners are aware of their responsibilities. Clear guidance for riparian owners is available through the Environment Agency publication "Living on the Edge". The third edition of this was published in 2007 and is available from the Environment Agency website4 and offices. This material is already made available by a number of local authorities and is likely to be further promoted by the national and local strategies. The Environment Agency has also undertaken to review the publication to take account of the changes to legislation proposed by the Bill, and through the strategies, including where appropriate advice on the roles of other organisations.
29. Defra should do more to promote flooding resilience at the most local level. The Bill should include a requirement on the Environment Agency and local authorities to include in their flood risk management plans a duty to promote resilience. (Paragraph 92)	The Department recognises the importance of promoting resilience as part of a long-term flood risk management strategy. The Bill now requires Secretary of State approval of the national strategy for England which will set out proposed measures, and the cost and benefits of different measures. Welsh Ministers will have a similar level of control as they will produce the strategy for Wales. Local authority strategies will need to be consistent with the national strategy and in any event Ministers will have the power to give guidance direct to local authorities. In this way Government will be able to ensure that sufficient weight is given by the risk management authorities to developing resilience. The requirement to set out costs and benefits of the measures proposed also puts some pressure on the risk management authorities to consider resilience measures which may be more cost effective. Local flood risk management strategies should identify areas where resistance and resilience approaches are likely to be more efficient than conventional approaches. The adoption of a wider definition of flood and coastal erosion risk management, together with funding changes will enable local authorities to promote these approaches more effectively, however a duty to promote resilience would not necessarily be appropriate in all locations (particularly where the chance of flooding is very small) and could take resources away from more effective flood risk management approaches.
30. The National Flood Forum is an example of what ordinary people can and will do to influence and control their flood risks. Those at risk of flooding need good information about what products and advice are available. Defra should consult the National Flood Forum and other local groups about the scope for more comprehensive advice for those at risk of flooding. The Department should explore the scope for these groups developing, with Defra funding if necessary, a system for reviewing and rating the effectiveness of flood defence products. (Paragraph 93)	The Department agrees that those at risk of flooding need good information about what products and advice are available. The Department has worked with the National Flood Forum for a number of years and supported their work with local groups and contributing to wider policy development. The Welsh Assembly Government is also working with the National Flood Forum and supporting the development of its presence in Wales. There is already a range of information available to householders on flood risk and the Department is planning a focused piece of work to bring this together and identify whether there are any gaps which need filling. There is an existing British Standard scheme for flood protection products. The test standard (PAS1188) was updated in March 2009 and includes requirements for manufacturers to include a test height and width on their products so that customers will know to what size of openings the products are suitable for.
WATER SECTOR
31. The proposals for the water administration regime appear appropriate. We note the water industry's concerns that the provisions may affect investor perceptions. However, those concerns are common to many proposed changes to the regulation or administration of the industry and should not prevent the inclusion of provisions intended to protect consumers and preserve water supply. The principal purpose of the water industry is the supply of potable water and removal of wastewater. The regulator and the industry have a duty of care to ensure that those core functions are not jeopardised by water companies taking on other trading activities. (Paragraph 96)	The Department is grateful to the EFRA Committee for its support for the provisions to amend the special administration regime for water companies. The issue of investor perception was considered in the impact assessment on the proposed reforms that accompanied the consultation document. This said: "Bringing in the rescue objective could also potentially reduce the cost of borrowing for water companies because there is a reduced risk of the business being sold if it gets into difficulties, but there are a large number of other factors to be taken into account by investors in capital markets so the reduced risk may not have much of an impact on actual costs." The special administration regime has been a feature of the regulation of English and Welsh water companies since privatisation and it is likely that investors will already factor in any risks around the regime in their decision-making process. The reforms that the Department is proposing will increase the options for the special administrator to produce a more satisfactory outcome to maximise value in the business while continuing to protect the interests of customers. This could have a positive impact on investors' decisions, but this will be one of many other risks that they would need to take into account. On water companies taking on other trading activities, Ofwat works closely with relevant undertakers to ensure that they are able to properly carry out and finance their statutory functions. This helps to reduce the risk of water companies running into severe financial difficulties or failing to meet key statutory or regulatory requirements, but does not, nor is it intended to eliminate all risks of this occurring. However, Ofwat requires that the assets of water companies are ring-fenced to ensure that other trading activities within the group do not receive any subsidies from the water business or put the delivery of water and sewerage services at risk.
32. We recommend that when the Bill is introduced to Parliament it is accompanied by a statement setting out Ofwat's assessment of the risks to water industry investors of the Bill's proposed changes to the regulatory regime. (Paragraph 97)	Ofwat has agreed that it will produce a statement as recommended by the Committee.
33. We accept the rationale for a process to alter standard licence conditions without excessive bureaucracy. However, we consider it proportionate for the provisions of Clause 234 to be balanced by a clear appeal mechanism that should be set out on the face of the Bill. (Paragraph 102)	The Department welcomes the Committee's acceptance of the rationale for being able to alter standard licence conditions. In line with process adopted by other sectors subject to economic regulation, there are several safeguards included in the clause in the draft Bill: Ofwat would have a duty to consult all water companies and other interested parties on any proposed change to the standard licence conditions; The Secretary of State/Welsh Ministers would be able to direct Ofwat not to make the proposed change; Companies would be able to submit representations and/or objections to the proposed change; Ofwat would have a duty to consider all representations and/or objections and would only be able to make the proposed change if: —the percentage of companies objecting to the proposed change is less than a specified percentage; and —the combined market share of companies objecting to the proposed change is less than a specified percentage. The Department considers that these safeguards mean that it would not be possible for Ofwat to push through licence modifications that the majority of water companies do not accept. Therefore an appeal mechanism associated with this power would be unnecessary and would create regulatory uncertainty for those water companies that had already accepted the change in their licences.
34. We agree that the period during which penalties can be imposed by the regulator should be extended. However, we consider it proportionate for the provisions of the Clause to be balanced by a clear appeal mechanism separate from the regulator. We recommend that Ofwat assess how the imposition of penalties affects companies' cost of capital and that any increase in the cost of capital at future price reviews attributed to the imposition of penalties should not be passed on to the customer in the regulator's final determination. (Paragraph 106)	The Department welcomes the Committee's agreement with the proposal to extend the period during which penalties can be imposed. Section 22E of the Water Industry Act 1991 already provides a right of appeal to the High Court against the imposition of financial penalties. This is in line with provisions in other sectors subject to economic regulation such electricity, gas, railways and postal services. Ofwat has had the ability to impose financial penalties since 1 April 2005. Therefore the risk of financial penalties is already a factor in investors' decisions. Financial penalties can only be imposed by Ofwat where water companies have breached their statutory obligations. Ofwat sets the cost of capital on the basis of a fully compliant industry. Where a company has breached its statutory obligations and faces a financial penalty that sum is met by its shareholders and is not passed on to customers.
35. We welcome the provisions in Clause 254. Much of south and east England suffer water scarcity, which is set to become more frequent and widespread. We note the concerns raised by the National Farmers' Union and recommend that, when using the powers under Clause 254, Ministers and water companies consider measures to mitigate the impact on agriculture. (Paragraph 107)	The Department welcomes the support for proposals to widen the scope of the hosepipe ban powers and will take forward the clause proposed in the draft Bill. New non-essential uses will only be added to the hosepipe ban powers through an Order once further work has been undertaken to establish the costs and benefits both to water companies and also to their customers of adding those non essential uses. Water companies will have the flexibility to limit the effect of a hosepipe ban by restricting its application in terms of timing, area, customers, practices and apparatus. The Water Industry Code of Practice sets out the principles by which water companies will operate to ensure that practices are consistent, transparent and proportionate.
WATER ISSUES CONSULTED ON BUT NOT INCLUDED IN THE DRAFT CLAUSES
36. Ofwat's price review mechanism does not provide sufficient incentives for water efficiency savings. We recommend that Defra include provisions in the Bill providing for time limiting of abstraction licences and water efficiency obligations on water supply companies. Such provisions are essential to achieve the vision set out in Future Water. In drafting these provisions Defra should consider their potential impact on the cost of water companies raising finance which would be borne by their customers. Defra together with the regulator, companies and financial institutions should consider how the legislation can be drafted to ensure the least detrimental effect on the water companies' ability to raise finance. (Paragraph 113)	The proposals for mandatory time limiting of all abstraction licences have been subject to a separate consultation exercise. Government is considering the results of that and will issue a response in due course.
37. In a market without competition, Ofwat is right to be cautious about the impact of mergers on customers' interests. It appears that the Government and Ofwat are committed to competition in some form. However, it would be inappropriate for the regulator to prevent mergers purely to maintain their ability to compare companies' performance. Defra should review the water industry's merger regime with the intention of relaxing its conditions when greater competition is introduced. Defra should ensure that any changes to the merger regime do not reduce the protection for consumers. (Paragraph 121)	Government launched a public consultation on the recommendations made by Professor Martin Cave's Review on 17 September. This included recommendations to reform the special merger regime. As the Committee notes, the water sector is currently one of the few sectors which has a special merger regime. Under the special water merger regime, any merger where either the acquiring or the acquired water company has an annual turnover of £10 million or more is automatically referred by the Office of Fair Trading to the Competition Commission. This threshold can be changed by the Secretary of State using secondary legislation. Government recognises that the wide diversity of companies in the English and Welsh water industry has greatly benefitted the sector, but we also agree that consumers and the environment could benefit through increased consolidation within the industry. Government is therefore consulting on the recommendations to increase the annual turnover threshold to £70 million and to introduce other changes to the regime. However, the Department also recognises the importance of Ofwat's ability to be able to make meaningful comparisons between water companies as part of the periodic review process and when it carries out its other regulatory functions. The Department therefore strongly supports the Cave Review's recommendations that Ofwat should commission an independent review of the scope for making greater use of alternative data sources and statistical techniques and their impact on the loss of a comparator, and continue to refine its econometric modelling techniques to take advantage of the information from alternative data sources. The public consultation will run until 18 December and it is our intention to include any legislative changes alongside reforms to the competition regime.
38. We do not accept Ofwat's argument that there is sufficient transitional flexibility in the regulatory regime to accommodate changes in charging schemes. We recommend that Defra explore including provisions in the Bill that create a subset of customers that could be excluded from the new charging method and which recognise the real world financial situation of not-for-profit organisations such as the Scouts, Churches and village halls. (Paragraph 123)	The Department has repeatedly said that community organisations should not face disproportionate increases in water bills as companies switch to site area charging for surface water drainage. Such increases are not in line with Government guidance issued to Ofwat in 2000, nor Ofwat's more detailed guidance issued in 2003 to water companies. The Department has always said that we would give the companies and Ofwat time to come up with a fair solution whilst being clear that the Department would intervene to fix this problem if Ofwat and the companies involved did not. The Department agrees with Ofwat that all customers connected to the surface water sewer should make a contribution towards the cost of removing and treating surface water where they use public sewers. This provides a financial incentive to reduce surface water runoff which can reduce the risk of surface water flooding, which is likely to increase in the future because of climate change. For this reason, where a charging scheme is based on surface area, we do not propose that any organisation should be wholly exempted from surface water drainage charges. However, increases in bills of many thousands of pounds, for example, are clearly unaffordable for community and voluntary groups, who risk having to close or cut back significantly on the valuable services that they provide to society. That would be in nobody's interest. The Secretary of State therefore announced on 28 September that Government will legislate to enable water companies in England and Wales to operate concessionary schemes for community premises for the purpose of surface water drainage charges, and require Ofwat to allow companies to exercise their discretion in the design and operation of schemes. This provision is included in the Bill currently before Parliament.
RESOURCES AND SKILLS
39. The provisions in this legislation can only be justified if the calculations in the impact assessments produce an overall net financial benefit. Despite Defra's assurances, we remain concerned that the impact assessments are insufficiently precise and provide meagre evidence to support their cost and benefit calculations. We note that Defra intends to do further work on the impact assessments—that is essential. Parliament will expect that, when the Bill is introduced, its accompanying impact assessments provide a clear, accurate exposition of the costs and benefits and how the funding will work, particularly in relation to the new roles and responsibilities for local authorities. (Paragraph 134)	Government has strengthened the analysis underlying several of the impact assessments including an updated assessment by experienced consultants of the number of surface water management plans needed, staffing, SUDS and other costs for local authorities associated with local flood risk management. Similarly the analytical approach for the reservoirs impact assessment has been enhanced. Government is confident that the revised impact assessments provide robust analyses of the overall impacts of the proposals and where appropriate have undertaken sensitivity analyses which show that a substantial net benefit will result in almost all cases. We have also summarised the costs and benefits for the individual impact assessments to provide an overall analysis for the Bill.
40. We are not convinced that local authorities will benefit from the transfer of sewers to the degree anticipated in the impact assessments. There remains some uncertainty about the costs of adopting and maintaining SUDS—until these questions are answered doubts remain about the impact assessments' robustness. (Paragraph 135)	Government has strengthened the analysis for the calculation of new burdens for local authorities, which demonstrates that it is extremely unlikely that additional local authority expenditure will exceed the savings identified. We are confident that the assessment represents the best available evidence; it uses the upper end of the range of cost estimates and the conservative end of the range of potential benefit. The Department will monitor the situation as implementation proceeds, including local authority take-up of new powers and functions. The Department will ensure that any increased costs to local authorities are fully funded to avoid upward pressure on council tax. To provide greater certainty and transparency, funding for the new lead local flood authority role and SUDS maintenance will be provided to local authorities as un-ringfenced area-based grants, so that local authorities will see how much is being provided to fund the additional roles.
41. We welcome the Government's announcement of funding to improve local authorities' skills. In its response to this report, Defra should provide an estimate of how many local authority staff will benefit from the additional funding; and how long it will take before local authorities have sufficient numbers of appropriately trained and qualified staff. (Paragraph 139)	The Department has provided funding to enable local authority staff to join the Environment Agency foundation degree programme. It is also working with the industry to develop other training including an apprenticeship programme, and a network of skilled staff within local authorities. About 25 local authority participants were identified for the foundation degree programme this year, but it is difficult to estimate numbers benefitting from the other initiatives. Within the impact assesment we estimated that on average each lead local flood authority would require between 1 and 3 staff members to undertake the SUDS and local flood risk management roles. Since there would be 147 lead local flood authorities, this totals between 147 and 441 additional staff across England needed to manage local flood risk and oversee SUDS. In Wales, we expect that a similar staffing level will be required, with between 1 and 3 staff required for SUDS and local flood management in 22 unitary authorities. So there would be 22 to 66 new staff required to implement these proposals in Wales. Other activities are also being explicitly funded through new burdens, such as the designation of third party assets, and the mapping and assessing of drainage assets; these roles will also require additional staff. For the lead authority role, it is proposed that authorities are funded in accordance with the level of local flood risk, and so some authorities could be funded to recruit three or four times as many new staff as other authorities. Proposals will be consulted on through the Department for Communities and Local Government, local government finance settlement working group. It is likely that these roles will be filled through a range of approaches including recruitment, contracting and secondment of experienced individuals, training of new staff and existing staff with relevant backgrounds and partnership working with organisations such as internal drainage boards. The Department recognises that it will take some time to develop the necessary skills within local authorities and this is reflected in the assumptions we have made around the programme of work. We are working closely with the Local Government Association and others on skills and will continue to keep the situation under review.
CONCLUSIONS
42. Defra has further work to do on the Bill and time is short. Even if Defra have a Bill prepared for introduction immediately after the Queen's Speech there is little realistic chance of it reaching the statute book before the next general election. As a result Defra might welcome more time to consider how to improve the current provisions; as well as the inclusion of provisions to implement the Cave and Walker reviews' recommendations; and consolidate existing legislation as recommended by Sir Michael Pitt. (Paragraph 142)	As stated in answer to the Committee's first recommendation, we do not want to delay changes that will improve protection to people's lives and property. We want to resolve immediately the deficiencies in legislation which the Committee rightly identified as needing urgent action. Delaying certain aspects such as provisions to implement the Cave and Walker Reviews' recommendations will allow us more time to consider the issues which have not undergone the same extensive consultation and rigorous Committee scrutiny that the vast majority of the provisions in the Bill have. As mentioned, subsequent consolidation will still allow us to achieve Sir Michael Pitt's recommended single unifying act on floods legislation. Our firm intention is that the current Bill will reach the statute book before the next general election. We hope that EFRA Committee members will join us in achieving that ambition and avoid a repeat of the terrible damage to homes and lives caused by flooding in 2007.

---

2   Government responses to the Committee's 1^st, 2^nd and 3^rd Reports (2007-08) were not required. Back

3   TNS Worldpanel Surveys 2009 for AHDB Meat Services

 Back

4   The Environment Agency is obliged to recover its regulatory costs from those whom it regulates. This under-recovery from the pig and poultry sector was therefore in effect subsidised by permit charges upon other sectors

 Back

5   The estimated increase in production of 70% is quoted by OECD-FAO in their Agricultural Outlook 2009-2018 (published on 17th June 2009) http://www.agri-outlook.org/pages/0,2987,en_36774715_36775671_1_1_1_1_1,00.html See p. 11, fifth bullet point. More detail is provided in THE RESOURCE OUTLOOK TO 2050 http://www.fao.org/es/esd/Natural%20resource%20use%20-%20Bruinsma.pdf .We are aware that other headline projections have been attributed to FAO and cited in international fora, and we are further investigating this, together with DfID.

 Back

6   Expenditure and Food Survey  Back

7   Agriculture in the UK 2008, tables 5.9 and 5.12 Back

8   Determining the environmental burdens and resource use in the production of agricultural and horticultural commodities.  Back

9   A theoretical analysis of how the protein requirements of livestock in England and Wales might be best met Back

10   Determining the environmental burdens and resource use in the production of agricultural and horticultural commodities.  Back

11   A theoretical analysis of how the protein requirements of livestock in England and Wales might be best met Back

12   http://www.eatseasonably.co.uk/ Back

13   http://sandbox.defra.gov.uk/food2030 Back

---

Prepared 7 January 2010