|©Parliamentary copyright||Prepared 10th May 2011|
The outcome of the Comprehensive Spending Review
House of COMMONS
TAKEN BEFORE the
Tuesday 16 November 2010
Caroline Spelman, Dame Helen Ghosh and Peter Unwin
USE OF THE TRANSCRIPT
Witnesses: Rt Hon. Mrs Caroline Spelman MP, Secretary of State, Dame Helen Ghosh DCB, Permanent Secretary, and Peter Unwin, Director General, Environment and Rural Group, Department for Environment, Food and Rural Affairs, gave evidence.
Q1 Chair: Secretary of State good morning. Thank you very much for joining us, you’re most welcome. This is the evidence session on the outcome of the Comprehensive Spending Review (CSR). For the record, would you like to introduce those you’ve brought with you this morning?
Mrs Spelman: Yes, could I start by just apologising for being a few minutes late.
Chair: I absolutely understand.
Mrs Spelman: Cabinet overran and I’ve come as quickly as I could. I think the Committee’s already met the Permanent Secretary Helen Ghosh, but perhaps not or perhaps previously, and Peter Unwin is one of our Director Generals.
Chair: Thank you. We quite understand, and we’re most grateful to you for coming. We understand that the Cabinet ran on, so we kept your place warm for you.
Mrs Spelman: Thank you.
Q2 Chair: Could I just start off with a couple of general questions? The settlement with your Department, Secretary of State, was one of the earliest and as a result, obviously you were first off the ground. Do you regret, in a way, settling so early and perhaps taking a bigger reduction than other Departments or than you might have done if there had been a longer, more protracted negotiating process?
Mrs Spelman: No, not at all. We set out to try and settle early because we took the view that, as a relatively small Department, to have been dragged before the Star Chamber for a reduction of between 25% and 40% might have placed us in a very vulnerable position. We felt there were a number of things we wanted to obtain as part of our settlement with the Treasury, which we were more likely to achieve if we were in the vanguard of early settlers. Specifically, we set out to try to protect capital expenditure, and I think I’ve mentioned to the Select Committee before that it’s apparent that we have a better than average settlement for capital. That was particularly important to us in order to protect flood defence capital. As part of the give and take it meant we had to take quite a tough settlement on resources, but I think when Select Committee members actually look at where we’re placed amongst the unprotected Departments, there are six of us that are within 6% of settlement, and we are very similar in many ways. There were other things we sought to secure as part of our early settlement-a reward for good behaviour if you like. Unusually, perhaps, the Treasury agreed to our request that we might be able to keep the proceeds from sales of our assets, and perhaps even more beneficially, 120% of the sales of those assets, which can be used by Defra for other capital projects. The Treasury also agreed to help us with some of our redundancy costs. These additional things were part of what we regard as a reasonable settlement.
Q3 Chair: We know much more now about the nature of the Comprehensive Spending Review results for the Department. What we don’t know at this stage is what the impact will be in terms of local authority resources. Of course the two main risks for which your Department is responsible, that of flood risk, to which you’ve referred, and that of animal health, both rely heavily on substantial local authority involvement. How concerned are you that, when it comes to the local authority Comprehensive Spending Review, they will actually have the resources both to commit to the flood risk management schemes, to the maintenance of flood defences, and also to the front line if there ever was another animal health outbreak such as BSE or foot and mouth?
Mrs Spelman: Well, we all work very closely with the Department for Communities and Local Government. I work and have a good working relationship with the Secretary of State in that Department. In fact, both our Departments were amongst the early settlers, which point will not be lost on the Select Committee, so the Select Committee might imagine that we spoke a great deal about the interrelationship that we have. We certainly strongly recognise the importance of not placing unfunded burdens upon local government and we have allocated to local government within our own budget, financially, recognition that it isn’t reasonable to ask local authorities to do things without resourcing them correctly. Specifically in relation to floods, we maintain our contribution to them. This is important in respect of the Flood and Water Management Act of course, because it’s recognised that there are lead local authorities with responsibilities under that legislation. In respect of animal health, again we work closely with local government. I’m sure we’ll come on to a more extensive discussion about animal health budgets in general, but the risk based management approach gives us that assurance that, working together with local government, we can be resilient in the face of any outbreak of animal or plant disease. I don’t know whether either of you would like to add something about local government?
Dame Helen Ghosh: We will be able to test the response of all sorts of local partners through the various emergency exercises we carry out. As members of the Committee will probably be aware, we have just done such a large-scale exercise on foot and mouth disease, called Silver Birch. We will be working with all sorts of partners, including local government, to discuss the lessons from that. Similarly, we’re doing a major emergency testing exercise in the spring next year on large-scale flooding, which I think is actually kicking off with the Secretary of State tomorrow. Both of those kinds of exercises enable us to gauge the stresses and challenges of all our local partners, including local authorities.
Peter Unwin: On floods, as the Secretary of State has said, local authorities as you know will be taking on extra responsibilities under the Flood and Water Management Act. We’ve given them £21 million for next year and £36 million for subsequent years to cover that. In addition, the figures included in the memo that we sent to you on the spending review on expenditure on floods don’t include contributions by local authorities. They, like other public sector bodies, will need to make tough choices about priorities, but the past has shown that those particularly affected will see floods as a high priority, and we hope that they continue to be able to contribute to it.
Q4 Chair: We’ll be coming on to floods later, but you’re not intending to restore the balance more in favour of maintaining water courses rather than capital expenditure-from your answer, Secretary of State, the focus will be on the capital projects.
Mrs Spelman: Over the period of the spending review we will be spending £2.1 billion in total on floods.
Dame Helen Ghosh: Yes.
Mrs Spelman: Almost exactly 50:50 capital and maintenance, so I think that probably answers the question, that we regard them as equally important. Very important, as part of our negotiations with the Treasury, was to make sure that we retained as much of the capital as possible. I think it’s important to just stress to the Committee that this was a bidding process, we inherited a situation where the previous Government had agreed to reduce capital by 50%. It was decided, as part of the spending review process, that all the Departments would then have to compete with their bids for the residual capital. We were very successful in securing a very good outcome from that process because there is a very good return on investment when public money is spent defending peoples’ homes.
Q5 Dan Rogerson: To pick up on the Chair’s point about maintenance, I am wondering about big society issues. Obviously there are limits, and in some departments it’s easier than in others to engage with voluntary organisations Looking at people such as the British Trust for Conservation Volunteers, who do maintenance work, there seems to be a body of people there who are quite keen to get out-I’ve seen them doing some habitat work-but maybe that’s the sort of stuff they could look at doing as well. Is that something the Department would consider through the Environment Agency?
Mrs Spelman: Certainly. I think the Select Committee very recently saw Mr Benyon talking at length about this subject. I think that the big society approach to improving resilience, in civil society, is an obvious way forward. Could I make it perfectly clear, that is in addition to the funds that we have protected and allocated? It’s additionality. I think that Mr Benyon spoke at length about ways in which communities might be successful in bringing forward projects that otherwise might, because of their lower return on investment, have got pushed to the back of the queue. Absolutely, we do see great potential in engaging the communities that seek to protect themselves sooner and more effectively in finding additional ways to achieve that. But I do stress it’s additionality and not a substitute for.
Q6 Amber Rudd: Secretary of State, notwithstanding your strategy for early settlement, the Department did in fact get the second largest budget cut in percentage terms. Do you think that was a satisfactory outcome for the Department, given that you have some of the UK’s most important risks to handle?
Mrs Spelman: Well, I’ll just come back to my point that, as a new team of Ministers in conjunction with the senior civil servants in the Department, we thought long and hard about how to approach this spending review. To give credit to the civil servants, they had anticipated that whoever formed the next Government would have to find savings of the order of at least 25%. So the way we approached these negotiations with the Treasury was to try and put together a package for them which for us prioritised the things we considered most important, consistent with the structural reform plan, now the business plan. So the resources went hand in hand with the priorities that the new Government had set for the Department without compromising the risks that the Department has to deal with.
Indeed, the Whitehallwide understanding of the emergency services role that Defra has was of assistance to us in securing one of the best capital settlements. So the two things have to be set alongside each other, and in considering the savings we would need to make on resources, this was done very carefully, with the knowledge and understanding that senior civil servants had of the way the Department runs and how it can be run efficiently and effectively, to make sure that we have not exposed the Department to undue risk.
Dame Helen Ghosh: As the Secretary of State has already said, if you look at the distribution of reductions on resource spending, actually we are very much in a group with others and there’s very little to choose between us. You have to look at the stories of individual Departments. As the Secretary of State has said, actually our settlement of only minus 34% is a pretty good settlement on capital. Those who did well generally did very well for very specific projects. So if you look at the DECC capital, for example-Energy and Climate Change-that went up for two reasons: nuclear decommissioning and carbon capture and storage. Transport got money for High Speed 2. The Cabinet Office shot up because it has to provide money for the referendums next spring on voting. So behind every Department there’s actually a pretty good story. Two other points: the 33% cut on our admin spend part of resource is of course exactly the same as every other Department, in fact a few Departments are even more. I want to emphasise the point that we knew, when we advised the Secretary of State and agreed with the Secretary of State at what level we might settle, what we were going to do with the money. We had a plan, so we knew, for example, that we would be able to protect HLS and ELS, indeed expand HLS. If you look at the key areas of our spend, we knew how we could live within that budget, and that was the basis on which we worked with Ministers to decide when to settle. It was absolutely not an unthought out process.
Mrs Spelman: I’d just also like to add, perhaps stating the obvious to Select Committee members but worth reinforcing, that obviously I’m part of Cabinet Government, and a decision was taken collectively by the Cabinet about which Departments to protect and which Departments would be unprotected. I was part of making that decision. As the Chief Secretary to the Treasury pointed out, we decided to lift some Departments out of the spending review process to protect them completely, for perfectly understandable reasons: the Department of Health, because the ageing population means that unless one continues to increase funding to health it ends up being a realterms cut, and International Development because, as I’m sure hon. Members will understand, Haiti reminds us that at any time we may face disaster in a very poor country and we will be called upon for funds. From that moment, the fact that there were protected Departments meant that unprotected Departments were bound to receive an above average reduction. I mean, this is one of the consequences of a collective decision making process.
Q7 Chair: But we’re not placing a higher priority on foreign disasters than home disasters are we?
Mrs Spelman: Not at all, no. I think it’s very important for the record to remind everyone present that we’re talking about orders of magnitude here. I think sometimes in relation to overseas aid it is forgotten that the objective of the Government is to reach the UN guideline of 0.7%, less than 1%, of GNP. In fact, we spend more on ice cream in this country than we do on overseas aid, so I think it’s important to get that in balance. Where Defra has a particular interest in this, which I can give tangible expression to, is that obviously the action that we take abroad can have important benefits at home. Of the money that came through in the spending review, from international climate change finance, £100 million was given to me to put on the table at negotiations in Nagoya. Why is this important? Because the loss of the rainforests actually does have an impact on us, in the sense of its impact on climate change or loss of genetic resources, and ultimately the fact that if people can’t afford to live in the countries that they’re in they will tend to seek safe harbour elsewhere. So there are very strong reasons for Defra to be fully supportive of that decision to protect spending in the Department for International Development.
Chair: We’ll come back to flooding, but I don’t know that that would wash necessarily with the people of Cumbria who had the devastating floods in November last year.
Q8 Amber Rudd: I just want to follow up, if I may? When you were here in September, Secretary of State, you said that you thought it was very important that you maintain the resilience of the Department following the CSR.
Mrs Spelman: Yes, absolutely.
Amber Rudd: Do you feel that that has been achieved?
Mrs Spelman: Yes I do. Obviously, as the emergency service of the Government, it’s very important that I do retain that. I just have one comment, Chair, if you would indulge me for a second. Again, there isn’t any suggestion that our support for public money to be spent protecting rainforests in very poor countries is at the expense of people at home. I did explain, the money did not come from Defra’s budget, it came from the Department for International Development, generously given to me to put on the table. So, to reassure your own constituents and others who may be watching this interview, I’d like to make it perfectly clear. The flood defence capital, and our objective in maintaining our flood defences, is entirely within the Defra budget, and none of that budget had gone to, in this instance, the Nagoya negotiations; it was entirely from a different Department’s source.
Q9 Amber Rudd: The Department might suddenly be extremely tested. What are you doing to work out the ability of the Department to cope with multiple floods or multiple animal disease-something very dramatic happening at the same time?
Mrs Spelman: Well one of the things that’s impressed me in the six months of my sojourn at the Department is its willingness to constantly test and retest itself against the risks that present themselves. Last week we had an exercise simulating an animal disease outbreak, from which even seasoned campaigners involved in the exercise said further lessons were learnt. The new Ministers of course were involved in that simulated exercise to deal with such a disaster, so that we should come up to speed very quickly on how the process operates. I think what’s very clear is that the successive experiences that the Department has had of different emergencies have all helped to build a more robust model for dealing with these emergencies, and the new Ministerial team has been integrated into that.
Q10 Amber Rudd: Right. So was there an ongoing assessment during the CSR period, conducted by Defra, to see how it would cope with different eventualities?
Mrs Spelman: The Department has an internal process of undertaking assessments. Obviously we have a Governmentwide role in terms of rural proofing, ultimately the impact of the spending review, but we needed to know what every Department’s savings were before we could undertake that exercise. Internally, the Department undertakes these assessments against policy decisions and spending decisions that we make, and informs the Ministers of these contingencies. I’m sure that Helen would like to come in on that.
Dame Helen Ghosh: When you look particularly at the issues about our resilience to emergencies, I’ll ask Peter to just comment on the way the Environment Agency has been thinking about this through the spending review. If you look at animal health emergencies, we’ve been working for some time, really since 2007, on what kinds of structured response we need in our Animal Health Agency and the Veterinary Laboratories Agency, learning the lessons of 2007, in terms of large scale response. We’ve been working for the last three years on how we would cope if foot and mouth broke out all across the country. Therefore we have already been doing our planning and our assessments about what kind of level of spending, in terms of admin spend in the agencies, we would not wish to fall below.
Similarly, when we thought of the animal health budget, which we’ll probably discuss again later, we have worked very closely with our vets on what is a safe level of surveillance to be financing. That is focusing on risk, not including any kind of goldplating, but it assures us that we are dealing both with diseases that we know about and with diseases that are new to the country, so that is absolutely being built in. In terms of emergency response and the Environment Agency, I think it’s true to say that where the Agency’s proposing to take its savings is mainly in the parts of the organisation that are not about emergency response.
Peter Unwin: Yes, the Secretary of State referred to an exercise last week called Silver Birch.
Amber Rudd: Interesting.
Peter Unwin: That was looking at an animal health disease outbreak. We have a similar exercise next spring called Watermark , which will be looking at a major flooding incident-on the recommendation of Sir Michael Pitt, which we’ll be carrying out. We will be launching that process later this week. When we look at our own resilience on floods in particular, obviously the Environment Agency is a very important part of that, and as the Permanent Secretary said, they have protected absolutely within their budget their ability to respond to floods. With all the improvements they’ve made in recent years in forecasting, again as a result of the Pitt Review, they will be protecting completely their ability to respond to an incident and their ability to maintain assets. So those have all been protected within their budget reductions.
Amber Rudd: Okay, thank you very much.
Q11 Chair: Just following on from Amber’s line of questioning, the Prime Minister has described the Department as the "fourth emergency service". I think Amber was asking, without putting words into her mouth, what would happen if there was a double whammy, both a flood and an animal health incident in a particular rural area? Has your assessment shown that rural areas perhaps got the rawest deal and, if that is the case, what are you going to do to address that?
Dame Helen Ghosh: Of course we have done the analysis, as indeed has also been driven through, in particular by Oliver Letwin at the Cabinet Office, about the impact on rural areas of the spending review overall. If you come to the question of emergency response, of course in 2007 we had exactly the situation you describe: we had multiple animal disease outbreaks and we had major flooding. Now on the whole it was the case that the two emergency responses moved more or less in parallel. Peter was certainly at the helm when it came to the flooding incidents and I was probably focusing more on animal diseases,. There isn’t a very clear overlap between the demands on local partners and the Department of flooding, as there is with animal diseases, because they tend to be slightly different specialist functions. I think it’s the case that the greatest challenge would be a multiple animal disease outbreak, or large-scale flooding, rather than, as the 2007 experience showed us, we can’t cope with the two things happening at the same time. I don’t know if that was your experience, Peter?
Peter Unwin: That’s true, we learn a lot from each other but we run two different systems because they’re two different sorts of responses that we have to make to those outcomes. Obviously there could be particular strains on Ministers and the top of the office, but the machines within the Environment Agency in the case of floods, and Animal Health in the case of an animal disease, would run broadly independently.
Mrs Spelman: I wonder if I could just come in on this, because I think the logic of your line of inquiry is the simple equation that savings in money mean compromising a capacity to deal with a disaster. One other important undertaking we secured from the Treasury, again I think as part of being co-operative and reaching an early settlement, was the undertaking that we could come to them for the resources required to deal with a major disaster. The contingency within Defra’s budget in any event, based on historic disasters, is overshadowed by the scale of what is required from the public purse in the event of a major national disaster. That undertaking was given by the Chief Secretary, and interestingly enough by his predecessor, when we were looking at the savings that were necessary to make in the first year, the present financial year. There’s an understanding on the part of the Treasury that where there is a really major disaster, or multiple disasters, we have proper recourse to national reserves in those circumstances. Perhaps that would give the Committee some reassurance that it’s not resource constrained in the event of the scenario that the hon. Lady is outlining.
Q12 Amber Rudd: Right. It’s very interesting hearing about the simulations, but would you consider at some stage perhaps running Watermark and Silver Birch at the same time, in order to see what the outcome would be and what the financial demands might be in those circumstances?
Mrs Spelman: Well of course I’m bound to say yes to that. The nature of the type of emergencies that Defra has to deal with is actually extremely varied, and although my sojourn has been brief I have been impressed by the willingness and readiness of the staff to constantly test and retest themselves and related agencies against different scenarios in order to continuously learn and improve the model that has been developed from the past. I’m sure on a subsequent occasion we could have a combined event. I can assure the hon. Lady that, when the list of at least 12 possible disasters was shown to Ministers there were a few sleepless nights. We feel better for having taken part in a simulation, and I’m sure we will take part in every subsequent simulation including the possibility of a multiple disaster scenario.
Dame Helen Ghosh: It is just as likely that the multiple disasters are ones that don’t involve Defra. We might have one of these disasters but at the same time you might have an emergency that’s normally dealt with by another Department, and the Civil Contingencies Secretariat and, at a ministerial level, the National Security Council, take these issues extremely seriously. On the back of the latest security assessment that was published earlier this year, they are considering precisely that kind of issue: how you would deal with multiple versions of those broader national security challenges, one of which, one of the top four, is of course flooding .
Q13 Neil Parish: Good morning, Minister. Your business plan sets out the input and impact indicators you’ll be measured against. How did you choose these indicators from a long list of data collected by the Department? And will the Department spend less money on monitoring its performance under this review as compared with previously?
Mrs Spelman: Well, the business plan evolved by an act of co-operation, with the new Ministers coming in, reflecting the coalition agreement, which in itself changed the business plan evolved by my predecessors. I wasn’t shadowing the Defra brief at the time. So the structural reform plan, which became the business plan, is something that in an iterative process the Ministers and senior civil servants worked up together to reflect the priorities in the coalition agreement. As part of that, at a very early stage, we had to give careful consideration to when we could start the work that we had publicly committed ourselves to undertake and when we were likely, realistically, to be able to complete that. So our structural reform plan, right from the beginning, set up a realistic work programme. For example, it contained the view that one needed to stagger the introduction of White Papers in order for the workload to be manageable for the Department. So the Natural Environment White Paper discussion precedes the Water White Paper and so on. So the start and finish times of these activities were determined in conjunction with the staff that will help us complete them.
Over and above that, when the structural reform plan became a business plan, we were already publicly committed to some start and finish times, so that the impact indicators were drawn from the structural reform plan. We couldn’t change that position, and again we chose measurable indicators by which we can hold ourselves, or we can be held, to account. Again, the time scales of these were drawn from the structural reform plan, so it all followed in a sequence of deliverability, and we hope our assessments have been correct. I’d like to point out that sometimes starting and completing activities are dependent upon other Departments, not just our own. In relation to the impact indicators that have been chosen for our Department, if I was to take one of these, say household recycling rates, we monitor them extremely closely, as the previous Government did, but the important thing for us is to continue the trend of increased recycling rates.
Dame Helen Ghosh: Yes.
Mrs Spelman: That is something that quite realistically we would expect to do on a quarterly basis, and to keep a very close eye on, because it’s inextricably linked with the whole question of how much waste goes to landfill and trying to reduce that amount. Again, that is a tough indicator for us, but incredibly important to the industry concerned. Freeing herds from TB infection is a tough challenge for us, and we’ve set ourselves a tough challenge of monitoring that extremely closely, and that will be important whatever the outcome of the consultation on bovine TB. So the origin of these indicators is drawn from the structural reform plan.
Dame Helen Ghosh: The process run by the Cabinet Office limited us, we were under a numerical limit on how many we could include, and we’ve chosen things that, as the Secretary of State said, we thought were the best measure we could find of the key features of our priorities, and things we collected anyway. So, all these things are things that we, in some sense, do already. So we won’t, as we did under the previous PSA set, spend two years trying to work out what the proper measure of one of our PSA indicators was before we could start discussing it with the Committee. So, this is data to which we already have access. Of course it’s a very different sort of regime in terms of not setting out a measure of success; this is part of the transparency agenda of the Government. Part of the transparency is indeed that we are currently consulting on these indicators, so if the Committee, and indeed any member of the public, has comments on those, please let us have them. The pressure for improvement comes from transparency and the public, and obviously Members of Parliament, and we are not setting a target for improvement ourselves-which is a very different kind of world for us to be in.
Q14 Neil Parish: With these indicators you want to prove that you are the greenest Government ever. One of the indicators is the number of households where there is risk of damage from flooding. Now sometimes we need the rivers dredged and we actually need to get drainage moving, and that may not always seem so green, but in the end we actually want to save those houses from flooding. So, do you see a problem there? Also, when it comes to the environmental impacts of farming, I would suggest to you that, taking food production, sometimes it can actually be a positive benefit to agriculture, especially where you’ve got a lot of grassland. Are these indicators going to take all these things into consideration, because I just don’t want it concentrating on one aspect?
Mrs Spelman: It sounds like the hon. Gentleman will have some very helpful points to make on our consultation, and he begins with this today. In terms of being the greenest Government ever, remember that is right across all Government departments, and these impact indicators are the ones which apply to Defra. Every department has a set of impact indicators. These are the indicators that we’ve chosen, that will drive us forward. They aren’t easy to obtain, we haven’t set ourselves token indicators or targets, and the fact that it’s so transparent means that you and the public can challenge us if you feel that the indicators we’ve chosen are, in some way, too easy for us to reach. I certainly don’t think these are, and I take on board completely what the hon. Gentleman has said about the positive and negative environmental impacts of farming. I share his view entirely that the production of food sustainably can be entirely beneficial to the environment, which is why our number one priority for the Department is to support the food and farming industry in sustainable food production, precisely because we believe that is possible. Inevitably, a set of impact indicators are a distillation of the huge range of activity that the Department undertakes. We’ve chosen them because they are quite precise and measurable, and we will have data on which to be able to assess whether we are heading in the right direction: whether the trend is in the direction we wish to go. The consultation process is precisely there to ameliorate these indicators and to give the public the opportunity to do that.
Dame Helen Ghosh: Of course lying below them will be a whole series of other indicators, so if you take the households protected from flooding, that will just be one of the Environment Agency’s indicators. Peter and his team will agree with the Environment Agency the rest of the suite, which again will be published. That will undoubtedly pick up some of the environmental issues you raise.
Q15 Neil Parish: Right, okay, thank you Secretary of State. I’ll move on to the next question. You alluded to it earlier on in your statement when you were talking about how Defra had to make cost savings back in 2007. Does that mean the Department is now so lean that it will struggle to find further administrative budget savings?
Mrs Spelman: No, I don’t accept that. There is an interesting thing about the inyear savings that we’ve made, and a clear demonstration of this is the Environment Agency, because we shared the savings pro rata this year across the Defra network. Despite a 5.5% reduction in its resources, the Environment Agency has managed to more than exceed its target in terms of the protection of homes. I think that’s a clear demonstration that it’s possible to both achieve or even exceed the desired outcome and make efficiency savings. I think it’s right to take some time on the admin savings, for which, as the Permanent Secretary said, 33% is the requirement across Government. Obviously we will endeavour to take these savings from the back office rather than the front line. In terms of head count, which is an important element of this, we’ve shared with the Select Committee the anticipated numbers of people we will need to let go. There are a couple of things I would like to say on that. One is that the Department, quite prudently, froze vacancies from before the time of the change of Government, anticipating that whoever formed the next Government would have to make savings of this order, so we won’t have to make as many people redundant as would have been the case if the Department had not taken such a prudent view.
The figures that we have given to the Select Committee of an anticipated reduction in staffing levels of between 5,000 and 8,000 people actually reflects less than 33%; the figures are between 16% and 26%. Some of the savings on administration, quite clearly, are not all in staffing numbers. There are other ways in which we have managed to make savings, in terms of procurement and IT, and they are part of achieving our 33% outcome. So it is a mix of measures, but I think the prudent strategy the Department has taken with regard to human resources has proved to be helpful at a time when obviously we don’t want to let more people go than we have to.
Dame Helen Ghosh: Absolutely. As the Secretary of State says, our strategy is, and will continue to be, to make the savings we can on IT, on estates, to get out of leases when we can get out of leases, to reduce our back office costs, to join in interdepartmental procurement and so on. Again, as we explained to the Committee, in terms of downsizing across the whole network-and the figures the Secretary of State quoted apply to all 30,000 including our NDPBs-we will all be aiming to do as much as we can through natural wastage and voluntary redundancies and take the savings as far as we possibly can to protect jobs. I think the crucial thing within the Department, and the mantra we have used, is to make sure that the staff within the core Department are focusing on the things that only Government can do. Where do we really add value, where do we facilitate things like the actions of civil society? Going back to our earlier discussion, what are the things that only Government can do in terms of emergency response and protection? Then we assign our remaining staff, and there will still be 70% to 75% as many of us as there were before, within our very flexible project and programme systems, to absolutely key activities. So that’s the planning work we’re doing at the moment.
Mrs Spelman: I think it’s really important as a new Minister in the Department to stress that Defra has adopted a flexible model of staffing in a way that is innovative, that makes it easier for people to move in different jobs within the Department. Undoubtedly it’s good for their career development, but it means that the actual redundancy impact can be cushioned by having a flexible approach to staffing.
Peter Unwin: One difference between now and the reductions you referred to in 2007 is that on this occasion we’re looking at them much more across the network as a whole, both the back office costs and the frontline costs. In 2007, the process was to give a reduction figure to the Environment Agency, Natural England, Animal Health, and they’d all get on with it individually. We’re now looking, for example, at IT, where we spend £400 million across the network, with 900 people involved in IT. We must be able to do that more efficiently. We have 270 offices across the network, about 85% of them within 20 kilometres of another office, so again we could organise our estate more efficiently. So in back office costs we really think that by operating as one network we can make much bigger savings. That will also apply to front line costs when it comes to issues like joint inspections and that sort of thing.
Q16 Neil Parish: Yes, I think perhaps a certain amount of simplifying the Single Farm Payment could perhaps reduce a lot of cost there, and we could stop introducing more and more maps all the time; they’re not only complicated for the Department but complicated for the farmers. My final point on this one is that you’ve announced that you intend to make savings relating to property, and there’s talk of what you can sell in the way of forest and other property. What agreement have you reached with the Treasury over whether Defra keeps the money or whether it goes back into the Treasury’s coffers?
Mrs Spelman: A very important feature of our settlement with the Treasury, which I tried to emphasise right at the beginning, was that as an early settler and as a securer of significant capital funding from the bidding process, the Treasury agreed to us retaining entirely the proceeds from sales of our assets. That was not just for 100%, but if we managed to sell those assets at a higher level than we originally budgeted for, we may keep up to 120% of those assets. Now, we’ve put a figure into our budget of £100 million. That is largely made up of the planned sequential sales of the forestry estate, which have gone on since, as far as I can tell, the beginning of time, including in each of the years of the last Government. The projected figure contained within our budget continues that trend. It is not exclusively forestry-we have other assets, property assets, which as a result of the savings that we’re making we may be able to relinquish. As with all these things, and learning very much from the warnings of the Father of the House about being careful when to sell these assets, we will of course look for the right time and the right way to do that, in order to maximise the return. In fact we’re incentivised to do that by the fact the Treasury has agreed we can keep 120% of the proceeds. There are very strict rules within Government, and obviously they apply to the Department, that the sales of assets, the capital, can only be used for capital. I’m sure the Chair would be interested to know, because of her interest in flooding, that it would be perfectly possible for us to use the proceeds from sales of these assets towards increasing the capital available for flood defences, for example. We have that assurance from the Treasury and it is very valuable to us.
Q17 Thomas Docherty: What is the value of the property portfolio owned by Defra?
Mrs Spelman: Well I know that we anticipate recovering between £30 million and £40 million from the rationalisation of the Defra estate, that’s the figure that we have budgeted for. The total value of our estate, I’m afraid I don’t-
Dame Helen Ghosh: Well we don’t of course own the freehold for much of our estate. The majority-
Q18 Chair: Covent Garden?
Dame Helen Ghosh: Sorry, Covent Garden is private; it is not a Defra owned element of the estate, it’s owned by the Covent Garden Market Authority. It is one of the elements in the £100 million estimate.
Chair: I think the Minister told us that-
Mrs Spelman: It’s in there.
Dame Helen Ghosh: The £100 million that we might expect to get from assets includes, obviously, forestry estate, as the Secretary of State described.
Mrs Spelman: The rationalisation
Dame Helen Ghosh: The rationalisation of the estate, and some element possibly from Covent Garden Market Authority. I thought you meant the properties that we occupy as a Department and as NDPBs; I thought that was your question.
Q19 Chair: I think it would be helpful, just for the record, that we had-
Mrs Spelman: The freehold book value of the property is £160 million, so it does-
Thomas Docherty: £160 million?
Q20 Chair: Of what you own? £160 million of what you own? That’s including the forestry?
Dame Helen Ghosh: Sorry, this is getting very confused.
Q21 Thomas Docherty: I have a list here from the National Audit Office of properties.
Dame Helen Ghosh: Those are properties we occupy as a Department.
Thomas Docherty: No, own.
Dame Helen Ghosh: Properties we occupy.
Thomas Docherty: No, own.
Dame Helen Ghosh: Some of them may be leased.
Thomas Docherty: We’ve got two lists.
Dame Helen Ghosh: Yes, fine.
Thomas Docherty: We’ve got a list of owned.
Mrs Spelman: 185 properties are leased.
Dame Helen Ghosh: Yes
Mrs Spelman: 114 are freehold, with a book value of £160 million. We had a target of £30 million to £40 million of gross annual savings by the end of the spending review. Those are the figures that we have put into our calculation. Is that the figure you wanted?
Thomas Docherty: Yes.
Dame Helen Ghosh: But that is not the same figure as the value of the forestry estate, of Covent Garden Market Authority or other things which are, as it were, within our orbit but not property we occupy.
Thomas Docherty: Yes, that was it.
Dame Helen Ghosh: That was the clarification I was trying to make.
Q22 Chair: Just a moment, if you don’t own the Forestry Commission how will you make savings by-
Mrs Spelman: We do.
Neil Parish: They own it but we don’t have the value of it.
Chair: Right, I think it would just be helpful to know what we’re talking about.
Dame Helen Ghosh: Sorry, the Government owns it and the Forestry Commission is a nonministerial Government Department within our parliamentary vote. So the Government indeed owns the public forest estate. It’s a different kind of ownership, not so much a different kind of legal ownership but it’s a different category of ownership from properties that we own in a freehold sense.
Q23 Thomas Docherty: Right so there’s a portfolio that you own, a portfolio that you lease, and then separately there’s the forestry.
Mrs Spelman: Yes.
Dame Helen Ghosh: And the Covent Garden Market Authority and all those things, yes.
Q24 Thomas Docherty: Right, well that’s absolutely fine. You’ve estimated you hold £100 million in total; has that money been spent, effectively, or is it going to be bonus money if it comes in?
Mrs Spelman: No, it’s not been spent, because obviously it depends on market conditions. We have to be extremely careful about these sales, in order to optimise the recovery; it has not been spent.
Q25 Thomas Docherty: Okay, so if you get it, it will be a bonus.
Dame Helen Ghosh: If we get it, it will be a bonus, as you say. As the Secretary of State said, it’s capital and we could put it towards-
Neil Parish: To stop flooding.
Mrs Spelman: Absolutely.
Dame Helen Ghosh: We could put it towards any appropriate, good value capital spend.
Q26 Chair: Just to be clear, some of this is already being used for flood defences. I gather-it was on the BBC News-the pilot project in my area is currently being partfunded by the Forestry Commission, so we’ve just got to be a little bit careful that we don’t-
Mrs Spelman: Is this Pickering?
Mrs Spelman: Do you want to have a word about that?
Chair: Well we’re coming on to that so we’ll just stay with this question.
Mrs Spelman: Well I think once again there’s been a lot of media speculation about forestry, and I think there are a couple of really important points to emphasise. We’ve had to do quite a bit of myth busting in this area. Only 18% of forest and woodland in England is publicly owned, so we are talking about quite a small percentage. Historically, year on year Defra has disposed of hectares of forestry. Just going back to 2000, 406 hectares, 2001, 97 hectares, the reason for these differences is to do with market conditions; last year 1,100 hectares. The yield from that is what we are hoping to recover, and we are allowed to keep by the Treasury, as long as we redeploy it for other capital projects. It will depend on market conditions as it always has done, this is not a new practice.
Q27 George Eustice: I think it’s quite an interesting part of your agreement with the Treasury. I wanted to ask about the valuations you’re basing these calculations on: are they a bid valuation that’s outdated or are they open market accurate valuations-or as accurate as you think they can be?
Peter Unwin: They’re open market valuations, but the Government will be consulting on the whole process of forest sales in due course. Obviously the price will depend on what conditions are put on the sales when they take place. So some sales will undoubtedly have conditions on them to protect public benefits, environmental benefits, access, other things like that, and as a result the book value will be less than if it was a pure open market value. The receipts assumed within the £100 million total, of which forestry is the biggest element but by no means the only element, are a very small amount of the overall forest estate. The overall forest estate is going to be worth something between £600 million to £800 million.
George Eustice: Right.
Q28 Chair: What sort of price did we get last year?
Mrs Spelman: It was £13.5 million for 1,100 hectares sold. I think again it’s very important to make a distinction; the consultation document will come out shortly, but I think it’s very important for the sake of public understanding that there’s a distinction between commercial forestry and what I would call heritage forestry. So to suggest or raise any speculation that we’re just about to build a golf course all over the New Forest is ludicrous, quite frankly. That is heritage estate; commercial estates are what we all know of as plantations, largely, of timber. Sequentially over time, including by the previous Government, this has been sold to realise that asset. So there is a distinction. We actually think, because the coalition Government is committed to big society and an increasing role of civil society, that this is actually the right time to consult on the possibility of giving the community that’s closest to the forest and the woodland the opportunity to take ownership. I would contend that the community that lives closest to the forest is the one most likely to protect it. We will be consulting on all the options in relation to the public estate but in the context that only 18% of woodland and forest in England is in public ownership.
Amber Rudd: I just wanted to ask, if I may, on this 120%, I haven’t quite understood. Does that mean that where the asset sale realises the book value, or value at which the Department is holding it, the Department gets to hold on to the 20% of the additional profit?
Mrs Spelman: Up to 20%. Of course it depends on the market conditions. If in a particular year the value of timber was so high that we realised more than 120%, I think the Treasury made it clear it would want to come into discussion with us at that point, understandably.
Amber Rudd: Thank you very much.
Dame Helen Ghosh: It will be looking at the total figure.
Mrs Spelman: Yes.
Dame Helen Ghosh: Up to £100 million, we’re assuming; if it were £120 million we could keep £120 million.
Amber Rudd: Oh, I see.
Dame Helen Ghosh: But we couldn’t keep £121 million. It won’t be looked at in batches.
Peter Unwin: Once we’ve made over £120 million we’d have to discuss it with the Treasury. They may, depending on the circumstances and what we were going to spend it on, agree we could spend it. But they would reserve the right to use it for other things if that was what they thought was right.
Q29 Neil Parish: It’s not about individual assets?
Dame Helen Ghosh: No, it’s because they’re trying to control spending, therefore they have given us £100 million, and that is what they have put in their calculations about reducing the deficit. If we spend another £20 million, that’s okay, but if would spend another £21 million then we’d have to have the discussion Peter describes.
Mrs Spelman: I haven’t been in Government long enough to know for sure, but I believe that it hasn’t historically always been the case that the Treasury has allowed departments to keep the sales of their assets. Again, I commend the package that we secured with the Treasury, which contained this element that is very valuable to us.
Amber Rudd: It’s a positive incentive.
Thomas Docherty: I have a quick question on capital spend. Obviously there’ll be a need for the Rural Payment Agency to have an IT system post2013 CAP.
Dame Helen Ghosh: Yes.
Thomas Docherty: That probably affects a fairly large chunk of money; it’s a big ticket item. Given the last five years, it’s probably important to get these things right. Can you clarify where that money’s going to come from in the budget? Or would that be an additional sum that would be required?
Mrs Spelman: No, it’s budgeted for.
Dame Helen Ghosh: It’s budgeted for. We are assuming that it will come out of the capital settlement that we’ve got, but of course there are a variety of ways in which you could procure it. We initiated a review into the RPA; indeed we’re working through this now with what used to be called the Office of Government Commerce, the Francis Maudeled Efficiency and Reform Group. One might want to procure a new IT system as part of a larger package of provision of services as a whole. So my procurement team is currently looking at the various options for direct procurement, for procurement in partnership with someone who can also deliver the services. We would also expect it to be substantially less expensive than the previous very bespoke, very complex IT system. For example, an IT system that could cope with the 80% of absolutely straight forward, bogstandard applications could be built much more cheaply. Then when it came to the complex cases, people on borders with uplands and lowlands and so on, then you could probably deal with that through spreadsheet kinds of approaches. Since there are only just over 100,000 customers for this service we think we can procure an IT system much more cheaply than the old one. It puts a premium on the point Mr Parish raised earlier: the simpler we can have the next CAP system the better, and I know that’s something high on the Secretary of State’s priorities.
Mrs Spelman: Absolutely.
Dame Helen Ghosh: We’ve got all sorts of ways in which we can keep the cost down.
Q30 Thomas Docherty: You said you had a budget for it. How much have you allocated, Secretary of State, and what was the previous cost?
Mrs Spelman: I’ll just have a look.
Dame Helen Ghosh: I’m not aware that we have put a specific figure in place.
Peter Unwin: Can I just make a clarification on the figure we referred to a few minutes ago on overall asset sales? The amount we budgeted for is £83 million, and 120% of that is £100 million, so £100 million is the sum that we can spend before we’d have to go back to the Treasury and have negotiation as to whether we could spend more than that.
Q31 Chair: You reached that figure on the basis of sales that have taken place over the last two or three years, so it’s a fairly accurate figure?
Dame Helen Ghosh: Yes.
Peter Unwin: Well it’s a projection of the continuation of sales over the past years and an assumption of some sales of estates and other issues. The biggest part of the £83 million would be forestry sales.
Mrs Spelman: We have to make contingency for IT renewal, but it is in the context of the timescale of the CAP reform negotiations.
Dame Helen Ghosh: Yes.
Mrs Spelman: This is actually very tricky because the new financial perspective is from 2013. Obviously in terms of prudence with public resources, what one doesn’t want to do is to overcommit to renewing a system that may then result in having to be completely replaced should CAP be calculated on a different basis after 2013. So 2013 is the anticipated date when CAP reform negotiations might conclude by, as far as anybody can be sure of that date, so we have to make contingency. In the interim I just want to stress that the coalition Government has come into an inherited situation, and the Minister of State has personally committed himself to getting this system working. Slowly but surely the RPA is getting to grips with the problems that it had. The running costs of the Agency have in fact gone down. There’s a balance here to be had in the good operation of the Rural Payments Agency; if through the speed of trying to make the calculations there is a greater degree of inaccuracy then the actual amount of progress made is undermined by that. So the Minister of State is trying very hard to work through the practical problems that the RPA faces with the existing IT system, and to put right the problems that present right now that have gone wrong. We don’t know, yet, what form the CAP reform will take.
Chair: Can we come back to that.
Q32 Thomas Docherty: That’s a very long answer to "How much have you budgeted for and how much did it cost previously?"
Dame Helen Ghosh: Well the figure for how much it cost previously is a combination of the original procurement and then the amount we’ve had to spend every year since. I’m trying to remember but I’ll come back to you with an accurate figure. My recollection is that it’s £80 million to £100 million. We haven’t budgeted a specific figure yet.
Thomas Docherty: Right.
Dame Helen Ghosh: That is because we are going through this very outline procurement. As the Secretary of State said, we won’t know the details of the CAP reform until much closer to the date, but we can work with partners to say, "Assuming it looks approximately like this, with some elements of areabased payments or some special treatment, or whatever it might be, tell us how you might build an IT system."
Chair: We’ll come back to that. Can we move on?
Q33 Thomas Docherty: You mentioned before you were looking at between 5,000 and 8,000 job cuts, I think that was the figure that you shared with us. That’s about 20%, about a fifth of the total of Defra.
Mrs Spelman: I calculated it this morning. The range is 16% to 26%: 26% at the top end, 16% at the lower end. It’s a percentage of the 30,000 across the network. So it’s below the 33%.
Q34 Thomas Docherty: Okay, sure. So two quick questions. Number one is, whilst you’re making the reductions how do you intend to maintain your delivery network and your policy formulation skills within the Department? Secondly, in terms of the process, how are you informing your staff about the job reductions? Have you conducted a staff survey this year?
Dame Helen Ghosh: Yes.
Mrs Spelman: Would you like to answer those?
Dame Helen Ghosh: Yes I’ll answer all of those in order. How are we protecting delivery and policy skills? As I think the Secretary of State indicated, in administrative cost reduction, broadly speaking we’re assuming the same sort of level of reduction across the piece. We can come back to the detail of that in relation to specific agencies. In the case of the Environment Agency and some elements of Natural England, for example, the costs of staff do not count within the admin budget because they are identified as frontline staff. So people, particularly working on maintenance and building frontline flood defences, are not covered by the admin budget. They’re covered by the other efficiencies that the Environment Agency needs to find but not by the overall 33% figure. Going back to my point about deciding where we should put our staff within the core Department, what we are doing is working with each of our agencies, and within the core Department. We’re working with each of them to agree a sensible level of admin spend, agency by agency, NDPB by NDPB. Peter obviously would know more about the Environment Agency and Natural England. We have been, within the Department, talking to staff about reductions of those kinds of levels for about the last six months, and talking to them about our general approach, which as I said was to look for back office savings first and then a voluntary departure system, while at the same time, as the Secretary of State said, making sure we manage our staff overall, in such a way that we’re not faced with a sudden falling off a cliff. The NDPBs have been doing this particularly successfully. Yes, we have carried out-
Chair: I’m so sorry, we’re not going to get through the whole procedure this morning unless we shorten the answers.
Dame Helen Ghosh: I’m sorry, I’ll just answer the question: yes, we’ve done a staff survey along with all the rest of the Civil Service and the results will come out just after Christmas.
Q35 Thomas Docherty: My understanding, according to the Law Society Gazette, is that you’re taking a 40% reduction in the number of lawyers in your Department. Is that correct?
Dame Helen Ghosh: I think that is a version of the guidelines we’ve given to what you might call back office activity, so that would be HR, finance, IT, estates people and lawyers, where we would look for slightly higher reductions in order to protect what one might call the policy-making front line. The legal profession is of course somewhere that’s between those two, as sort of semipolicy makers. It may well be that it doesn’t end up being a 40% reduction.
Peter Unwin: These are numbers that we have asked people to exemplify.
Dame Helen Ghosh: Yes.
Peter Unwin: No decisions on those have been taken.
Q36 Thomas Docherty: Secretary of State, if we assume that figure is broadly accurate, it’s probably fair to say that as you reduce your spending on, effectively, implementation of EU directives-
Mrs Spelman: I didn’t say we’d do that. Why would we do that? That’s front line and we’re faced with infraction costs. One of the things that’s very clear is that all Government departments that are unprotected are facing a 25 to 40% reduction, and across Whitehall a 33% reduction. You can’t just salami slice a tiny bit; it actually requires re-engineering of processes. This can be a very positive thing within a department, providing one approaches the staff in a constructive way, taking their suggestions for how we might do things more efficiently. I mentioned earlier that Defra has this particular approach that I commended to the Committee, the flexible staff resourcing approach, which means that people aren’t tied to static directorates and fixed units. We will explore with the staff how to achieve this level of staff savings whilst ensuring that their careers are interesting, their jobs are satisfying, and the front line is not compromised.
Mr Docherty, you were particularly concerned about policy, so can I just mention that in the reform of our arm’s-length bodies, we have actually taken policy makers, from within those bodies, back in to the core Department? So actually we have increasing strength in policy making within the Department.
Q37 Thomas Docherty: So you aren’t spending a penny less on things like water quality, or anything else that the EU directives are on? You’re saying that all those areas of spend are unaffected?
Peter Unwin: Would it help if I said a bit about-
Dame Helen Ghosh: No, we’re not saying that we will spend-
Q38 Chair: How have you got to a situation where you have so many lawyers and so many press officers in one Department?
Mrs Spelman: Well, with respect to the Chair, I have been there six months.
Q39 Chair: I’m not blaming you. I’m just asking how we got to this situation. Is that common among other departments?
Mrs Spelman: I think that is a question that should have been put to the last Government, with the greatest respect. I think that you are speaking to me about the Comprehensive Spending Review. In conjunction with the civil servants, we are taking a strategic and rational approach to reduction in administration, trying as far as possible to protect the front line, which very much does include ensuring that the United Kingdom is compliant with European directives and always mindful of the risks of disallowance and infraction.
Dame Helen Ghosh: We are a Department that does a great deal of legal activity, we do bills, we do litigation, we do all the European work you describe. I do not believe we are disproportionately staffed with lawyers. Indeed, we have been reducing our numbers of lawyers very substantially.
Thomas Docherty: I didn’t say you were.
Dame Helen Ghosh: The Chair implied that we have more lawyers than a department of our scale, with our kind of activity, would have. I don’t believe that’s true. Equally, I’d be very happy to give the Committee the number of press officers. Again, our press office is pretty tightly staffed with specialists on particular subject desks, but again I don’t think it is disproportionate compared with other Government departments, but we could give the benchmarks.
Mrs Spelman: We could, yes, absolutely.
Peter Unwin: I know we’re pretty short of time but I could give you some of the examples of how we’re making cuts in the delivery.
Chair: I think we’ll come to that in more detail, but if we could move on to Richard Drax.
Q40 Richard Drax: Secretary of State, in the past Defra’s network has been criticised for its financial management, not least for its role in the Rural Payments Agency. Bearing in mind the scale of your cuts how are you going to improve the financial management within Defra and its agencies?
Mrs Spelman: Well as I mentioned earlier I think the Rural Payments Agency is one that is deserving of particular attention. That is why a Government Minister has decided to allocate some of his precious time to a handson role with the Rural Payments Agency to try and ensure that the historic problems that it has faced are addressed. I think that the trends are in the right direction in terms of reducing cost of each transaction and reducing numbers of delayed payments, but there is definitely still room for improvement. That is why Mr Paice has specifically taken on that role. Within the departmental structure there is management board at which we review the financial regularity of authorities that are part of the Defra family. I’ve only attended one or two of these management boards in my six months but I think that regular meetings are important for holding ourselves and our arm’s length bodies, those that remain and are being reformed, to account. We are accountable as a Department to make sure that there is continuous improvement.
Dame Helen Ghosh: Can I say, I think there was a critical report on the Department’s finances in 2006, four years ago. Since then we have completely changed our operating model, changed our finance staff. We’re now regarded as a very, very high performing Department, in terms of our financial management, by the Treasury. They explicitly praised us for our professionalism on the efficiency programmes that we had to develop before this last election. They’re coming to us to look at how we do our portfolio and spending investment decisions, because they think our model is a good one. One of the reasons they were prepared to settle with us early was because they know we are in charge of our money, we know what we spend it on and when we say we’ll do something, we do it. I think if you had the Treasury team sitting in front of you, they would say we have transformed our financial management from where it was four years ago. Part of the early settlement and the reasonable settlement we got is a reward for that.
Mrs Spelman: I can concur with that. The Chief Secretary to the Treasury made it quite clear to us, when we met with them and settled with them in September, that they regard Defra as one of the leaner, better run Departments from a financial perspective. I accept the RPA has particular issues but as I say, we haven’t ignored those. We’ve put a Minister, at his own volition, on the case.
Q41 Neil Parish: On the complexity of the single farm payment, Mrs Beckett brought in such a complex system that in the end it cost £1,700 to administer a payment in England, and £250 to £300 in Scotland. What can the Department and we in Government do about it to sort this out, because it’s crazy?
Dame Helen Ghosh: Short of reversing that original decision, which we did indeed consider with the Secretary of State at the time-actually it would have cost us more money to revert, let alone going back to Europe to get the decision-we concluded that we should press on and make that process as efficient as it possibly could be. We’ve now got to the stage, of course, where most of the complexity is unwound. The historic element is very insignificant in the payment.
Chair: We’re coming on to the CAP, if we could move on to evidencebased policy.
Dame Helen Ghosh: Okay, so at the moment it’s not as complicated as it was in 2006.
Q42 Neil Parish: So the cost is dropping?
Dame Helen Ghosh: The cost is dropping.
Mrs Spelman: 10% each year.
Dame Helen Ghosh: It’s down to about £1,000 a case now. Of course the Scottish and Welsh have not been without problems.
Chair: Could we come on to the CAP later, if we could stay with evidencebased policy?
Q43 Richard Drax: Can I move on to the role of science in your Department, Secretary of State, and the establishing of committees of experts. There’s some concern they may dilute the independence of Defra. Just quoting from Sir John Lawton, chairman of the Royal Commission on Environmental Pollution. He said, "I really, really worry about where Government is going to get awkward but constructive advice". Do you think that policy units within Defra will be able to provide this awkward advice, and what changes in policy or structure are needed to encourage this?
Mrs Spelman: As part of the preparation of our Comprehensive Spending Review submission to the Treasury, the chief scientific advisor within the Department was at pains to stress one point: it’s important that in any reductions we secure we have to make sure that our evidence base is robust and is strategically distributed in line with the evidence priorities. We were careful to protect the evidence budget to make sure that we do have that resilience. That is something Ministers attach importance to, you will rarely find a Minister not using the phrase that we want evidenceled, sciencebased policy. You can’t have that without the evidence base, so we have protected the evidence base. It has taken some cost reduction but in a way in which the chief scientific adviser assures us will not compromise our ability to deal with disasters and emergencies as we face them and to evolve policy in a sound way.
Q44 Richard Drax: On that point, are you intending to continue Defra’s Evidence Investment Strategy 20102013?
Dame Helen Ghosh: Yes.
Mrs Spelman: Absolutely.
Q45 Richard Drax: How will you ensure that the scientific knowledge and expertise held within organisations such as the Royal Commission on Environmental Pollution and the Commission for Rural Communities, which are going, won’t be lost?
Mrs Spelman: Two things. One is the Royal Commission on Environmental Pollution?
Richard Drax: Yes.
Mrs Spelman: We took a view with that organisation, which was created I think three decades ago. That was created at a time when these concerns about environmental pollution were relatively novel, since when concern about environmental pollution is completely mainstream to what the Department does, since when a number of directives have been introduced at a European level that make absolutely sure that all Member States pay attention to the need to deal with environmental pollution correctly. As regards the Commission for Rural Communities, that was the example I had in my mind when I answered a question from Mr Docherty. I said that with arm’s-length bodies that we have abolished or reformed, that had policy making within them, in many cases we have taken the policy making capacity back in house, and the Commission for Rural Communities is a very good example of that. We work very hard with their staff who are based in Cheltenham to try and ascertain where they might like to transfer to within the core Department, but to retain their policy making capacity. That is not least because we are the Government’s rural champion, and we want to make absolutely sure that we have that capacity and we have brought it back within the Department.
Richard Drax: Thank you.
Q46 Neil Parish: On waste, is there an innate tension in the business plan between a desire to achieve national goals on waste whilst at the same time devolving power to local communities, including councils and businesses? Also, how do you work with the Communities Department to deliver policy?
Mrs Spelman: I think I mentioned earlier that we work very closely with the Department for Communities and Local Government. In some ways, Mr Parish, it’s an advantage to have shadowed that brief for many years before entering Government. Our intention, absolutely, is to work with local authorities very effectively. I think the most recent set of municipal waste statistics are a source of encouragement, because what they basically show is all the trends are moving in the right direction. The volume of waste is decreasing, the amount going to landfill is decreasing and the amount being recycled is increasing. Now obviously one of our indicators is to make absolutely sure that those trajectories remain on course and we will review them constantly to make sure that they are. Within our budget there is provision for local authorities, for resources to help them with waste collection and special grants to help them find ways to address particular waste issues. I’m sure that the Committee will recall that recently we had to make a series of quite difficult decisions in the context of the spending review about which PFI projects to give the green light to, and which we felt that we could not. Again, it’s not a guarantee that the 11 out of 18 projects that were given the green light will necessarily proceed, because those local authorities have to find the resources to match in order to make the project proceed. Conversely, some that we didn’t give the green light to for central support will proceed anyway because the local authorities have decided that they have the resources necessary to go ahead with the project. We remain committed to helping local authorities in dealing with waste.
Q47 Neil Parish: Waste to power and biodigestion is not always met by local people with great glee. How is the Department going to help to promote these, because they’re both very useful sources of power?
Mrs Spelman: Indeed, yes absolutely. Lord Henley, who regards himself as a waste aficionado in the Department, is an enthusiast for both methods of waste disposal. We are working with local authorities looking at the opportunity afforded by anaerobic digestion. The key with that is the constant feed stock, so institutions like prisons and hospitals that have 24/7 discards of organic waste are ideally suited to that method of disposal. It’s not ideal for institutions that have a broken supply, because the bugs need to eat constantly.
On waste to energy, I think it’s a local decision. There are some parts of the country that have embraced with enthusiasm the waste to energy model, and other parts that are not comfortable with that model. The new coalition Government has made it perfectly clear that we want to devolve more power, that we believe localism is the right approach to take, and one would expect to see diverse outcomes. I don’t know whether Peter would like to add anything on our relationship with local government; that’s what I think Mr Parish was interested in.
Q48 Neil Parish: Yes, communities.
Peter Unwin: Well, as the Secretary of State has said, local authorities will make their own decisions, and what we can do is help them with information. It goes back to the point raised on evidence just now, putting out information on energy from waste and that sort of thing to allay some of the public fears. In some cases that works, and in some it doesn’t, but we can put that information out and help them.
Neil Parish: Okay, thank you.
Q49 Chair: In terms of actual quantified savings, Defra has set out over the period of the spending review only £372 million. So there’s a large gap.
Mrs Spelman: No, in our note to the Committee I think we’ve made it clear how the savings break down.
Dame Helen Ghosh: £661 million.
Mrs Spelman: £661 million. I’m reading from the note given to the Committee: programme savings of £330 million, capital savings of £157 million, administration savings of £174 million. So I think we have set out in our memo to the Committee how the total amount is broken down.
Dame Helen Ghosh: The difference between that figure and that figure.
Q50 Chair: You said in an earlier answer, Secretary of State, that the Department will spend £2.1 billion on flood and coastal defences over the period of the review. This is actually 20% less, £516 million less, than would otherwise have been spent on Environment Agency work for the 2010-11 period. Just to clarify, you said in a press release that the money that you’re saving, the efficiency savings on flood and coastal defence capital expenditure, will be reinvested. You appear to have contradicted this in subsequent reports. Is that something you’d wish to clarify?
Mrs Spelman: No, I think we’re getting confused here. First of all could I just remind everyone here of the context? If Hilary Benn had been sitting before the Committee today he would have had to deal with the fact that Alistair Darling had committed the previous Government to 50% savings in capital, so we inherited a situation already where the previous Secretary of State could not have maintained the rate of expenditure on flood defences that that Government originally set out. They simply could not have afforded it. Our budget for floods is at least £2.1 billion over the spending review period, and I will invite Peter in a minute to explain the significance of the words "at least". This actually represents 8% less spend by Defra over the previous four years, because the average of the previous four years was £590 million a year, so it’s actually 8% less. The second point the Chair made about-
Chair: Can I ask a specific question, if I may?
Mrs Spelman: Yes.
Q51 Chair: Will the funding provided to the Environment Agency, under the period of the review, be sufficient to enable new flood defence projects to be built?
Mrs Spelman: Those that are contracted for will proceed.
Q52 Chair: So you’re not going to review the points system that we inherited from the last Government? There won’t be a fairer distribution of spending in rural areas as opposed to urban areas?
Peter Unwin: Yes, the Ministers will be reviewing the allocation methodology for floods. As the Secretary of State has said, all schemes that are currently contracted and under construction will continue unabated. As it’s possible to bring in new schemes, the criteria governing those schemes will be considered by Ministers and set.
Q53 Chair: Are you able to put a figure on how many homes at significant risk of flooding will remain unprotected at the end of the review period?
Mrs Spelman: We’d prefer to put a figure on the number of homes that we will protect by the end of the period, which is 145,000. That is the number of additional homes we’ve committed ourselves to protecting within the spending review period. I would like to give Mr Unwin the opportunity to explain why the £2.1 billion is at least £2.1 billion-the significance of "at least".
Chair: Okay, if you could do it briefly.
Peter Unwin: The £2.1 billion is what we would pay through the Environment Agency; in addition to that there will be local authority expenditure, which we touched on earlier in the session. At the moment they’re spending about £100 million a year, and obviously they’ll be taking decisions on priorities, but as I said, in the past they have given a high priority to floods. In addition, we’ve spoken about the capital receipts that we hope to get, and we haven’t allocated those yet. If we were to reinvest those, floods would obviously be a high priority for Ministers to consider in deciding what capital expenditure to use them for.
Mrs Spelman: Absolutely.
Peter Unwin: So that’s why we talk about "at least" £2.1 billion.
Q54 Chair: What if there is a threat to the £100 million local authority expenditure under their comprehensive spending review?
Peter Unwin: It’s not included in the figures we’ve quoted, so anything at all that local authorities spend will be on top of the £2.1 billion.
Q55 Chair: I’m just curious about the levies that the last Government talked about, which in opposition I think the present Government were not so keen on but are now proceeding with. Who will actually pay these levies?
Mrs Spelman: Could I please just stop the Chair there, because once again we know from the forestry episode that a comment like that can give rise to front page headlines in national newspapers. So, could I make it perfectly clear that in due course we will come forward with a consultation document looking at how additional resources can be brought to address the question of how we improve the resilience of communities to flooding? The consultation document will set out a number of ways in which this is possible. It is, for example, sometimes in the interests of water companies to be involved in the provision of flood defences, because it prevents the contamination of their water supplies by inundations of sea water, and they have an interest in bringing additional capacity to this question. In due course, as Mr Benyon outlined, we will be looking at additional ways to help improve the resilience of communities. In essence, what we’re proposing there is a piece of good news, which is that a project that might have gone to the back of the queue because the return on investment was poor-and that was the original criteria for granting support from the state-may be brought forward by a combination of state and other resources.
Q56 Chair: Those houses, other than the 145,000 that you hope to help, if they’re in the future deemed to be uninsurable, do you intend to intervene?
Mrs Spelman: Well, we have an ongoing dialogue with the insurers. The Association of British Insurers expressed themselves to be pleased that we had managed to defend as much of the capital of the Department as we did, not least because most of it is flood defence capital. We will be working with the Association of British Insurers as their statement of principles come up for renewal in 2013 to look at ways to make sure as far as possible there is no reason why anybody should not be able to insure their property. The proposals will in due course be made public. The consultation on additional flood resource initiatives are likely to increase the ability of homeowners to insure themselves at reasonable cost.
Chair: I’m sure we’ll revisit these issues. If I could turn to Richard Drax?
Q57 Richard Drax: Yes, on to forestry if I may, Secretary of State? You are committed to selling off parts of the Forestry Commission’s estate, and we know that. In oral questions you said one advantage of that would be that "community and civil society are most likely to give it"-that’s the forest-"the best protection". What evidence is there for that statement?
Mrs Spelman: Well, quite simply because the people who enjoy access and benefit from nearby woodland and forestry are the people who most want to protect that ongoing access. I’d suggest that the people who live near the Sherwood Forest or the New Forest, or other heritage forests, will have a particular interest in keeping them just as they are today for the sake of their children and their grandchildren. The challenge for us is to look at bringing the reality of community ownership closer to sometimes quite small communities. One wouldn’t expect a small village, necessarily, to have the resource to secure the ownership of heritage forestry, if it was on a very large scale. We need to work through, in our forest consultation document, how to help civil society secure ownership of forestry that it desires to do. I think that is entirely consistent with the coalition agreement’s approach to the big society benefits of involving people in the protection of the environment where they live.
Q58 Richard Drax: Which is all well meaning, but how are they going to manage it as well as the Forestry Commission do now? In the sense that they’ve got their own lives to lead, they’re all busy people and suddenly they’ve got a great lump of forestry to maintain, which takes a lot of work.
Mrs Spelman: I imagine they would contract to do that.
Q59 Chair: These local people, who are they and where will they get the money from?
Peter Unwin: We’ve had expressions of interest from environmental bodies, for example the Woodlands Trust and others who’d be interested in taking some sites on, on behalf of a local community. A local organisation could take it on with the community.
Mrs Spelman: When I was before the Environmental Audit Select Committee last week this question came up in relation to the Sherwood Forest. This very point was made by a Member, who I imagine didn’t live very far from the Sherwood Forest, that it is so important to local communities, often to the small mining communities that live in close proximity to the Sherwood Forest, that we would need to make it possible for parcels of it to be made available to the communities that had an interest in seeking ownership. This will be elaborated in a consultation document on forestry, where we’re looking at a number of options. It is that important distinction between heritage and commercial forestry, that it’s important to remember is at the heart of all of this.
Q60 Richard Drax: What assessment have you made of the reduction in price that Forestry Commission forest will attract compared with private forest?
Peter Unwin: We haven’t as yet because we haven’t consulted on the way that they will be sold, which obviously will have an impact on the price. The receipts we’re talking about in this consultation are quite a long way into the future, so they’re not the figures for which we need to put figures into public spending assumptions at this stage.
Mrs Spelman: Historically, this is very important; I was trying to illustrate earlier that it’s not new for the Forestry Commission to dispose of portions of its estate year on year on year. The price does vary; timber is a commodity and the volume of sales and the price recovered fluctuates from year to year. I tried to give a contrasting example of that: last year when the Forestry Commission disposed of 1,100 hectares of forest, it planned to recover £13.5 million from that. By comparison, in 2002, only 690 hectares were sold. That’s approximately half what was sold last year, but it yielded only £5 million. So, it’s difficult to project anticipated sales precisely over a five-year period. Because we’re budgeting on this question we have looked at a planned disposal of 15% of the estate, yielding a spread of, year on year, £13 million, £18 million, £20.5 million and £23 million net receipts from sales. So we have a projected sale of assets but it will depend on the market.
Q61 Richard Drax: Historically I think Governmentowned Forestry Commission land goes at a much cheaper price, that is the point. We touched on this, but just to confirm, the proceeds of this will go to your Department? I think you already mentioned that.
Dame Helen Ghosh: Yes.
Mrs Spelman: Absolutely.
Q62 Richard Drax: Good. Can I just confirm that this Forestry Commission consultation is running at the same time as the House’s consideration of the legislation that would enable this all to go ahead-is that correct?
Dame Helen Ghosh: Public bodies, yes, absolutely.
Q63 Chair: Hang on a minute, because Richard’s point is that the Public Bodies Bill, which gives the legal basis, is going through the House of Lords at the moment and is not due to reach the Commons.
Dame Helen Ghosh: Yes.
Q64 Chair: So your consultation is actually going on before we’ve got the legal basis for the sale.
Dame Helen Ghosh: Indeed, but as the Secretary of State said, in the early years of the figures that she quoted then actually it’s a level of sales that can go on under existing powers and rules. You only need the additional powers that are in the Public Bodies Bill, as I understand it, for the later years when you want to go beyond the kinds of levels of sales that we do now. So in fact the Public Bodies Bill should be an Act well before you are making sales towards the latter end of the SR period. I believe that’s correct.
Q65 Chair: That’s a onceandforall legislative permit, that you will never again as a Department have to come back for future sales of forestry or such?
Peter Unwin: That is the intention.
Mrs Spelman: The Public Bodies Bill is an enabling Bill on the reform of a wide range of arm’s-length bodies.
Q66 Chair: So you will never, ever again have to come and ask permission?
Mrs Spelman: We should not have to, no.
Q67 Chair: So this is our one and only chance?
Mrs Spelman: The disposal of the public forest estate is possible under existing legislation-
Dame Helen Ghosh: Yes.
Mrs Spelman: As the Permanent Secretary made clear; the Bill provides a cautionary provision for use in future years, should it be required. We shouldn’t need to come back for any other legislation, no.
Q68 Chair: Is it altering the status of the Forestry Commission as well?
Mrs Spelman: The statutory duties of the Forestry Commission go beyond just sequentially selling off the estate. It has a regulatory function, it has functions to oversee access and other benefits, which will continue and will be enabled to continue.
Q69 Richard Drax: We’re hoping to take the lead in delivering the Nagoya commitments on biodiversity. What new approaches will the Natural Environment White Paper contain to ensure the UK meets these targets?
Mrs Spelman: Well, I think that question is somewhat outwith the comprehensive spending review, with great respect. Obviously the Natural Environment White Paper is a discussion paper about natural resources in the round; it has not been launched in connection with the comprehensive spending review. I would point out that the Comprehensive Spending Review decision specifically ensured that both forms of environmental stewardship should be maintained. In fact, higher level stewardship, which gives the greater environmental benefits, should be increased by 80%, we anticipate. So within the spending review there are important measures which underpin the objective of the Natural Environment White Paper, which will be to place increasing importance and value upon our natural resources. I think that because it’s a discussion paper and the White Paper itself hasn’t yet been published, I would suggest we come back to that with this Committee in due course. As I say, there are important biodiversity dimensions to the Comprehensive Spending Review both at home and abroad, but the environmental stewardship schemes were something which as Ministers we attached great importance to the maintenance of. Indeed I think it’s right to pay tribute to the work undertaken by a number of NGOs.
Chair: Could we have slightly shorter answers?
Mrs Spelman: I’d just like to mention that the NGOs, of which the Select Committee will be well aware, attach great importance to the maintenance of stewardship schemes as well.
Q70 Richard Drax: On that particular point, actually, how do you respond to concerns from NGOs that it is not practical to rely on NGOs and charities to deliver the UK compliance with targets?
Mrs Spelman: Well we’re not necessarily relying on the NGOs to do that, so that’s perhaps a misunderstanding of the role that we anticipate. As part of civil society in this country, and particularly this Department, it has the incredible blessing of a number of very large, very well organised, highly respected, internationally renowned NGOs. Many of these have expressed to us an interest in becoming more involved in protecting the biodiversity of our country and see an opportunity to be more engaged in partnership with the state in terms of protecting and enhancing that biodiversity. I think Mr Unwin mentioned the role of the Woodland Trust, for example, who have expressed an interest in protecting and enhancing the biodiversity of our forests. The RSPB attaches a great importance to the increase in higher level stewardship schemes, and I would expect to continue to be very involved in that. However, it doesn’t mean that we place all reliance on the third sector.
Q71 Richard Drax: Local people, what about them? More powers for them, and if so, what powers?
Mrs Spelman: Engagement.
Q72 Richard Drax: Green open space, for example?
Mrs Spelman: We must remember local people are often members of the Woodland Trust or the RSPB. For example, the kind of role that I imagine that a local person might play in the kind of new world I’m describing, the big society, comes from visiting a farm close to my constituency where the farmer there has a higher level stewardship scheme and has gone to great lengths to try and attract skylarks to nest. He said to me it was most important to know whether it’s succeeded; was there an outcome for the investment of public resources in achieving this? It was two members of the local RSPB who put in the time to come in and see whether actually the skylarks had successfully nested and fledged from those sites. That to me is partnership working, it doesn’t mean that we completely rely on local people and the third sector to deliver on important requirements that we’ve set ourselves. We just see a great opportunity to work in partnership with them.
Q73 Amber Rudd: You have allocated £90 million per year over the spending review period for disallowance.
Mrs Spelman: Yes.
Amber Rudd: Are you confident that the RPA is now sufficiently resourced to make sure that is going to be sufficient?
Mrs Spelman: Would you like to answer, Helen?
Dame Helen Ghosh: I’m happy to answer that. The Secretary of State has described both the historic improvements that we have been making in the performance of the RPA, but in particular the role that Jim Paice is taking now. He is very much picking up the outcome of the review that we commissioned a year ago. That review said that now the time has come we’ll increase the speed of payment to farmers, but there’s still a lot of dirty data in the system and we need to rebalance between speed of payment to farmers, keeping that as a priority, against the cost to taxpayers. The main cost to taxpayers, as the Secretary of State said, the admin costs of the RPA have gone done, but have been, historically, disallowance. So we have effectively already paid our disallowance for the ’05 and ’06 years. By 2006 we were beginning to pay only 2%, which is the standard level of fine that you’d expect to pay, which we had paid with the old schemes. We will shortly be having informal negotiations on the fines to pay for ’07, ’08 and ’09. The provision we made in our accounts last year was for a level of about 2%. That’s the basis on which we’ve had the discussion about 90, 90, 90 in the three years of the SR. The fact that we are now paying even closer attention to accuracy as well as speed should mean that we do manage to keep our disallowance within those levels. We’ve also got flexibility from the Treasury to move the money between years if there’s any lumpy spend, which is what we’ve done historically. We hope, at that level of disallowance, we should be okay.
Q74 Amber Rudd: Notwithstanding all those efforts, if there were a situation where it went up by 5%, how would you fund it?
Dame Helen Ghosh: It’s something we’d talk to the Treasury about.
Mrs Spelman: Again, I stress the importance of being an early settler in our package with the Treasury. It gave us an opportunity to share with the Treasury the unusual characteristics of our Department’s risks and liabilities, of which disallowance is one, because 80% of the business Defra does is covered by Europe. That is a point accepted by the Treasury: we do face disallowance risks and infraction costs.
Dame Helen Ghosh: Mr Parish will be well aware of this, but I think one of the main things the Commission is interested in is are you making an effort and are you conscious of the risks. I think that was why our ’06 figure was lower than our ’05 figure. Although in some senses the more work you do, the more you tend to unearth in terms of historic data that you might have stopped and corrected earlier, the fact is that you can say to the Commission we’re getting a grip on the facts. The Court of Auditors is very interested in a level of control, what they hate is a sense that it’s all out of control and nobody knows what’s going on. So the work that Jim Paice, the supervisory board and the RPA are doing is absolutely vital to that.
Q75 Neil Parish: £160 million was paid in 2009 for the mistakes that the previous Government made in having this complex system. How much more money is left there for us to pick up from this payment, from not being able to get payments out to farmers on time and the penalties imposed upon us by the Commission?
Dame Helen Ghosh: Well, we made provision in our accounts last year, which is not the same as real money, it’s still this peculiar thing called nearcash, of about £170 million.
Neil Parish: Right.
Dame Helen Ghosh: That was for ’07, ’08 and ’09, some of which wasn’t SPS, as you’ll be aware it was other kinds of schemes.
Q76 Neil Parish: Quite a lot of it was, most of it was?
Dame Helen Ghosh: A substantial amount of it was. So you could say, if there is a figure it’s somewhere around £171 million. Again one needs to do the negotiation with the Court of Auditors and the Commission, so that’s our best guess at what that figure might be. That is provision, money for which we have provided in our budget this year. If by any chance it was higher than that clearly we might have to have some negotiation with the Treasury as the Secretary of State describes.
Q77 Neil Parish: I’m sorry to keep on about this, but this is the legacy of the last Government, especially of Mrs Beckett’s complicated system, which we’re all still having to pay for.
Mrs Spelman: Mr Parish, it’s Mr Paice who’s picked up the poisoned chalice and we have to wish him well.
Neil Parish: I do, I wish him very well.
Mrs Spelman: Hindsight’s a wonderful thing, isn’t it? This, it seems to me, is a problem across Government; all too often people get carried away with designing a tailor made IT system to suit a problem where in fact an offtheshelf system will deal with the vast majority of cases, then the resources can be put to the anomalies. Of course we can all see that with wonderful clarity now but we are where we are and we have to work through what we’ve got.
Q78 Amber Rudd: The CAP offers very little opportunity for individual countries to reduce their expenditure. Do you see yourselves working with other countries into 2013 to try and persuade them to do so?
Mrs Spelman: General CAP expenditure?
Amber Rudd: Yes.
Mrs Spelman: Well, two things I think are very clear. As part of the earlier stages of CAP reform, there is a consensus among Ministers that we need to simplify the CAP. This would, without doubt, be agreed to instantly, and in fact we have begun, it might have struck the other agricultural Ministers as a bit of rocket science to do what we’ve actually chosen to do here as the incoming Government. This is to set up a red tape taskforce to ask the farmers who have to work with the regulation how we could reduce the burden of regulation without compromising the objective for which it was set up. When I suggested that at a European Council meeting there was almost an intake of breath that this was a remarkable thing to think of doing but others suggested they might do the same. Already Mr MacDonald, who’s taken on the role of chairing the red tape taskforce, has had hundreds of suggestions for how this might be achieved. In terms of saving some of the costs of administering the CAP it is actually through the joined up working of the Environment Agency, Natural England and the RPA that we can achieve some of these savings, because very often all three agencies will visit the farm in rapid succession.
It may be perfectly possible, through the simplification of inspections, to make really quite significant savings, even before we reform the present CAP.
Amber Rudd: Excellent, thank you.
Q79 Chair: So there’ll be no more gold plating?
Mrs Spelman: I sincerely hope not.
Q80 Chair: Can I ask, is there a correlation between the number of lawyers in the Department and the likelihood of infraction proceedings.
Dame Helen Ghosh: I’ll turn to Peter as our expert, but no.
Chair: I know Mr Docherty was keen to pursue this point.
Dame Helen Ghosh: Infraction, as you will be aware, comes back to demonstrating as a Department that you’re taking initiative.
Q81 Chair: In the Water Framework Directive, I think, we’re one of a number who are facing infraction proceedings, so we’re not alone.
Dame Helen Ghosh: No, again, Peter will be an expert on this, but fundamentally infraction comes about when the Commission believes that you are not making an effort to achieve the outcome. So, for example, the UK was slow on implementing the Nitrates Directive; it has caught up with itself on the Urban Wastewater Directive. It’s less lawyers than it is policy makers who are the people who can determine the future of infractions. We have never yet, as the UK, paid one. Peter wants to say more on the risks, which are mainly on his side.
Peter Unwin: The Urban Wastewater Treatment Directive I think might be the one you have in mind, where we’re in infraction proceedings at the moment, as are a number of other member states. Lawyers play a part in that, but as Helen has said; it’s the policy officials who do a lot of negotiation with Brussels on this.
Q82 Chair: Bearing in mind that you want to simplify and cut red tape for farmers and food producers, have you calculated what the cost to the Department would be of doing so?
Mrs Spelman: Well this is very much the work of the red tape taskforce and presumably the cumulative benefits of the over 350 submissions that the red tape taskforce have received.
Q83 Chair: Are they the ones reporting in spring?
Mrs Spelman: Yes. Once Mr MacDonald has been through all the submissions he’s received, to see which stand up and which are workable proposals, he will be able to quantify the potential savings that would bring. As I used the earlier example, I think we can all see that there is tremendous room to make savings through cutting out the duplication, which is a very strong feature of administering the regulatory framework.
Q84 Chair: I’m sure just one inspection and less mapping would do that.
Mrs Spelman: Absolutely, and we take that on board completely.
Q85 Chair: Take that as a representation?
Dame Helen Ghosh: Some element of our disallowance has been slowness with remapping, so that was an EU requirement we had to comply with.
Mrs Spelman: I think there’s a very interesting philosophical point. At my first meeting with the Commissioners I raised the issue of the Air Quality Directive with Commissioner Potočnik, because there’s a Directive where 26 out of 27 member states are not able to comply. I think the Commission are actually quite receptive to the problems of succeeding directives, which have considerable costs attached to their implementation, at a time when the whole of Europe is facing austerity.
Q86 Chair: Could I just ask, you have a number of regional offices, and York and Yorkshire are obviously beneficiaries-
Mrs Spelman: Yes.
Chair: Are you minded to review these, and are you worried that it’ll be more difficult for farmers and the public to have access? I’ll let the Secretary of State answer.
Mrs Spelman: I commend the Select Committee because they’re on to the kind of savings that we are looking at. Again, when you think about the Defra network of organisations, a number of them have regional offices. I think it is perfectly possible to make savings by having joinedup provision out of one of their regional offices. So we retain the access point for the farmers, which is incredibly important, and I take that on board entirely, but we make savings to the Environment Agency or Natural England, or indeed to ourselves, if we merge our functions out of one location.
Peter Unwin: Natural England are actually closing down their regional structure but having a direct line from national to local, so the farmer will still have the local advice, which is the point of contact for the farmer, but savings will be made by taking the regional tier out of the equation.
Q87 Chair: Will a lot be achieved with a telephone call? Can a lot be achieved by remote means?
Mrs Spelman: I’m sure it can, and increasingly farmers are encouraged or almost expected to provide their interaction online. A very important part of the spending review was a decision by DCMS to improve rural broadband provision, so in fact farmers can access that. There was one other point I meant to mention. There’s another area of simplification or cutting out duplication, which I think could make a significant saving. Agencies like the Environment Agency and Natural England are both statutory consultees in the planning process. They both have to make statutory provision, and there are ways in which these agencies can actually work together to provide the statutory provision required without duplicating it. I know local government would welcome that kind of simplification: a saving to them and a saving to us.
Q88 Dan Rogerson: On this issue of, particularly, leased property, trying to colocate services, would the Department encourage its agencies and indeed its own sections to look at colocation with other parts of the public sector, whether that be other Government Departments or indeed local government and so on?
Dame Helen Ghosh: The answer is yes. We’re looking at our own estate, to see when our leases come up and take advantage of them, and the Efficiency and Reform Group in the Cabinet Office, under Francis Maude, has got a programme specifically to look at all the public sector property in regions. I happen to know about the South East because I’m working with the group of teams there, and they’re looking at all the property and, if a local authority has some empty space, how all other bits of Government could move in. That’s something we’re looking at.
Q89 Dan Rogerson: I know there has been an issue in the past where different parts have different national leasing agreements with different companies and therefore can’t get out of them and move on to that.
Dame Helen Ghosh: Yes, exactly. It’s very complicated but we’re trying to work through it.
Q90 Dan Rogerson: Turning now to the question of bovine TB, the Government has announced that it’s going to look at a whole range of solutions to do with this problem, including culling, which is something that the previous Government decided not to do, or ruled out. In terms of allocating funds to bring this in, what allocations has the Department made, looking at how this policy might be introduced, following on from consultations?
Mrs Spelman: It’s very important to make the overarching point that we remain committed to maintaining the ability to respond to animal disease and emerging threats, and to take a riskbased approach to that. There are some savings that could be made in animal health, because some diseases, which we’ve been surveying very closely, have diminished in their significance, like TSEs (Transmissible spongiform encephalopathies). Specifically on bovine TB, this is clearly a disease of epidemic proportions that needs to be dealt with, and we have a consultation under way at the moment for the ways in which we might well do that. This is something that we need to look at in partnership with the industry in any event. On many occasions I meet with farmers who suggest to me ways of reducing some of the cost of dealing with bovine TB to themselves and to us, but without compromising the quality of the surveillance that we provide. I can illustrate that for you: some farmers who are at low risk and whose surveillance is once in every four years tell me that they’re concerned that they’re not frequently checked enough and they feel at risk as a result of that. In other cases, there are examples of where the surveillance process could be coincided with other visits. There are a number of ways in which we can look specifically look at bovine TB, but it’s incredibly important that we don’t compromise our ability to tackle this disease, which has cost so many animal lives.
Dame Helen Ghosh: On the specific issue that you raise, about paying for the cull, if Ministers were to decide to license culls, as the consultation paper makes absolutely clear, there’s a very good costbenefit analysis, and there is not an argument for the Government paying for the cull to be carried out. So, were a cull to be carried out, the costs would be borne by the industry. It does factor in that there might be potential costs around some policing, but essentially it would be paid for by the industry, and that is the basis on which we’re consulting.
Q91 Dan Rogerson: Have you made an estimate of the costs to farmers of engaging in culling activity when compared with the costs that they currently have with regard to dealing with a herd breakdown? In terms of farmers taking decisions about what activity they want to pursue, it’s appreciated that the cost of culling might be high to them if the support isn’t there, but it may actually cost them more to do that than not.
Dame Helen Ghosh: My recollection-but it’s in the consultation paper-is that the calculation is of the cost of a cull carried out by the Government or the public sector against the economic benefits in terms of compensation saved and the economic value of the industry: that way around. I think it would be for the industry to decide whether it was worth it to them. Overall we haven’t made any assumption about a change to the amount of money we spend on TB in the SR period, because that would be anticipating any outcome of the consultation and of the work of the TB Eradication Group.
Mrs Spelman: I have some figures, if that would help, Mr Rogerson. It is difficult, but bovine TB is costing the taxpayer around £63 million, of which £26 million was spent on compensation for slaughtered cattle. Under the proposed approach in our consultation document, the cost to Government, based on an estimate of the licence applications in the first year, would be £2.1 million over 10 years. It’s a very difficult calculation to make, and one of the reasons we’re consulting on it is the question of the cost.
Q92 Dan Rogerson: Sure. So you have a target for where you would hope that introducing culling would bring down that level of cost to the Treasury in terms of compensation?
Mrs Spelman: The main objective of consulting on this is to reduce the epidemiology, both in the badger population and in the cattle population. Obviously that’s the main objective. There is a cost dimension to this, and if we’re successful in eradicating the disease then it costs the taxpayer less and it costs the farmers less, and fewer lives are lost. The purpose of the consultation is to weigh up the options and all the factors as part of that decision very carefully.
Q93 Dan Rogerson: In terms of budgeting, which we’re talking about at the moment, are you factoring in a model in terms of how compensation would go down?
Dame Helen Ghosh: No.
Q94 Dan Rogerson: So if it does that’s a bonus?
Dame Helen Ghosh: We’ve made no assumption. That is a bonus. We have not assumed any change, at this stage, to the amount of money we’re spending on TB because it would anticipate the outcome of the consultations.
Mrs Spelman: On all questions of cost sharing generally with the agriculture industry, we await the outcome of the Rosemary Radcliffe report, which is due to be published on 13 December. We haven’t pre-empted the outcome of that very substantial piece of work, which will inform the decisions and policies that flow from there. We haven’t preempted the outcome of her work.
Q95 Dan Rogerson: The other thing that the Permanent Secretary referred to, as did the Secretary of State, briefly, in her introductory remarks, was the policing issue. It was identified that that might have a cost in the short term. Which Department would fund that, and would money travel across Departments to do that, or is this something that would be borne by your colleagues in the Home Office?
Mrs Spelman: Well, as far as I’m aware the Home Office doesn’t bill other Departments for the policing costs of any eventuality in relation to that. We have an estimate figure, but it’s very difficult. This is very much in the speculative realms of whether there would be public disorder. It’s very difficult to estimate what costs would be incurred at all, but I think it is borne by the Home Office.
Q96 Dan Rogerson: The Home Office is aware, when talking presumably to rural authorities in particular, that that may well be a cost in the police settlement?
Dame Helen Ghosh: Yes, and of course ACPO are among the groups to whom Ministers have spoken, in the course of putting together the consultation proposals.
Mrs Spelman: I was very impressed with the way in which ACPO participated in the Silver Birch emergency exercise. We do work very well with the Home Office in terms of any requirement to keep public order, in relation to disease outbreaks, or dealing with plant and animal disease-we regularly work with them.
Q97 Chair: Is the higher level stewardship scheme new money? If it’s not new money, where has it come from? Has entry to it been suspended for a period of time, and restricted only to successful applicants?
Mrs Spelman: Just a couple of things on this, and I think Peter could elaborate on this more. Quite simply, the savings of approximately £66 million that we anticipate making as part of the maintenance of this regime have to do with the exchange rate, the relative strength and weakness of sterling in relation to the euro, and the rate at which we match fund the monies that come from Europe to support this scheme. Notwithstanding making savings of £66 million, we are able to maintain the programme, and indeed we hope to increase higher level stewardship by 80%, whilst maintaining the entry level stewardship scheme, because both are important, and both have important roles to play.
Q98 Chair: Has there been a temporary suspension?
Mrs Spelman: The temporary suspension arose after awaiting the decision on the recalibration of the Stewardship scheme, arising from the spending review. My understanding is that Natural England have now ended that period of suspension. It was to do with the fact that we wanted to increase by 80% the higher level stewardship scheme. So it required a recalibration of the two in order to reflect the spending review decisions. Mr Unwin can fill you in on the detail of how Natural England approached that.
Peter Unwin: First of all, as the Secretary of State has said, the way the money has been found is through better use of the European money, taking advantage of the change in the exchange rate and our ability to change cofinancing rates.
Q99 Chair: So if the euro recovered? It’s highly unlikely, but you’d have to review this again.
Peter Unwin: The assumption for the euro that we’re using going forward over the next three years is 80p to the euro, which I think you’ll find is a fairly conservative estimate against that of most of the banks that forecast over that period. Obviously it’s not impossible that it would go over it, but it’s not what we expect. That has enabled more money to come in, and the temporary suspension has now been lifted. The reason was that in the previous unfunded schemes, just to take you through the history of RDPE a little bit, there was significant underspend in the early part of the seven-year programme. On the assumption that underspend would be made up in later years there was a proposed increase in HLS. That assumption was never realistic, frankly, in the context of the spending review. The increase that we’ve managed to have of 80% is a very significant increase, but not as big as might have been assumed under that. For that reason, Natural England had to have a period of reprioritising schemes, and now they will be able to let the key schemes go ahead this year. Some farmers will still need to wait until next year but all will be able to go ahead in due course.
Mrs Spelman: Chair, for the benefit of this Select Committee we issued a press release this morning. Obviously farmers need to know that the temporary suspension has been ended because they all need to know where they are. We issued that at 9.30 this morning, so it’s perfectly clear to those who need to work with the stewardship schemes that the hiatus has come to an end, and what the reasons for it were.
Q100 Chair: Now, the Minister of State’s concern about the low level of monitoring of improvements, has that been addressed? Is it being addressed?
Mrs Spelman: This is, I think, a very good example of the partnerships that I was talking about earlier on. In terms of entry level stewardship, we would like to see increased environmental benefits, and this is an area where organisations like the Wildlife Trust, the RSPB and others of our NGOs can really help us make sure that for public investment in stewardship we get the best possible return. I think that is an example of the big society at work.
Q101 Chair: Are you concerned about, with the cuts to Natural England, being able to deliver the HLS scheme?
Mrs Spelman: No. Natural England are confident of their ability to deliver this scheme. The cuts at Natural England, as with a lot of our arm’s-length bodies, will principally fall on their back office. We’ve identified together, as a Committee and panellists, obvious examples of the way in which duplication between the Environment Agency, Natural England and the RPA could be cut out, so more of Natural England’s resources can be focused on its core objectives, one of which is oversight of these Stewardship schemes.
Peter Unwin: I can give you some examples of that. They’ve reduced their offices from 60 to 30 and they are hoping to go down to 20. They have reduced their core services by about 34% and their reducing their external affairs because of the point the Secretary of State made earlier about stopping their policy work and their lobbying activity and they’ve reduced that by 48%. So that’s where they’re concentrating their savings to protect the front line.
Q102 Chair: Just one final question on the RDPE-we’ve had a huge number of representations about what’s going to happen. Who is the delivery arm going to be between the Regional Development Agencies being phased out and the Local Enterprise Partnerships coming in?
Peter Unwin: The delivery bodies will remain as they are: Natural England at the moment deliver most of the agrienvironment schemes, Forestry Commission deliver some of them through the Woodland Grants Scheme. The RDAs are responsible for the socioeconomic schemes. With the abolition of the RDAs, our intention will be to move that work back into the Department at some point.
Q103 Chair: So it’ll be centralised?
Peter Unwin: Well, how to do it is still to be decided, but the Department will take that over as the RDAs are run down. That will be done in a way that shouldn’t affect the delivery to farmers.
Q104 George Eustice: Just on that point, I think you said last year that you had an open mind on the idea of Local Enterprise Partnerships, Secretary of State? You’ve clearly ruled that out in the short term, but is it something that, longer term, might still be possible?
Mrs Spelman: In the medium term. Absolutely, whilst the Local Enterprise Partnership map is evolving and local authorities are deciding which Local Enterprise Partnership they want to be a part of, it’s not possible to place that responsibility with them. Once the Local Enterprise Partnership map is consolidated, we will know where we are with those organisations. They are an obvious vehicle of local delivery.
Dame Helen Ghosh: Yes, in particular the leader programme, but they would need to be at such a stage where we could persuade the Commission that they were appropriately managed organisations to deliver, and competent in terms of delivery. That’s obviously a key barrier as far as we’re concerned.
Mrs Spelman: That is a very important point actually, if I could just underline that. In a conversation I had with Commissioner Cioloş in the margins of an informal Agricultural Council meeting in the summer, he impressed upon me the importance the Commission attaches to ensuring that public resources are properly applied to the purpose for which they were intended, and properly controlled and audited. After all, quite a significant part of this is European money. So we hold responsibility for assuring the Commission on that point and that is why we have to be absolutely sure about the delivery vehicle. In the short term, if it’s inhouse, we take responsibility for that ourselves.
Q105 George Eustice: Beyond that, in Cornwall for instance, they’ve obviously had a lot of experience of managing European programmes already so they’re keen to take it on.
Dame Helen Ghosh: Objective One, yes.
Q106 George Eustice: Finally, the other thing on this RDPE point. What a lot of farmers complain about, and people involved in administering these grants, is that Defra have added a lot of additional conditions that tend to drive grant applications down a specific course, towards particularly environmental schemes, when at a European level it’s more about business development. Have you got any plans to review how that guidance works?
Mrs Spelman: Well I’m never happy to hear that anything is being gold-plated or in any way made more onerous than it needs to be. I’m not aware of specific examples because I’m relatively new in the post but if the hon. Gentleman would like to furnish me with examples of where, in his view, locally Defra has been in some way obstructive or overly dirigiste with it, then I will be happy to look into it.
Q107 Neil Parish: The cost of these schemes has also been criticised as being very high. Are you looking into that?
Mrs Spelman: Well, obviously there’s a drive on efficiency saving across the board, including in Natural England, so I think as part of our overall objective in the Comprehensive Spending Review to reduce administrative costs, we would look to achieve that as part of the stewardship scheme.
Q108 George Eustice: I want to move on to issues around animal welfare. The cuts DCLG are taking may have an impact on all the trading standards services which obviously have a very important role locally in monitoring farms, abattoirs and markets. Have you got any concerns over where that might cause a problem?
Mrs Spelman: No, I’m not concerned over that. The important thing is that we have to remain committed to maintaining our ability to respond to animal disease. We are going to make some savings in this area by taking a new risk-based approach to surveillance. There are a number of diseases, for example, that are part of our surveillance programme, the incidence of which is now so reduced that it is not necessary to continue to put input at the same level. TSE is a good example of that. So we are reviewing on a risk-based basis how we approach disease surveillance, but we are certainly not going to compromise our ability to deal with any outbreak.
Q109 Neil Parish: How will Defra fulfil its responsibilities in relation to animal health and welfare, given that resources for local trading standards services are dependent on local authority budgets for Communities and Local Government?
Dame Helen Ghosh: The answer is essentially the same as the one we gave earlier. We do recognise that local authority budgets will be under pressure, we have been working very closely in the course of the spending review with CLG colleagues to talk about the kinds of services we wish to see continuing in terms of local authority activity and inspection, particularly around welfare. I think we are confident that they are sufficiently funded and will give sufficient priority to the things that the public care about. I don’t think we have a concern in that area, but we recognise that all local authorities will be challenged.
Mrs Spelman: We continue to fund local authorities as a prime enforcement agency, but as I said, we’re reviewing the way we approach all our animal health on a risk-based basis. I think that is without compromising our own resilience.
Q110 Neil Parish: A Government-commissioned review last year praised the Animal Welfare Council, not least for providing exceptional value for money. How will being a committee of experts enhance the council’s work?
Mrs Spelman: FWAG do you mean?
Dame Helen Ghosh: Do you mean the Farming Animal Welfare Council?
Neil Parish: Yes.
Mrs Spelman: To demonstrate to the hon. Gentleman just how much we value the work of FWAG-
Dame Helen Ghosh: No, FWAG is different; FWAG is the Farming and Wildlife Advisory Group.
Mrs Spelman: Right.
Dame Helen Ghosh: FAWC is the activity that is carried out on the farm; I think ADAS plays a part in that. There will be some reductions in the budget that we put into that, but not-we hope-beyond a level that is appropriate, because obviously the British public care very deeply about the welfare of animals on farms. We absolutely understand that, and I know Mr Paice has reiterated the Ministers’ commitment to the welfare of farm animals in a letter to the papers today. We are absolutely aware of that and we would not let our support for that drop below an acceptable level.
Q111 Neil Parish: I think it’s about this committee of experts and improving the independence and impartiality of the council. How do you intend delivering that?
Mrs Spelman: Are we talking about FAWC now?
Neil Parish: Yes.
Dame Helen Ghosh: We would be happy to write specifically about that. I think in general terms, as the Secretary of State said, a number of our Scientific Advisory Committees have moved from NDPB status to being specialist adviser committees. We wouldn’t have done it if we thought that that was going to, in any way, mitigate their independence or the challenge that they give us. We like the challenge of a scientific and evidence base, it’s what underlies all of Ministers’ decisions, and the move away from NDPBs to some other advisory status is not any kind of signal on lack of independence.
Mrs Spelman: Just to underline that point about science-led, evidence-based policy, a number of the decisions, particularly that the Minister of State has made, have been on the advice of FAWC. He has used this scientific base on which to make his decisions, and he’s put a stiff defence of approaching policy as Ministers with that sound scientific base, in response to quite inflammatory and unfounded accusations in national newspapers about our whole approach to animal welfare.
Neil Parish: I welcome that . Thank you.
Q112 Chair: You have a huge amount of information on the web already. Are you looking at ways of putting more information there? Will it be cost-effective?
Mrs Spelman: The Chair gives me a wonderful opportunity to draw Committee members’ attention to something which we regard as very good value for money. Following on from the last question, where we’ve noticed in our short time that on a number of occasions real fears and concerns have been raised about possible sales of forests, possible sales in National Parks and most recently on animal welfare, all of which were unfounded suggestions. Select Committee members will now find there is a clear site on our website for myth-busting, which just sets out very clearly: the myth, the truth. We feel that is an important part of our role, to take responsibility so that myths don’t gain credence. We all know, as professional politicians, that any subsequent rebuttal cannot put right the damage done by the screaming headlines that occurred before.
Q113 Chair: Could we bust one myth? Your original website said that every contract over £500 would appear on the website. Your current website doesn’t refer to this.
Dame Helen Ghosh: I think we should come back with details, I don’t think we ever promised that for every contract of over £500.
Q114 Chair: It’s in the business plan published on 8 November. I haven’t got chapter and verse, but that’s our source.
Dame Helen Ghosh: Sorry, I handed over my business plan.
Q115 Chair: It’s not a trick question, we just wondered whether-
Dame Helen Ghosh: We are publishing a large amount of data, including from next week everything we spend over £250,000.
Q116 Chair: This was £500.
Dame Helen Ghosh: I’m not conscious that we have ever promised that, and I will be stunned if I am corrected by the Chair of the Committee that it is every contract over £500, because that would be an extraordinary number of contracts.
Q117 Chair: It would be very transparent.
Dame Helen Ghosh: While I’m looking for that, do ask another question.
Q118 Chair: Secretary of State, have you considered ways of obtaining income for the Department by charging commercial organisations for access to the website?
Mrs Spelman: Personally, I’m not aware of that, but we are just about to appoint a new director of communications and I think, as a ministerial team-
Q119 Chair: Is this a new appointment, I thought we were freezing vacancies?
Mrs Spelman: It is a vacancy, but I’m sure that the Chair would realise that a director of communications within the organisation is something we cannot do without. Our director of communications went to the Foreign Office and we do need a director of communications. The ministerial team feels that we need a fresh approach to communications, and the myth-busting part of the website is part of our influence on this. I haven’t looked at charging for it, and I think the most important thing is to review the efficacy of the existing communication vehicles. The way in which people receive their information about all our activities varies, but we’ve got a significant increase in the number of hits to that website since we put the myth-busting feature on it.
Q120 Chair: Page 19 of the business plan says, "We will publish online full information on all new Defra projects over £500".
Dame Helen Ghosh: I’m sorry; I thought we were talking about contracts. Sorry, I’m being extremely dim here. I can’t see it. I’m looking at page 19 of what we published.
Q121 Chair: That was the original version of the document, which seems to have fallen off.
Dame Helen Ghosh: I think CLG did that, and the version we published, the final version most recently said, "We’re going to publish online details of every item of expenditure over £25,000", which I think will start next week. "New tender documents for contracts over £10,000", and we’ve already published names, job titles and annual pay rates for SCS.
Q122 Chair: So it’s not £500?
Dame Helen Ghosh: Not £500, it’s £10,000 for new tender documents and £25,000 for every item of expenditure. Different Departments are doing different things, and I know CLG has gone down to, I think, £500.
Q123 Chair: That’s very helpful. Can I thank you very much indeed for your patience? Just one more request: you did undertake to provide a valuation of the current estate for the Committee’s purposes. That would be most helpful.
Mrs Spelman: That was the £160 million.
Dame Helen Ghosh: To Mr Rogerson.
Q124 Chair: For the purposes of today, we’ve been provided with a document, and we don’t understand the anagrams. It would be quite nice to have a valuation of each property.
Dame Helen Ghosh: Assuming that we have a valuation of each property, which I imagine our estates-
Q125 Chair: You must have, otherwise you wouldn’t be able to put the information on it for sales purposes.
Dame Helen Ghosh: To add up the total, indeed.
Chair: I’ll leave that one with you, Permanent Secretary. Can I thank you very much indeed for your patience, for being with us this morning. Secretary of State, Permanent Secretary, Director General, and to the Committee and the staff as well, and the official recorder, thank you very much indeed.
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