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Defra spending cuts - where the axe could fall

Defra is staring down the barrel of huge cuts to an already-depleted budget over the next five years. Alistair Driver reports on where the axe might fall and what it could mean for farmers.
Defra will survive but is facing huge cuts to its budget
Defra will survive but is facing huge cuts to its budget

Defra has just embarked on an ambitious 25-year plan to drive the food and farming sectors forward.

 

Secretary of State Liz Truss has made much of her plans to ‘turbo charge’ the rural economy by, for example, boosting exports and cutting red tape.

 

But unprecedented cuts looming on the horizon have led many to question the department’s ability to carry out even its core functions – and ensure its future viability – let alone deliver these loftier ambitions.

Story so far

Defra’s budget has already taken a battering since 2010, the start of the ‘Age of Austerity’.

 

  • Its 2009/10 budget stood at £3.15 billion – £0.69bn for capital spending and £2.46bn non-capital (or resource) for day-to-day expenditure such as salaries
  • By 2012/13, after the first of wave of cuts, when Defra was told to its non-capital spending from £2.4 to £2bn, it was reduced to £2.46bn
  • Last June, Defra was asked to save a further £83 million in its 2015/16 budget
  • This now stands at £2.25bn, including a non-capital budget of £1.76bn

 

The graph below shows how Defra’s cuts, among the harshest across all Department’s unfolded during the last Parliament, including the impact on capital and resource spending.

 


Read More

Defra reaches agreement with Osborne over scale of budget cuts Defra reaches agreement with Osborne over scale of budget cuts

graph

 

In a short guide to Defra’s finances, published in September, the National Audit Office said Defra took the following steps to meet its decreasing budgets:

 

  • Redundancies across its bodies – the 20,721 full-time equivalent staff (excluding the Forestry Commission) employed by Defra on March 31, 2015, represented a reduction of 1,160 on the same date in 2014 and of 2,464 (11 per cent) on 2012
  • Ending leases to or vacating more than 100 properties
  • Savings in the cost of information and communications technology and procurement
  • Attempted savings through the Government’s ‘digital by default’ programme (although BPS ended up costing about £5m)

Future cuts

All this will pale into insignificance against what is to come.

 

As Chancellor George Osborne pursues further savings of £20bn across Government by 2020, he has asked non-ring-fenced departments to submit plans for two scenarios – for cuts of 25 per cent and 40 per cent over the next five years.

 

Industry figures believe the Treasury will push Defra towards the 40 per cent scenario.

 

truss

Defra Secretary Liz Truss has insisted Defra will continue as a separate Department, refuting claims its very existence was in doubt given the severity of the forthcoming cuts on top of cuts already made over the previous Parliament.

 

But there is no question the cuts of the scale under discussion will mark a radical change in how Defra and its family of agencies operate.

 

Mrs Truss she said last week the Department had not yet submitted its plans to the Treasury. Along with other Departments, it is currently in the process of holding detailed negotiations with the Treasury about where the savings will be made.

 

Final details of the cuts will be announced in Mr Osborne’s spending review on November 25. “We’ll deliver more with less,” Mr Osborne said.

Where will the savings be made?

Mrs Truss and Farming Minister George Eustice have given some broad hints at where Ministers believe savings could be made, although much of the fine detail is still up for discussion.

Further redundancies

A further round of redundancies is already in progress across core Defra and its agencies.

 

This is likely to see the Departure of some senior Defra civil servants and a reduction in the number of its directorates.

Cutting duplication across Defra’s arm’s length bodies

There has been no consideration of merging or abolishing any of the 34 bodies in the ‘Defra family’, Mrs Truss revealed last week, no doubt to the surprise of some.

 

Instead, the intention is to seek further savings beyond those achieved in the past five years by cutting duplication, including sharing back office functions such as human resources, IT, finance and press, across the various Defra bodies.

The Defra family

Defra is a sprawling organisation, incorporating 34 different arm’s-length bodies (see the full list below) beyond the core department, performing a wide variety of functions.

 

In 2014/15, Defra employed 22,874 staff across all its bodies at a cost of £890m.

 

The biggest employers were:

 

2014/15 expenditure

Defra contribution

Staff

Environment Agency

£1.294bn

£890m

10,357

Natural England

£194.4m

£179.6m

2,241

Core Defra

£6.3bn *

na

2,191

Rural Payments Agency

£2.829bn *

£294.5m

2,116

Animal Plant and Health Agency

£214.7m

na

2,098

Other agencies and NDPs

na

na

 

3,872

 

*Includes CAP expenditure

 

Salaries and spending

  • In 2014/15, Defra Ministers’ salaries and pensions amounted to £278,490 (Liz Truss, £63,066; George Eustice, £30,375; Dan Rogerson, £30,375; Lord de Mauley, £129,076; Owen Paterson (until July 2014), £25,598)
  • Five civil servants earned salaries, bonuses and pensions in excess of £100,000, led by Permanent Secretary Bronwyn Hill (£180,000 to £185,000).

 

Defra’s 2014/15 accounts show the ‘Departmental Group’ spent:

  • £125m on IT service costs
  • £7.6m on consultancy
  • £2.1m on stationery and printing
  • £6.2m on office services
  • £7.1m on training

Disallowance

Defra’s accounts also include EU disallowance penalties of £642m over the years, relating mainly to errors in delivering the Single Payment, money deducted from its share of EU fuds.

 

For more information on Defra's accounts see its 2014/15 annual report.

Defra's Arm's Length Bodies

Non-ministerial departments

Forestry Commission

The Water Services Regulation Authority

Executive agencies

Animal and Plant Health Agency

Centre for Environment, Fisheries and Aquaculture Science

Rural Payments Agency

Veterinary Medicines Directorate

Executive non-departmental public body

Agriculture and Horticulture Development Board

Board of Trustees of the Royal Botanic Gardens Kew

Consumer Council for Water

Environment Agency

Joint Nature Conservation Committee

Marine Management Organisation

National Forest Company

Natural England

Sea Fish Industry Authority

Advisory non-departmental public bodies

Advisory Committee on Pesticides

Advisory Committee on Releases to the Environment

Independent Agricultural Appeals Panel

Science Advisory Council

Veterinary Products Committee

Tribunal non-departmental public body

Plant Varieties and Seeds Tribunal

Other

Broads Authority

Covent Garden Market Authority

Dartmoor National Park Authority

Drinking Water Inspectorate

Exmoor National Park Authority

Lake District National Park Authority

New Forest National Park Authority

North York Moors National Park Authority

Northumberland National Park Authority

Peak District National Park Authority

South Downs National Park Authority

UK Co-ordinating Body

Yorkshire Dales National Park Authority

Citing Natural England and the Environment Agency in particular, Mrs Truss highlighted her desire to forge a ‘shared purpose’ across Defra’s bodies, suggesting a bringing together of policy teams.

 

“Organisations like the Environment Agency still has its own HR and finance Departments, IT systems as does Natural England and core Defra,” she told the Environment, Food and Rural Affairs Committee.


“There is a big opportunities to put those back offices together, work together more closely so we are delivering things better services on the ground.”

“I want to get to a position where we’re concentrating our resources on those front-line experts, not on duplicating functions between different parts of Defra."

Devolving policy to local level

Mrs Truss highlighted her desire to see certain policies and activities devolved to the local level.

flood

For example, bodies such Internal Drainage Boards could carry out flood management work ‘more cost-effectively’ than Defra/EA, she said.

 

She also cited the decision to roll out the recently-piloted policy of allowing farmers and landowners to carry out water maintenance, without having to go through the EA.

 

“There are some things where we want to see decisions made more locally," she said.

 

“I would like to see Internal Drainage Boards and the Somerset Rivers Authority we have just set up take on more responsibility."

 

The desire is to achieve a ’win-win’ - saving money for Defra while delivering policy more effectively at local level.

‘Smarter policy’

Defra plans to deploy satellite technology and introduce a single farm inspection task force to reduce the number of inspections saving it and farmers money.

 

Mrs Truss said it was is also looking at the concept of ‘Natural Capital’ to influence policy, looking at, for example, planting trees and paying farmers to use less pesticides upstream to reduce costs of flooding and pollution.

Withdrawing funding

Mark Pope, chairman of the NFU Environmental Forum, recently warned Defra was likely to withdraw its support for the Campaign for the Farmed Environment.

 

He said Government support for the voluntary industry initiative was under a ‘severe threat’ at a time when it was more important than ever, give the exodus of farmers from agri-environment schemes under the ew CAP.

 

Similar concerns have been expressed about other projects, including WRAP, which focusses on reducing waste and ensuring resources are used sustainably.

 

Tenant Farmers Association chief executive George Dunn said Defra was also looking to save money on areas like its work on the Farm Business Survey and in preparing regulatory measures such as the units of production order used for determining farm tenancy succession applications.

Research

Research, which currently accounts for a big chunk of Defra spending, is another area under pressure. Members of the scientific and farming communities have called on the Government to resist cuts to the £160m agri-tech strategy and other key research areas.

 

Mr Eustice highlighted a £250,000 project committed to tackling problems caused by urban seagulls as an example of where the axe would fall following the Treasury request for fresh savings to the 2015/16 budget.

 

Defra is likely to increasingly seek to fill the funding gap for research, and other areas, from other sources, including farmers’ levies.

 

Mr Dunn said: "I am sure that AHDB will also come under pressure to deliver more of what has been core to Defra, including on the research side."

Charging for services

Defra and its agencies already charge for a number of services. For example, environmental protection and abstraction licences brought in £274m in 2014/15, Defra’s accounts show.

 

Stressing it would be implemented on a ‘case-by-case basis’, Mrs Truss confirmed plans to raise more funds in this way, including increasing some existing charges. “We want to incentivise people to do the right thing,” she said.

 

This could mean charging for licences and other regulatory ’services’, plus passing on more of the costs associated with animal health, including bovine TB, which currently costs the taxpayer about £100m a year.

tb

There have long been discussions about passing on more of the cost and responsibility associated with bTB, including testing, compensation and reactor disposal, year. The cuts could force the issue.

 

NFU president Meurig Raymond has cited this as a major concern, urging Labour Ministers to join him in opposing moves to heap more of the cost burden onto farmers.

 

“The big concern, with so many demands on Defra, we could end up with more demands for cost recovery for animal health. At a time when the industry is suffering very badly on output values, that would be difficult.”

Responding to emergencies

ai

Further cuts will seriously test Defra’s emergency response capabilities in the event of future flooding or animal or plant disease outbreaks.

 

Speaking to MPs last week, Mrs Truss repeatedly insisted its ability to respond to these sort of emergencies would remain a priority.

 

She insisted Defra had place to reinforce its veterinary from home and abroad in the event of a major animal disease outbreak.

 

She acknowledged, however, Defra would have to seek emergency funding from the Treasury for a major outbreak. But she said the key was to deploy effective surveillance and preventative measures to detect and control outbreaks at an early stage, as Defra had a good record of doing in recent years.

 

"I can reassure you there will be enough vets in the event of a major outbreak," she told the EFRA Committee.

 

Defra has always been keen to stress its commitment to its large flood defence budget, reinforced after the Somerset floods of 2014. But whether it can survive the forthcoming cuts fully intact remains to be seen.

 

This will continue to be one of the biggest areas of concerns, as more details of the cuts emerge.

 

Industry reaction

NFU director of policy Andrew Clark said the NFU was concerned cuts of up to 40 per cent could ‘damage front-line delivery services’ and threaten the productivity and profitability of farm businesses.

 

"That is why we believe that Defra should first seek savings in back office functions rather than reducing spending on areas that are key to our members, such as animal health, flood protection and a fully functioning Rural Payments system.

 

"We also have concerns about cost recovery, if this simply means paying for the continuation of services that could be delivered more effectively and efficiently.

 

"We believe that there is scope for some services, including some provided by agencies such as the EA, to be delivered more cost-effectively by other providers.”

 

TFA chief executive George Dunn said: "In our regular dialogue with DEFRA it is clear that there are no "sacred cows".

 

"I think we are in a very dangerous period of time within which departmental spend will be determined more by expediency than by impact.

 

"No doubt too we will see renewed focus on bringing together Natural England, the Environment Agency and the Forestry Commission.

 

"Cost recovery will be a big issue particularly on things like routine testing for TB and other APHA services.

 

""The biggest concern is the extent to which we see continuing "brain drain" from Defra. It has already lost a large number of competent and knowledgeable, high-ranking civil servants and the fear is that more will go.

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