3. The Department's total expenditure for 2013-14
was £6.252 billion, taking into account both its activities
funded directly by Parliament and grants made following the receipt
of money from the European Union, predominantly to fund agricultural
subsidies and rural development schemes.[3]
The Government budget allocated to and spent by Defra is known
as the Departmental Expenditure Limit (DEL) and it is set at Spending
Reviews. The table below shows Defra's final DEL expenditure (outturn)
against its approved budgetary limits (estimate) in 2013-14.
4. The Department has underspent its central Government
funding allocation each year since the 2010 Spending Review. In
2013-14, Defra spent £2,433 million of its DEL to meet its
strategic objectives which resulted in a £61 million (2 per
cent) underspend compared to its budget.[4]
The Department's Annual Report and Accounts 2013-14 state that
the £50 million underspend against resource DEL was due to
the following factors:
a) £30
million was not spent as the UK Government challenged EU disallowance
penalties on 2010 and 2011 Common Agricultural Policy (CAP) scheme
expenditure; and
b) £20
million was intentional underspend following approval from HM
Treasury to carry the funding into 2014-15 to spend on flood prevention.[5]
5. We have reported in detail on flood funding during
this Parliament and pursued some of our concerns further during
this inquiry. In February 2014, Defra announced an additional
£130 million funding to respond to the winter floods 2013-14
(consisting of £110 million revenue and £20 million
capital), which had been sourced from Defra's existing allocation.
The Government Response to our Report on Winter floods 2013-14
explained that the £130 million had been found:
6. We sought more clarity around the details of the
"internal re-prioritisation" throughout this inquiry.
Defra told us that "it is not possible to identify specific
budgets that were reduced",[7]
and that:
Defra found the remaining £130m from existing
resources in 2013-14 and 2014-15. £80m was found in 2013-14
and £50m in 2014-15. With Treasury agreement £50m was
then transferred from 2013-14 to 2014-15. The sources of the funding
are set out in the table below.[8]
| £m
| 2013-14
| 2014-15
|
| Underspend within the Disallowance ringfence
| 23 | |
| Disallowance funding not utilised
| 30 | 40
|
| Recycling of other underspends within the department
| 27 | -
|
| Active, in year, management of emerging underspends
| - | 10
|
| Total |
80 | 50
|
7. It is unclear
how the £80 million underspend in 2013-14 set out in Defra's
written evidence corresponds to the £50 million underspend
set out in Defra's Annual Report and Accounts for the same period.
It is also unclear what the distinction is between "underspend
within the disallowance ringfence" and "disallowance
funding not utilised": in total these two disallowance figures
are worth £53 million which does not agree with the disallowance
underspend of £30 million set out in the Annual Report and
Accounts. Lastly, Defra's written evidence refers to £50
million being transferred from 2013-14 to 2014-15 with Treasury
approval, whereas the Annual Report and Accounts states that £20
million was transferred with Treasury approval.
8. Defra must be more transparent about where
emergency money such as the winter floods funding is found and
what impact this has on the Department's other priorities and
policy delivery. We are not aware of any reason why the Department
could not identify which specific budgets were reduced, despite
our repeated requests for this information. The Department must
provide a clear and detailed explanation addressing each of the
discrepancies we have identified with specific reference to the
underlying data in the Annual Report and Accounts.
Budget adjustments
9. In common with most Departments, Defra has faced
reductions in funding since 2010. The table below shows the decreases
in Defra's DEL budget since 2010-11. As a result of the 2010 Spending
Review, the Department was required to make a 16.7 per cent real
terms reduction in resource expenditure from £2.4 billion
(2010-11) to £2 billion (2014-15). The Department's resource
budget is set to reduce by a further £200 million by 2015-16,
roughly 10 per cent of Defra's overall resource budget.[9]
| 2010-11
| 2011-12 | 2012-13
| 2013-14 | 2014-15
| 2015-16 |
| Resource | £2.4bn
| £2.2bn | £2.1bn
| £2.0bn | £2.0bn
| £1.8bn |
| Capital | £0.6bn
| £0.4bn | £0.4bn
| £0.5bn | £0.6bn
| £0.5bn |
| Total | £3bn
| £2.6bn |
£2.5bn | £2.5bn
| £2.6bn |
£2.3bn |
10. In our Report on the Departmental Annual Report
2012-13 we recommended that "the Secretary of State needs
to be clearer about what substantial cuts in Defra's budget will
mean for policy delivery" as "administrative and efficiency
savings will not represent the entire savings".[10]
We are concerned that a lack of clarity remains in relation to
the £200 million savings which must be found in 2015-16,
particularly following confirmation from the Permanent Secretary
that the Department had "not actually taken those decisions
to set budgets for 2015-16" but that the cuts would "come
from a variety of areas. We do have a very varied and diverse
set of delivery arrangements".[11]
The Department's remit is wide so there is a risk that making
budget cuts across a variety of areas leads to a 'salami-slicing'
approach whereby small cuts are made across the board, rather
than a more strategic approach being taken. When we asked exactly
where the budget cuts would fall, the Secretary of State replied:
The whole philosophy of the Department has to
be to get more for less, so we want to achieve the same outcomes
on the front line.[12]
And:
It is certainly not a case of salami-slicing;
it is about focusing more on the outcomes and not doing things
that do not achieve those outcomes and objectives.[13]
11. Given
the breadth of policy areas covered by the Department, coupled
with the unpredictable nature of emergency events such as flooding
and animal and plant health disease, it is important that a strong
case is made to protect Defra's budget at the next Spending Review.
12. It is frustrating that our concerns about
the lack of clarity surrounding pending budget reductions have
not been addressed. We reiterate our previous recommendation that
the Secretary of State must be clearer about where budget cuts
will fall and what impact this will have on Defra's policy delivery.
We understand that the Secretary of State makes decisions based
on outcomes in line with Defra's priorities, but the priorities
in themselves do not provide a clear guide as to where the axe
will fall. Defra has not provided the clarity or detail needed
to scrutinise the Department's planned expenditure or policy delivery.
Disallowance penalties
13. Disallowance is a financial penalty imposed by
the European Commission on Member States that are found to have
made CAP payments inaccurately. These inaccuracies are identified
only once the Commission has audited accounts, so that Defra accounts
routinely show disallowance figures relating to CAP payments made
several years ago. Defra may disagree with the Commission's assessments
and request conciliation, so the process for agreeing levels of
disallowance to be applied to the UK can be complex and take many
months. Since the introduction of the 2005 CAP, Defra accounts
have recognised £580 million worth of payments owed as disallowance.
Of this, £407 million has been paid and £173 million
remains to be paid for the period up to 2011. However, delays
within the Commission mean that it has not yet assessed disallowance
levels for the years 2012-14 so the amount owing may well go up.[14]
14. Defra's 2013-14 accounts were not qualified by
the Comptroller and Auditor General (C&AG)—only the
second time they have not been qualified owing to CAP disallowance
since 2007-08.[15] Although
£41.8 million of disallowance was included in the 2013-14
accounts, mainly relating to 2010-11, the C&AG did not consider
this to be "material" irregular expenditure (i.e. expenditure
made outside of Parliamentary intention). However, the Permanent
Secretary told us there was a "significant risk" of
disallowance penalties for 2012, 2013 and 2014.[16]
Defra expects that penalties for the current CAP will only be
fully calculated and settled by 2019-20.
15. We have criticised the performance of the Rural
Payments Agency (RPA) in respect of high levels of disallowance
incurred in previous years under the 2005 CAP. The C&AG notes
that the problems experienced by the RPA and Defra in implementing
the 2005 CAP have "undoubtedly contributed" to disallowance
levels.[17] In response
to this, Defra has put in place a series of measures under its
new CAP Delivery Programme to prepare for implementation of the
new CAP from January 2015. This includes measures to ensure effectiveness
of IT systems.
16. With the
main reform provisions of the new Common Agricultural Policy scheme
coming into play in 2015, Defra, the Rural Payments Agency and
farmers are having to adjust to a complex set of new rules. It
is therefore vital that Defra and its agencies ensure that lessons
learnt from problems with payments under the previous CAP schemes
are taken forward effectively so as to minimise disallowance risks
in future. We welcome the CAP Delivery Programme put in place
by Defra and the Rural Payments Agency to prepare for the new
rules applying from 2015 but it is essential that the Department
closely monitors performance and that early action is taken to
rectify any problems.
17. The Secretary of State and the Permanent Secretary
must make it a priority to review progress and ensure that effective
mechanisms, including IT systems, are in place to provide timely,
accurate CAP payments to farmers.
18. In
our Report on Rural broadband and digital-only services,[18]
we gave the Rural Payments Agency credit for taking a number of
important steps to ensure that those with poor broadband speeds
can access its new CAP application software but, given the difficulties
experienced with previous CAP schemes, and in particular given
the variable state of broadband access in rural areas, we reserved
judgment on the effectiveness of its preparations until they had
been tested in action. We also recommended that the RPA had a
contingency plan in place in case the new CAP application system
proved difficult for farmers with limited broadband capability
to use and to enable it to respond to the software not functioning
at the level required.
Staff satisfaction
19. The Civil Service People Survey 2013 was carried
out at Defra in October 2013 and published in February 2014. The
key indicator (known as the engagement index) determines the level
of staff engagement through three key elements: the extent to
which staff speak positively of the organisation; the extent to
which staff are emotionally attached and committed to the organisation;
and whether staff are motivated to perform at their best. Defra's
overall engagement score was 52 per cent, which was an increase
of 2 percentage points compared with 2012. This was 6 points below
the Civil Service average of 58 per cent (compared to 8 points
below the Civil Service average in 2012). When asked for her views
on the most recent results, the Permanent Secretary said:
Obviously I would always like the people survey
scores to be higher than they are, but I am a realist. If that
is what staff think about the Department, I have to deal with
that and act on it. I was pleased to see that for the core Department
last year, there was a 2% improvement in the overall score. For
areas where we had focused a lot of attention, like learning and
development, there was a noticeable upkick, but I still think
we have a lot more to do on improving our leadership of change,
because we have a lot of change to do. It is not going to go away
and we could get better at doing it.[19]
20. The Department continues to lag behind the
Civil Service average and must increase its efforts to avoid another
repeat of poor staff survey results.
21. As in 2012, 'leadership and managing change'
scored particularly low at 35 per cent and still lagged 6 points
behind the Civil Service average. Within 'leadership and managing
change' the following breakdown provides more detail:
| Leadership and managing change
| % positive |
Difference from previous survey
| Difference from Civil Service average
|
| Defra keeps me informed about matters that affect me
| 58% | +2
| 0 |
| I think it is safe to challenge the way things are done in Defra
| 38% | +1
| 0 |
| Senior managers in Defra are sufficiently visible
| 49% | +7
| -2 |
| I believe the actions of Senior managers are consistent with Defra's values
| 41% | +7
| -2 |
| I have the opportunity to contribute my views before decisions are made that affect me
| 31% | 0
| -5 |
| I feel that change is managed well in Defra
| 23% | +4
| -6 |
| Overall, I have confidence in the decisions made by Defra's senior managers
| 34% | +5
| -7 |
| I feel that Defra as a whole is managed well
| 35% | +6
| -8 |
| When changes are made in Defra they are usually for the better
| 16% | +2
| -11 |
| I believe that the board has a clear vision for the future of Defra
| 28% | +6
| -14 |
22. The themes of 'I feel that change is managed
well in Defra' and 'When changes are made in Defra they
are usually for the better' scored particularly low at 23
per cent and 16 per cent respectively. Last year, we asked the
Permanent Secretary how she was tackling issues of low morale
and lack of confidence in the way that the Department manages
change. She said that Defra had embarked on a number of initiatives,
many focusing on learning and development. For example, it had
run a campaign to remind staff that they were entitled to five
days training per year: this was noted as a "priority for
2013" in the Permanent Secretary's foreword to the Annual
Report and Accounts 2013-14.[20]
However, when we asked Defra about the uptake of this scheme,
we were told that the Department "did not collect this information
centrally in 2013-14".[21]
The Department has confirmed that it is taking steps to measure
learning and development in 2014-15 including by asking a question
in the 2014 People Survey to determine how many days learning
and development had been received by staff in core Defra.
23. This year, the Permanent Secretary said:
My personal view on this is that I am not surprised
because we have spent more time focusing on ministerial priorities
[…] I think we could do more. We have been engaging with
them over the summer to say, "This is our vision of how we
operate as one business," but we need to put more substance
behind that, so I think there is more work to be done. It is not
about Ministers; it is about us, so I take responsibility for
that.[22]
24. We
welcome the initiatives introduced by Defra to address low staff
satisfaction levels but we agree with the Permanent Secretary
that there is more work to be done to improve the levels of staff
engagement. This is not the first year that the Department's staff
survey results have been disappointing and, in addition to taking
responsibility, senior managers need to commit to taking action
to address these results.
25. When new initiatives are introduced (for example
the '5-A-Year' campaign) they must be promoted and monitored to
ensure that positive results are being achieved. We invite the
Department to set out in its response to this Report the specific
actions it is taking to address low levels of engagement in leadership
and managing change and to keep us updated with the results of
its monitoring of such initiatives.
3 NAO, The performance of the Department for Environment, Food and Rural Affairs 2013-14,
November 2014, para 1.17 Back
4
The total underspend in 2012-13 was £18.5 million (0.7%) Back
5
Defra, Annual Report and Accounts 2013-14, p54; NAO, The performance of the Department for Environment, Food and Rural Affairs 2013-14,
November 2014, para 2.2 Back
6
Government Response to the Committee's First Report of Session
2014-15, Third Special Report of Session 2014-15, HC 701, p8 Back
7
Defra (DEP0002) para 9 Back
8
Defra (DEP0002) para 7 Back
9
Q20 Back
10
Environment, Food and Rural Affairs Committee, Ninth Report of
Session 2013-14, Departmental Annual Report 2012-13, HC 741, para
9 Back
11
Q20 and Q22 Back
12
Q94 Back
13
Q95 Back
14
Defra, Annual Report and Accounts 2013-14, p89 Back
15
Defra, Annual Report and Accounts 2013-14, p89 Back
16
Q45 Back
17
Defra, Annual Report and Accounts 2013-14, p91 Back
18
Environment, Food and Rural Affairs Committee, Seventh Report
of Session 2014-15, Rural broadband and digital-only services,
HC 834 Back
19
Q29 Back
20
Defra, Annual Report and Accounts 2013-14, piii Back
21
Defra (DEP0001) para 24 Back
22
Q34 Back
