The outcome of the Comprehensive Spending Review

CORRECTED TRANSCRIPT OF ORAL EVIDENCE    To be published as HC 611-ii

Environment, Food and Rural Affairs Committee

Comprehensive Spending Review FOLLOW UP  

Wednesday 30 March 2011

Rt Hon Caroline Spelman MP, Bronwyn Hill, Peter Unwin

Evidence heard in  Public Questions  126 - 237

USE OF THE TRANSCRIPT

1.

This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2.

Any public use of, or reference to, the contents should make clear that neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

3.

Members who receive this for the purpose of correcting questions addressed by them to witnesses are asked to send corrections to the Committee Assistant.

4.

Prospective witnesses may receive this in preparation for any written or oral evidence they may in due course give to the Committee.

Oral Evidence

Taken before the  Environment, Food and Rural Affairs Committee

on  Wednesday 30 March 2011

Members present: 

Miss Anne McIntosh (Chair)

Tom Blenkinsop

Thomas Docherty

 Richard Drax

George Eustice

Mrs Mary Glindon

Neil Parish

Dan Rogerson

Amber Rudd

 ________________

 Examination of Witnesses

Witnesses:  Rt Hon Caroline Spelman MP, Secretary of State for Environment, Food and Rural Affairs, Bronwyn Hill, Permanent Secretary, Defra, and Peter Unwin, Director General, Environmental and Rural Group, Defra, gave evidence.

Q126 Chair : Good afternoon, Secretary of State. Welcome. We are very grateful for your being here to discuss the Comprehensive Spending Review. For the record would you like to introduce your team?

Caroline Spelman: Yes, very much, thank you. Good afternoon everybody. It is a very special occasion to be before you. I would very much like to introduce the new Permanent Secretary, Bronwyn Hill. This is not quite the finish of her third day. This is Peter Unwin, who is well known to you. It is right to record in front of the Select Committee that Peter did a sterling job as acting Permanent Secretary through our interregnum.

Q127 Chair : I am sure the Committee would want to record our thanks to Peter for keeping the ship in good shape. Bronwyn, may we congratulate you on your appointment and you are most welcome here today. Secretary of State, given the fact that it was a very challenging settlement, are you concerned about the rate of inflation eating away at your resources over the coming year?

Caroline Spelman: Obviously, that is a cross-Government problem that is not confined to my Department. All our calculations as part of the Spending Review are spread over a four- to five-year period, during which time-as the Chancellor said during the Budget-we would assume that inflation would return to the target level that he has ascertained would support all these calculations, but that is obviously not an issue confined to this Department.

Q128 Richard Drax: Good afternoon. In your Department, are you going to achieve this year’s £162 million savings target?

Caroline Spelman: Yes, we are on target this year and on budget, I am very pleased to say. I must commend the Department for all the preparatory work that it has undertaken. If you are in the back of your mind worried about the decision to suspend the forestry sales, I should make it perfectly clear that they were not allocated. In any event, we had anticipated an outturn as part of the four- to five-year period. We await, of course, the outcome of the independent panel in terms of finding ways to provide better protection for access and other public benefits. If they are successful in doing that, they will presumably recommend that we resume on a better, more protected basis.

Q129 Chair : Secretary of State, could you just explain the Government’s thinking behind the Public Bodies Bill commencing in the Lords, rather than the Commons?

Caroline Spelman: Forgive me, but it is, after all, sponsored by the Cabinet Office and not by Defra. There are many arm’s length bodies in the Public Bodies Bill that pertain to Defra. We had the unenviable record of having the largest number of arm’s length bodies, at 92, which we have reduced to 39. This does not mean that I had special dispensation to choose at which end the legislation started. That was presumably the matter of a conversation between the Secretary of State and the Leader of the House or the Leader of both Houses, as a matter of fact. I do not have a particular view; it is a fact, it is a given.

Q130 Chair : We will come on to consider some of the bodies in a moment, but with hindsight would it have possibly been better to have established the legal basis in a statute before you proceeded as a Government Department to abolish individual bodies?

Caroline Spelman: Again, you are asking me to take a view about a decision that was not within my gift. I do not think it is helpful for me to opine about the worthiness or otherwise of a decision made by the Cabinet Office. The fact is, as far as Defra was concerned, our diligence was all around the question of applying the three tests to the 92 arm’s length bodies that we had about their technical function, and whether in fact the state needed to continue performing the role that they were undertaking-whether it was necessary for the state to continue in that role. When we applied the tests given to us by the Prime Minister, we drew up our lists of arm’s length bodies on the basis of those to keep; those to reform; those to abolish. As for which of the two Houses the piece of enabling legislation was introduced in, as I say, this was not a Defra decision.

Q131 Neil Parish: Internal Drainage Boards . This is, again, the Public Bodies Bill . What changes are you expecting in the Internal Drainage Boards?

Caroline Spelman: We have to be careful with the interpretation of those schedules. The Public Bodies Bill was designed to create a vehicle for Ministers to make changes if they needed to. I do not think we should automatically assume that it meant that we are going to make changes. My own view of the Internal Drainage Boards, since I have been in post and been to see their operation, is that I think they do an admirable job. I have seen the Internal Drainage Boards at work in Lincolnshire, where they face a substantial threat of a breach of sea defences and have very good ideas about how we might make ourselves more resilient. This was part of our exercise, Watermark, the other week. The point of the Public Bodies Bill provision was, if it were thought desirable to change the structures, to merge some of them, to create efficiencies, or something that we obviously would not do without consulting them, then the vehicle is there.

Q132 Neil Parish: You have brought me on to my next question very neatly, because I would suggest-having a lot of experience of one in Somerset-that these Drainage Boards have got far too large; far too bureaucratic; they cost an awful lot to administer; and nobody quite knows what they are doing. When you had a lot of local farmers and people who actually knew where the problems were making the decisions, it was much better. What I would suggest to you is that perhaps there is an argument in looking at some of these; they have grown so big and so cumbersome to administer, and they are not properly actually fulfilling the role. This would very much fit into our localism agenda.

Caroline Spelman: The very essence of the point I was making earlier is that the Public Bodies Bill is a piece of enabling legislation. It would allow us to streamline in the way you have just described; it allows us to strengthen the governance systems of those Internal Drainage Boards, if we have concerns that the governance is not strong enough. It gives the Internal Drainage Boards a duty of sustainable development, which, as you know, we are very keen to mainstream at the heart of Government. My experience versus your experience of Internal Drainage Boards shows us the overarching point, which is there is no one-size-fits-all-they vary. That is true of a lot of the patchwork of our arm’s length bodies. The Public Bodies Bill gives Ministers the powers to make changes, if we deem them necessary and if we are advised by those who regulate the activities that they undertake that it is necessary, but we would not do that without consultation.

Q133 Neil Parish: Okay, that is fine, but what I would suggest to you is they have been driven together; they have been made into very large organisations; and my experience has been that they have cost a great deal more to administer, so you do not have as much money to spend on drainage and environmental works. Is it possible that the Department will look at that?

Caroline Spelman: Of course, we are very happy to look at that, and certainly your suggestion would lead you towards a disaggregation. Back to the original point, the Public Bodies Bill allows Ministers to make these changes. I would like in the balance to record that I have seen what I think is a good Internal Drainage Board, which rather commended the benefit of working together with some rather smaller ones in this part of Lincolnshire. But what works in one part of the country, may not be right for another part of the country. Since we believe very strongly in localism, working together with the Environment Agency, we can optimise their operations. What we have is the power in law to do so, or providing the Bill passes through this House we would have.

Q134 Mrs Glindon: Have you worked out how many local offices of your delivery bodies will close? How will you protect delivery as a result of these closures?

Caroline Spelman: I cannot give you a precise number for how many of the offices of all our 39 remaining arm’s length bodies would close, because they are still exploring how to rationalise these parts of the public estate. What is quite encouraging is that a number of the arm’s length bodies are looking to make savings through merging their back offices; so, not in any way compromising the delivery, as you quite correctly draw attention to, but actually finding ways to live together under the same roof. This is certainly true of Natural England and the Environment Agency, our two largest agencies. A lot of our customers, those who are served by those agencies, complain about duplication between them. One of the advantages and the enhancements in delivery is to get some streamlining; by the fact they work together, they become more aware of where they are duplicating visits. This has brought the double benefit of saving us the overhead of duplicated premises in close proximity, but also improving the method of working between them.

Q135 Mrs Glindon: Do you think that it may affect some of the local projects that Natural England has been involved in, perhaps in some of the more urban areas-things that they have done that perhaps are not rural-based, where they have actually been engaging people in more urban areas in some of the projects-would that be lost?

Caroline Spelman: I have no reason to believe that it would be. We have been very careful with programme expenditure to look very closely at how the things we promised to do will be delivered. That is a separate question from where their staff are co-located, where, as I say, you may actually get an enhancement.

In terms of rural provision, for example, we are expecting to increase by 83% Higher Level Stewardship schemes, notwithstanding the austerity of the times. Natural England’s involvement in all that has to support, obviously, the increase in the expansion in the number of more demanding environmental stewardship schemes, which are typically in the most rural areas. I do not think the simple extrapolation from the number of offices impacting the delivery negatively needs to be made. I do not know whether Peter would like to comment on that.

Peter Unwin: Yes, as the Secretary of State said, a lot of these offices are very close together. From memory, we have 270 offices across the whole Defra network, and about 85% of those are within 20km of another office. There is quite a bit of scope to rationalise and save money via merging offices without greatly losing our ability to work in localities.

Q136 Mrs Glindon: Can I just finally ask: how much will closing the offices save?

Caroline Spelman: We have an estimate.

Bronwyn Hill: It is a very extensive network, as Peter has said. In fact I believe there are 614 different properties. Some of them are obviously laboratories, operational, as well as office buildings. At the moment, the broadbrush estimate over the four-year period is to reduce the year-on-year running costs by £57.3 million, so about 33%-that is significant. It is worth pausing because I think the strategy is right, because what we are trying to do is to say that it is much better to make the savings by reducing the cost of running buildings, than it is to reduce the number of people working in those buildings, because it is the people who deliver the services. To answer your question, we are being careful to look at opportunities to save money on running buildings in order to preserve the number of frontline staff who can deliver local services.

Caroline Spelman: If I could add to that, because I think that is important, we do of course regularly meet with the trade unions. A meeting took place yesterday, as part of a sequence of meetings that I have had regularly with them, where I reiterated that strategy: to try to reduce the size of the estate, rather than reducing the number of jobs. One of the reasons why the quite wide spectrum of staff that we may have to reduce by, from 5,000 to 8,000, is such a broad sweep is because what we have not yet got is clearly the figure that we will recover from the rationalisation of the public estate.

Q137 Tom Blenkinsop: What discussions have you had with the National Audit Office about the transfer of assets to a charity?

Caroline Spelman: A conversation took place with the Treasury over the transfer of assets, because typically in a dissolution of a public body the assets would not naturally return to the sponsoring Department, though I am sure every Secretary of State would wish them to do so. In the case of British Waterways, for example, the proposal to mutualise British Waterways, so it moves from being one of our arm’s length bodies to being a charitable trust, means its entire assets transfer with the mutualisation, with the agreement of the Treasury. That is an incredibly important dowry, if I may say so, for this proposal to mutualise British Waterways, which I know has support on all sides of the House. I am pleased to report that Mr Benyon is today launching the formal consultation on the British Waterways mutualisation, as I say, including the transfer of all the assets.

Q138 Tom Blenkinsop: How will the assets be transferred? What estimate would you have of the value to the taxpayer of those assets?

Caroline Spelman: Do we have any details?

Peter Unwin: From memory, I think the value of the assets is about £500 million. That was a year or two ago, so it may be slightly up or down, but that will be an endowment to the charity to enable it to fund a lot of the maintenance it will need to do on the canal network.

Caroline Spelman: In addition to that, we have-I think this is very important for British Waterways as well-given an undertaking of an income stream to the new charity out beyond the period of the Spending Review, so they have a guaranteed income stream with which to commence their new life as a charitable trust. I was very encouraged to speak to the Chairman of British Waterways yesterday about this, and it is interesting how that, together with the announcements in the Budget that the Chancellor made regarding inheritance tax-that someone could leave 10% of their estate to a charity-has already brought inquiries to British Waterways from people who would like to leave some of their estate to the new charity when it is set up. We are all feeling encouraged about the start in life that British Waterways Trust, or whatever it is ultimately called-that is part of the consultation-will have.

Q139 Dan Rogerson: One of the things the consultation mentions is issues around the freight responsibilities that are there for British Waterways.

Caroline Spelman: The navigations.

Dan Rogerson: Yes, absolutely, and therefore there are implications, potentially, for cost, possibly, in terms of anybody who uses that for freight, and the responsibilities that have been with the current setup for several decades. Should any commercial operators be worried about the changes and be on the lookout for what might happen to their businesses?

Caroline Spelman: As I say, we launched the consultation today, and there are a lot of questions in the consultation, including around the issue of the navigations. We have made a decision to stagger some of these changes in order to ensure that for commercial operators there is plenty of time to prepare. Hopefully, that is one of the things that will address any concerns that they have. I do not know whether you would like to add anything there, Peter?

Peter Unwin: Perhaps you could just explain what concerns you have in particular in terms of what they might do.

Q140 Dan Rogerson: Obviously, there are, I suppose, sensitivities around what will need to be done commercially to make things pay and to carry out the work. In the spirit of other organisations, if there are certain areas that could be seen to be a source of cash, they could be mined more heavily than others, if you see what I am saying. Are there any dangers in the way that is going? The Government, at the moment, presumably, through the subsidy, is effectively helping that activity to take place, and there could be an escalation in cost if that cost is then completely passed on to the operators.

Peter Unwin: As the Secretary of State has said, the subsidy will, in effect, continue. British Waterways has been given a settlement until the end of the Spending Review, 2014-15, and then, very unusually, a guarantee that beyond that they will have a minimum level up until 2022-23 of the same level, I think-£39 million a year-that they will be getting in the final year of this Spending Review. In addition, they will have the assets, which they will be able to use to cross-subsidise the operations of the canal system; they will be using the income from the assets to cross-subsidise that. Their intention is, and one of the reasons they are very keen to go down this route, that they will be able to raise charitable money on top of this in the same way as the National Trust and other similar bodies. In that sense, the income should be secure. Obviously, in the consultation period no doubt we will get comments on income going into future years, but with those three elements of income-the continuing subsidy, income from property, and any charitable money they can raise-they should be able to have the same level of support that they have at the moment.

Q141 Dan Rogerson: Without having to shunt costs on to one particular area of activity. Finally, if I may, how do we ensure that they do not become a property management organisation; that they maintain the focus on access and the activities that we all like to see?

Caroline Spelman: To some extent, they are a property management organisation now.

Dan Rogerson: Absolutely.

Caroline Spelman : I mean, they have an asset portfolio. I am not sure how many honourable Members have the canal network going through their constituency, but I certainly do. I have the Grand Union canal, with a significant number of locks, some of them in a poor state of repair. One of the big opportunities that arises from the mutualisation is the chance to overhaul the infrastructure. This is a lot easier to do with the transfer of all the assets because, obviously, it is endowing the new charity with a very significant asset base, against which it can achieve better financial management and better terms and conditions in order to effect repairs. In the intervening period, they are, of course, prioritising essential repairs, as I can bear testament to because the Kenilworth Road Bridge is being repaired as we speak, but there is a very large amount of the canal and waterway network that does require significant new investment. The combination of the guaranteed income stream from Government until 2022-23, plus the transfer of all the assets, I think gives the new mutual trust the best possible start in life. But there is a consultation document; the whole point of consultation is to engage as widely as possible with stakeholders about all aspects of their concerns about this transition, and it allows us to absorb all of those suggestions in the final outcome.

Peter Unwin: There will be a charity, the purpose of which is to maintain and enhance the waterway network, so no doubt the trustees of the charity will be keeping the focus on that as their main purpose.

Q142 Tom Blenkinsop: After almost a year in post, how would you rate your performance against your departmental indicators?

Caroline Spelman: We are not quite a year into post. In terms of lead indicators, the fact that we are on target on our budget is one of our key indicators; the fact that we have proceeded with the rationalisation of the arm’s length body structure, I think, reasonably smoothly; our progress towards our publication of our Uplands Policy, as identified in our business plan, has demonstrated the ability of the Department to produce, consult and execute something by which both parties within the Coalition set great store.

Of course, I cannot talk about the last year without touching on our experiences in relation to forestry, which were very difficult. I am sure, Mr Blenkinsop, you saw what I did in the House of Commons, which was to come and make a clear statement, taking full responsibility for that, and any future plans in relation to forestry will now be the subject of the independent panel. I am very pleased to report that we seem to have had no negative representations with regard to that since its establishment. Ministers will wait with keen anticipation for what the members of the panel have to say to us with regard to forestry in England, because it goes wider than the original consultation.

My observation generally, as a new Secretary of State, if I may say so-and spare the blushes a little of the civil servants-is that the Ministers have been pleasantly surprised by how smoothly we have been assisted and how professionally the Civil Service has supported us as new Ministers in helping us to develop a business plan, and a budget to go with that business plan, to achieve an early settlement, which brought us our strategic objective of protecting as much flood capital as possible. All of that has resulted in a very good working relationship with civil servants, and hopefully with the new ones who have just joined us.

For me the crowning achievement of the last 10 months, something that I shall look back on with great pride and pleasure, was the achievement of a multilateral agreement on biodiversity at Nagoya. I would be the first to say, once again, that the civil servants within the Department did most of the heavy lifting, and Ministers arriving at the latter stages of an international negotiation often get the credit, but it is not achieved without very significant preparatory work. In the context of other multilateral agreements that have not made good progress, within Defra, we can be proud that we have achieved that.

Q143 Tom Blenkinsop: You told us before, and I quote, "We have 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." How do you and your ministerial colleagues assess performance?

Caroline Spelman: The lead indicators have only just started to be assessed now. You were asking my reflections on the first 10 months. The lead indicators were not applied in May last year. So, the lead indicators followed on from an agreed business plan, which was first of all elaborated and then successfully approved by the Cabinet Office, and then, as part of that process, it is the Cabinet Office that holds us to account, but the business plan itself, with its timings for start and finish, is reviewed regularly by the Cabinet Office. As a matter of fact, we had one of our business plan reviews this week. That is a regular occurrence.

Q144 Tom Blenkinsop: How often do you get that data? Is there a timeframe to get that data?

Caroline Spelman: They are roughly quarterly.

Peter Unwin: There is a set of lead indicators, and this applies to all Government Departments. With our business plans we have published a set of lead indicators, 11 in total, and those, in common with all other Departments, will start being measured from next month, in effect-April 2011.

Q145 Tom Blenkinsop: That is fed back into departmental performance?

Caroline Spelman: Of course, yes.

Q146 Chair : Could I just, Secretary of State, return to the question of inflation. If you look at next year, 2012-13, in cash terms your budget is £2.5 million, whatever. If you take inflation into account, there is a dramatic drop in 2012-13; an even bigger drop in 2013-14; and a bigger drop again in 2014-15. My first question is, how do you plan to address this, so that you can meet all the targets and indicators to which you have made reference? Turning to your departmental business plan, what are the implications going to be of missed deadlines? The fact is that the Department missed one deadline in October on Green Government; two deadlines in December; one deadline in January; and one deadline in February. The Natural Environment White Paper is slipping probably from April to May. We would like to be clear as to what the implications of such delays will be for your budget?

Caroline Spelman: There are two separate things. It is important to stress to the Committee that the major item of expenditure in the Defra budget is staff costs. Because there is a pay freeze across the Civil Service, it is one way in which we are best protected against inflationary pressures. That will be true for other Departments in Government whose major item of expenditure, in fact, is staff pay.

The second thing is with regard to the business plans. There is a system of flagging progress or otherwise within business plans that works across Government. There may be perfectly legitimate reasons why particular start and finish dates have to change. Obviously, as regards the forestry consultation, we made a decision to stop the consultation, and that has an effect. We are now going to give time for a panel to deliberate and make recommendations to us as Ministers, so of course, that is going to affect the decision process.

As regards the business plan outline proposal for a decision on bovine TB to be made in February, in light of the Welsh Assembly’s experience, where they were judicially reviewed because they were found to have made an error in the process, I am sure the Committee would want the Department to be very careful indeed about the process it pursued in relation to making a decision about bovine TB. I made it very clear at the NFU AGM in February that we are not in a position yet to make a decision on bovine TB. I think you will be able to appreciate that, when the Cabinet Office is reviewing start times of particular policies or decisions that we have to make, they would first of all want to be satisfied as to the reason for taking some more time. In this case we await the legal opinion, and we cannot make a decision without it.

Q147 Chair : I am so sorry; I did not wish to go into the merits. The Committee wants to know about the impact of these delays on the budget. We have been led to believe that such delays can have an impact on the budget.

Caroline Spelman: I do not think they are likely to have an impact, because in a lot of cases when there is a commencement there is an element of expenditure, so it is cost that you tend to save, rather than accrue cost. Possibly, the only exception to that would be our decision to suspend planned sales of forests, which we made because we felt that the protection was inadequate for access and other public benefits. This is obviously a loss of planned income, but not of allocated income. We were very careful, in relation to the proposed forestry sales, because it was dependent upon market conditions, not to allocate the income stream from those sales. We could at this stage reasonably assume that when the panel has considered how to make access and other public benefits better protected, then those planned sales would be in a position to resume within the period of the Spending Review, so that the eventual outcome would not be significantly different.

Peter Unwin: A lot of these issues will not have a big impact on expenditure anyway. You gave the example of the Natural Environment White Paper, which is being delayed in large part because the original deadline was in the purdah period, when we would not have been able to publish it. Even so, if it were to slip a month or so, there is a team doing it, but the team will need to implement it once it has gone through. So the same sort of expenditure will be happening whether it is published in April, May or June.

Caroline Spelman: The National Ecosystem Assessment relates to that as well, because it goes together with the Natural Environment White Paper. Obviously purdah is certainly one factor, but the devolved administrations partly help to finance the National Ecosystem Assessment, which is a very important scientific work. We will have to wait for the new Governments in each of the devolved Administrations to form. It is possible they may be coalitions, so we have factored into our considerations how long it might take the new Ministers to be in post and for us to brief them, before involving them in the launch of that document. We are talking about six weeks of purdah slippage plus election-I do not know-reconfiguration, shall we call it?

Q148 Neil Parish: Reducing costs by £174 million in Defra is never going to be easy. You have announced that it could mean between 5,000 and 8,000 job losses. Also, there is the most recent survey of staff within Defra and within Animal Health, where only 29% were satisfied with the process in Defra and only 20% in Animal Health. My question is how are you addressing the fact that staff generally do not seem to like how the changes are being managed? I know it is not easy.

Caroline Spelman: I suspect across Government that nobody likes the uncertainty that comes with a 33% administration cut across all government departments, protected or unprotected, quite honestly. At the very least, it brings uncertainty. Certainly, as someone who feels responsible for the staff that we have, and, as you can see, admires what they do, I am doing everything in my power, and so are other ministers, to try and be helpful in this regard.

What I would pray in aid as evidence that we are approaching the process in a considered and compassionate manner is that our appeals for voluntary redundancies have yielded a higher figure than we were expecting of members of staff who choose, at this point, to go, on the terms and conditions being offered across the Civil Service. Of course, this is helpful with regard to the balance that we have to find, because then fewer compulsory redundancies, about which people are less likely to be content, will be necessary.

In respect of Animal Health and Veterinary Laboratories Agency, a compound factor there is the merger of two bodies. It is understandable that for staff in those two facilities there is an extra layer of uncertainty around that. I have been to visit one of the two premises, the Animal Health laboratories at Worcester, and the Chief Executive there, Catherine Brown, assured me that they are working incredibly hard to try and accommodate employees’ wishes in the matter, and to be considerate in relation to their responsibilities and their own job opportunities. I do not know whether you would like to add to that.

Bronwyn Hill: It is probably worth saying that I was recently in the Department for Transport, and I think their staff survey results were broadly the same in terms of the impact the uncertainties obviously had on people, and the surveys were done in October. What is important is that the leadership of the Department now helps to move to reduce that uncertainty, so running the voluntary exit scheme, getting the outcomes from that, and factoring that into our plans for the next two years is a very important early priority for both me and the senior management team. What our staff are saying to us is, "Communicate regularly with us. Make sure that any processes that you use to reduce numbers further are fair and transparent, and that you keep talking to us." That is something that we committed to do with the staff.

Peter Unwin: What I would say about the survey results is that, as you say, we went down slightly. Our overall staff engagement index, which is the headline figure from the survey, went down from about 54% to 53%. The 1% drop is actually less than the average drop across the Civil Service, because the whole Civil Service saw a drop. The main reason for the drop-and this was common across all the Departments and was not surprising in the circumstances-was increasing concern about pay and career prospects in the current climate. Against that, we had quite a significant rise in our scores for leadership and change management within the Department. We faced a lot of the issues that the rest of Whitehall did, but on those issues of leadership and change management we actually improved from previous surveys.

Q149 Neil Parish: The only thing I would say, with the figures I have in front of me, is that DFID probably has not had to make as many cuts or there has not been much of a reduction, but there is a 41% positive response there and only 20% in Animal Health. Secretary of State, you covered it in Animal Health, because you say it was the merger, but that is very, very low.

Caroline Spelman: DFID of course is a protected Department-lucky them. We would all like to be in that position, but we cannot be. You can understand why morale is good in such Departments, but that was a collective decision by Government, and one that I do not in any way regret. What I think is significant, now, where we are in the cycle, not quite a year in, is-is that a vote? Quickly.

When we first arrived, there was concern amongst the staff that, because of the recruitment freeze, there was no movement and lots of these very able people were asking, "How will I get promotion? How will I get preferment if there is this freeze?" One of the consequences of the scale of the reduction that we have to make is that the managers strategically need to remodel or recast some of what we do, because we are going to stop doing certain things. That will, in the fullness of time, now with the Permanent Secretary’s involvement probably this summer, lead to opportunities for the staff for promotion.

Chair : Secretary of State, if we could pause there for the vote. We will return in 15 minutes if there is one vote.

Sitting suspended for a Division in the House.

On resuming-

Q150 Chair : We move on to forestry, if we may. I would just like to ask at the outset, Secretary of State, about the basis of the Department’s costbenefit analysis and how you reached the figures. I would like to try to reconcile two statements that you made very close together. On 3 February this year, you said the "planned sales are expected to raise £100 million over the Spending Review period. That would be part of Defra’s overall provision within that period." Then, on 17 February, you said: "Any revenue from the planned sale of 50% of the land was a bonus. Now that those sales have been suspended, our Department’s spending plans are not affected."

Caroline Spelman: It is revenue that we anticipated from the sales, but by bonus I meant in terms of not allocated. That is the distinction. We had not allocated the £100 million to planned expenditure. Perhaps I did not express it all that well, but that is the distinction. We anticipated over the period between now and 2014-15, on the basis of the scheduled planned sales, an income of approximately £100 million. You can never be sure; it is the timber market, it is affected by world prices, it goes up, it goes down. It was our anticipated revenue of £100 million, but we had not allocated it and that is the distinction.

Q151 Chair : I would just like to pursue that. I would just like to go through the figures for some of the cost-benefit methodology in annex 7. Under the community woodlands and the heritage woodlands-

Caroline Spelman: I have not got that document.

Q152 Chair : I am not going to take you through the figures. The figures are a matter of record. Looking at the figures, the taxpayer was going to be out of pocket or the Department was going to be out of pocket, so I am not quite sure how-

Caroline Spelman: I am sorry, but what do you mean by out of pocket?

Q153 Chair: The cost of sale was going to cost more than the money you were going to receive. The cost to the Government, if I just give you one example, of community woodlands, was £5.1 million; the benefits were only perceived to be £2.7 million. Then, obviously, there are costs related to professional land agent fees. It was just trying to talk you through the thinking. I know it is a matter of history now, but just so that we can understand.

Caroline Spelman: We have not got this document in front of us right now, I have to tell you, but Peter will try to speak to that question.

Peter Unwin: I will do my best, from what I can recall of the figures, and I presume you are talking about the impact assessment that went with the consultation paper. The issue here was that the figures in the impact assessment looked at the cost of running the forestry estate at the moment. It then made an assumption that, if those duties were transferred through leases to commercial companies in some cases, or through transfers to charities in others, a similar number of people might be involved in doing that, and therefore the costs would be fairly similar. Of course, you then add into that the cost of sale and that leads to the result that you are talking about.

What the impact assessment was not able to reflect, and this is part of an issue about the way we do impact assessments in general across Whitehall, is the benefits that the Government believed would come from having some of the commercial forests run on a leasehold basis by commercial companies or some of the heritage forests run by charitable trusts. They saw wider advantages in there, which, because it was not possible to monetise them precisely, do not appear in the crude impact assessment figure. That was at the nub of the issue you were raising.

Caroline Spelman: Obviously, the consultation has been abandoned. This is now a question for the independent panel. They will look at a number of things in relation to the operation of the Forestry Commission. That is in their terms of reference. We had anticipated, in terms of asset disposal of the planned 15% of the public forestry estate-this was nothing to do with the forestry consultation on the wider public forest estate-that the Forestry Commission’s costs would be approximately 25% of the anticipated income stream. That is in the planned sales.

The point is that the panel will look at both. It will be able to look at the operation of the Forestry Commission; its commercial operation, the turnover of which is £54 million; and its profits of £0.7 million, and look at the ratio there. It can explore more widely the questions that we wanted to look at in the consultation, and beyond that, because the panel has the remit to look at forestry policy in England in general. All of these things will be considered as part of their work. I do not want to preempt the outcome of their research because they will make recommendations to Ministers.

Q154 Chair : Community woodlands, heritage woodlands: are these common concepts or were they created for the purposes of the consultation?

Caroline Spelman: They were created for the purposes of the consultation because it was the best way to help the public understand the different types of forest. Clearly, the public reaction to our proposals showed that lots of members of the public do not understand how little of the woodland cover in England is in public ownership. They have not realised that it has dwindled to 18% of forest and woodland cover in this country; most members of the public thought the figure was much, much higher. They also had not appreciated in some cases that the state was running a commercial forestry operation.

So, one of the things that the consultation did reveal is that there are different types of forest, for which different outcomes may be the right answer. I simply thought it was right, Governments of different persuasions over the last 30 years having sold off the public forest state without much consultation, to give the public the chance to be consulted about the future of the public forest estate. But that is history now, and the panel will take these questions forward.

Q155 Tom Blenkinsop: Did Defra seek advice from the Forestry Commission prior to the announcement of the consultation on the sale of public forests?

Caroline Spelman: Of course.

Q156 Tom Blenkinsop: Have you copies of that advice?

Caroline Spelman: The Forestry Commission wrote the consultation document.

Q157 Tom Blenkinsop: The advice that they gave you, have you copies of that advice that we could see as well?

Caroline Spelman: I do not know what form the advice took. They drafted the consultation. That was essentially their work. We do not have forestry policy people within the core Department. We rely on the Forestry Commission, largely.

Q158 Tom Blenkinsop: So, there was no interlocution, no phone calls, no e-mails, suggestions?

Peter Unwin: If I can just say, policy advice to Ministers-this is a convention under all Governments-is confidential to Ministers. That is reflected in the Freedom of Information Act.

Q159 Tom Blenkinsop: So there is advice, but it is confidential and we cannot see it?

Peter Unwin: The Forestry Commission are the departmental advisers to Ministers on forests, and they provided advice throughout the process.

Q160 Tom Blenkinsop: So, there is advice, but it is confidential and we cannot see it, is that right?

Peter Unwin: It is policy advice to Ministers and as such-

Q161 Tom Blenkinsop: So, there is policy advice, but we cannot see it.

Caroline Spelman: Mr Blenkinsop, I have regular phone calls with the Chairman of the Forestry Commission; she has my telephone number, I have hers. I do not necessarily make a note of everything that we say to each other when we speak to each other. You would expect the Secretary of State to have a working relationship with most of the-I speak to the president of the NFU; I speak to the president of the CLA. I do not spend all my time annotating.

Q162 Tom Blenkinsop: I know and that is what I was getting to, but that is not the same as the writing of a consultation paper, which you earlier said was the advice.

Caroline Spelman: No, I did not say it was the advice. No, no-I did not say it was the advice. I pointed out that the Forestry Commission prepared the consultation paper. So in terms of a public document that shows the iterative process between Ministers and an arm’s length body in drawing up a policy, I just wanted to make the point the Forestry Commission was commissioned.

Q163 Chair : I am not quite sure that is the question being asked. The question that is being asked is: did you seek the advice of the Forestry Commission as to whether there should be a sale, not as to whether there should be a consultation?

Caroline Spelman: Yes, of course we did.

Q164 Chair : Are we able to see that advice?

Caroline Spelman: No, apparently, if it is a convention across Government. There is not any telephone call advice that I can give you. From the moment we became Ministers, we had stakeholder meetings with all the arm’s length bodies, at which we sought their advice on the plans that we had within our business plans and our plans for arm’s length bodies. We have regular meetings with our stakeholders, both together as groups and separately, continuously of course, through the last 10 months, during which we seek advice and we exchange our thoughts on that advice.

Q165 Chair : The Woodland Trust and the National Trust, would they have been included?

Caroline Spelman: Of course, they would.

Q166 Chair : Actually as to whether or not a sale should proceed at that time, before the legal basis was established?

Caroline Spelman: Of course we spoke to the stakeholders. We have regular meetings with stakeholders. Incidentally, the stakeholders you referred to, of course, are on the independent panel, so they will very definitely be giving advice to Ministers in a formal way.

Bronwyn Hill: Isn’t one of the points that the reason the Secretary of State has set up the panel is so that they can look at these things afresh. In a way, publishing some advice that is now historic is not going to help contribute to that debate. We want a fresh and open debate on these issues, and that is why the panel has been set up to lead it.

Q167 Chair : With the greatest of respect, it would just help our thinking to know what the advice was and what the timeline was. It goes back to whether it would have been better to have had the legal base in the Public Bodies Bill, as to whether there should be these decisions on the Forestry Commission, on British Waterways, on IDBs, before a consultation was launched.

Caroline Spelman: We are conflating two things. Remember that the Public Bodies Bill emanates from a different Department from my own. It enabled Ministers in all Departments to abolish, amend or leave the arm’s length bodies that are under their wing. That was on a cross-Government basis.

Q168 Chair : Effectively, that was setting up the legal base. So, in a way, you are proceeding without the legal base by launching the consultation, which is what I was asking earlier?

Caroline Spelman: Okay, but we did not necessarily need the changes in the Public Bodies Bill. The Public Forest Estate has been sold off by successive Governments under the Forestry Act 1967 over the last 30 years, as I have said. We take the view as Ministers that the protection for access and other public benefits should be improved, and it may be that the independent panel advise us that Forestry Act should be amended to reflect that.

Bronwyn Hill: To try to answer Miss McIntosh’s question, as you know, a large number of bodies are covered by the Public Bodies Bill, and quite a number of Departments are actually consulting on what is going to happen to those bodies in parallel to the legislation going through. Clearly, this is all subject to the House’s approval, ultimately, but I do not think there is anything unusual in the consultation happening at the time the Bill is going through. In a sense, it is a consultation on the detail that would follow, subject to the Bill being approved.

Q169 Chair : Is there any particular reason why there was not a question in the consultation paper on maintaining the status quo?

Caroline Spelman: Obviously, it was an open consultation. It gave the opportunity for-

Q170 Chair : Is there one obvious box that was not there?

Caroline Spelman: Obviously, what cannot remain the same is that we had established before publication of that consultation that the status quo on protection for access and other public benefits is inadequate, as proved by the fact that, when the last Government was selling off parts of the public forest estate, access was impeded. At successive sessions of oral questions by Defra Ministers across the autumn, we made it clear that we were not satisfied that the status quo was adequate with respect to protection for access and other public benefits. It is logical that something there at the very least would have to change, but it was a genuine consultation and I defy honourable Members to say that the questions were not genuinely open.

Q171 Tom Blenkinsop: Was that advice from the Forestry Commission?

Peter Unwin: Can I just come back to this advice, and be absolutely clear. The Forestry Commission, as I said, are a Government Department. They are not, like Natural England or the Environment Agency, statutory bodies set up to advise Government with a degree of semi-independence. They are a Government Department reporting to Ministers in Defra as well as in the devolved Administrations.

Q172 Chair : They were quite a large feature of the Public Bodies Bill.

Peter Unwin: They are civil servants who are providing advice to Ministers. The convention of all governments is that that advice is not disclosed, for the very good reason that, otherwise, we would not have impartial and frank advice to ministers on a whole range of subjects. That was recognised by Parliament in the passing of the Freedom of Information Act. That is the reason why. We are not trying to hide anything by saying we will not give you this advice. We would not disclose to you policy advice that we give to the Secretary of State, as civil servants, on any issue. We will provide information under the FOI or willingly to the Select Committee, but the convention is that policy advice is confidential, for the very strong reason I gave.

Q173 Tom Blenkinsop: Effectively, advice was sought, but we cannot see it?

Peter Unwin: Advice was given. Because they are civil servants who advise Ministers, as is the convention under all governments, that advice will not be disclosed.

Q174 Thomas Docherty: First of all, Secretary of State, can you just clarify that you said that you did not need the change in the law? If I have heard you correctly, you said that you did not require the Public Bodies Bill-

Caroline Spelman: The basis for the sale of the public forest estate that has taken place over the last 30 years is the Forestry Act 1967.

Chair : That is for the 15%.

Q175 Thomas Docherty: Yes, the 15%. For the other 85%, you did require a change in the law. So you perhaps misspoke.

Chair : 15% is part of the Comprehensive Spending Review.

Caroline Spelman: I understand that, but it was a consultation. A consultation gives rise to an outcome, on the basis of which Ministers make the decision as to whether to proceed or not.

Q176 Chair : But you did not have the legal base for that, because the legal base was in the Public Bodies Bill, which has still not reached the House of Commons.

Caroline Spelman: The consultation would, I think, not even have been concluded by now, on its full length.

Q177 Thomas Docherty: But you were consulting on a basis that you did not have in law?

Caroline Spelman: We were consulting to see what the public wanted to do with the remainder of the public forest estate.

Q178 Thomas Docherty: You have discussed at some length with my colleague the issue of whether you sought advice or consulted prior to launching the consultation. Did you either seek advice or even inform the Forestry Commission before you cancelled the consultation? Were they notified in advance and, if so, by how much?

Caroline Spelman: Of course we sought advice from the Forestry Commission. We had regular contact with them. We had regular contact at official level, and we continue to have contact at an official level.

Q179 Thomas Docherty: Just so I am absolutely clear, you sought advice from the Forestry Commission about the cancellation of the consultation?

Caroline Spelman: There was a very long period between the initial draft consultation document being received by us, from the Forestry Commission, and it being approved within Government-properly written round and approved by all Cabinet Ministers. It took several months, during which time we continued to have conversations with the Forestry Commission. We took the decision to proceed with the consultation even after quite misleading comments in the press about what it consisted of. Obviously, they were as aware as we were about the mythology that was establishing itself about what our genuine plans were, especially having crafted the consultation document. So, a decision was made to proceed with the publication of the consultation. We then decided prematurely to curtail it.

Q180 Thomas Docherty: Perhaps it is my thick Scottish brogue. The question I asked was did you consult or inform the Forestry Commission before you cancelled the consultation?

Caroline Spelman: Yes. As I said, I pick up the phone to Pam Warhurst on a regular basis.

Q181 Thomas Docherty: So you phoned her to say, "We are cancelling"?

Caroline Spelman: I spoke to Pam Warhurst.

Q182 Thomas Docherty: Approximately how far ahead of you coming to the House was that phone call?

Caroline Spelman: It was not long before that. It was a rapid decision on our part to curtail it. It was very clear, as I said in the House, from the early responses that people were responding to what they read in the newspaper. They were heavily influenced by the media interpretation of what the consultation was about, and we were not going to get a clear view of what we wanted, which was to ask people what they felt about the future of the public forest estate. So, we made a decision prematurely to end the consultation. And I did speak to the Chairman of the Forestry Commission before I made my statement to the House.

Q183 Thomas Docherty: One final question, Chair. You have said "prematurely" I think three times now. Do you mean prematurely because the consultation ended early or that you think it was a premature decision to cancel the consultation?

Caroline Spelman: I made a decision to end the 12week consultation prematurely because it was clear that the public did not like what we were proposing to do, and that has the virtue of being able to say that we listened.

Q184 George Eustice: I just wanted to build on that point, because it is clear that the consultation was curtailed early in the light of public opinion, which is not a bad thing because democratic politics does respond to public opinion and that is what it is there for. But to what extent do you feel that what you were trying to achieve was misrepresented? Could you elaborate on that? You have said a few times that the media got it wrong, but what was the, I suppose, hope that might come out of this, rather than the perception that you were firing up the chainsaw or whatever?

Caroline Spelman: The consultation before its publication was characterised as a sell-off, whereas in fact what we were very keen to do was to engage civil society. We know that the previous Government looked at exactly the same opportunity. I have produced the three documents in Parliament to demonstrate that a previous Government had had exactly the same idea that we had-not an unreasonable suggestion.

Q185 Thomas Docherty: And rejected it.

Caroline Spelman: Yes, well, that was their decision. We felt it was reasonable to ask the public whether they would like to see parts of the public forest estate transferred into the ownership and management of civil society. The difficulty was that is very different from the way it was being presented publicly. What happened was the view established itself in the public mind that it was one thing and not the other. Inevitably, the difficulty is that one wants to respect the primacy of Parliament. I could have sprung to the airwaves in October to try to negate some of the false impression about what the policy was, but I am sure honourable Members will understand that, as part of collective Government, one of the things you have to do is to secure collective agreement for a policy that represents a change. That involves writing round to one’s Cabinet colleagues, undertaking impact assessments, preparing in a thoughtful and careful way to do such a thing. It takes time to do that. Also, we all know, as honourable Members, that the Speaker is not inclined to appreciate Members of Parliament who use the media as a way of communicating policy first, and not in fact bringing policy first to Parliament to present it here. We made the decision to respect those conventions. It took quite a length of time. It was the right way to do it, but by then the view of what the policy was about had formed itself in the public mind.

Q186 George Eustice: I have heard it said that in practice what probably would have happened is that you might have had, say, the Woodland Trust or the National Trust taking over the management of some work?

Caroline Spelman: Yes.

Q187 George Eustice: Is it your sense that it was actually less radical than it was portrayed?

Caroline Spelman: Some people who then went on to read the document said just that. As you would expect, we had many conversations with our stakeholders about this question and they have views. Many of them are represented on the panel. They will have the opportunity now, with an independent chair, to discuss some of their own thoughts about the public forest estate and to take that forward. That is the reason why I do not want to fetter the outcome of their deliberations, and we await their recommendations. I do not mean this unkindly, but obviously it is a little tangential to the Spending Review focus and, had I known that we would be going to focus specifically more on forests, I would have come with the consultation document and the annexes attached, and if necessary other documentation in relation to this particular question, if you wanted to pursue this.

Q188 George Eustice: You have mentioned the independent panel is going to cover quite a wide range of areas. I know you have previously said that there is potentially a conflict of interest, with the Forestry Commission being an operator and also a regulator. Is that something you envisage the independent panel thinking about?

Caroline Spelman: I am sure they should. I still take the view that, since the Forestry Commission is the largest supplier of timber to the UK market and also the regulator of that market, that at the very least presentationally, in this day and age, those functions ought to be separated in my view, but that is my view. It will be up to the independent panel, as part of its terms of reference to look at the operation of the Forestry Commission, to consider that. They will make recommendations to us as Ministers on that and, I am sure, many other points.

Q189 George Eustice: Is there any sense that concern is felt by others in the timber industry? Are there others who think this is maybe a problem that ought to be looked at?

Caroline Spelman: I think in this day and age if Ofwat were supplying honourable Members with water as well as regulating the market, honourable Members might have concerns. That is the principle that I have applied to this situation, where the regulator is at one and the same time the major supplier. In a more transparent age, where we expect greater accountability, I think those functions ought to be separated.

Q190 Tom Blenkinsop: One last question: was your decision to pull the consultation taken before the Prime Minister said he was not happy with the forestry policy at Prime Minister’s Question Time?

Caroline Spelman: We had made a decision within the Department, looking at the replies that we were receiving. The responses were informed by the coverage of what the policy was not in reality. It was very difficult, from the responses, to construe anything other than that people did not like what we were proposing.

Chair : Thank you. We will turn now to the Rural Payments Agency.

Q191 Thomas Docherty: There are a lot of problems facing farmers at the moment. One of the biggest single ones is the non-payment of the SPS. If I could ask you first of all, Secretary of State, during Defra questions a fortnight ago-I cannot remember which Minister it was.

Caroline Spelman: It would have been the Minister of State.

Thomas Docherty: Yes, Jim Paice. He said: "The objective is to have no fines at all, rather than to choose between fines. I am determined to make the payments as accurate as possible so that we can draw a line under the sorry past under the previous Government. Equally, however, I want to keep to the payment deadline of June, and we plan to do so." First of all, Secretary of State, what assurances can you give the Select Committee that, as the RPA target was missed earlier this month, you will meet the target, and if you do not, do you expect to have to pay fines?

Caroline Spelman: It is a perfectly fair strategy to try to reduce the cost to the public purse of being fined for late payment or inaccurate payment. The level of public expenditure on this has been really quite shocking. We are inheriting a situation that I am sure the honourable Member will acknowledge is less than ideal. New Ministers coming into post, of course, have had to get to grips with the underlying cause of this. The Minister of State has approached this task with enthusiasm, but it is difficult. There was a strategic decision that he had to make in conjunction with the new Chief Executive of the Rural Payments Agency about whether to go for speed or accuracy. Accuracy is the one that reduces the fines.

Farmers want the confidence of knowing that the payments they are receiving are accurate, because otherwise they are caught in all the problems that surround receiving an inaccurate payment, of which there is a long legacy. The Minister of State has made the decision to focus on accuracy, which involves incidentally going slower and a lot of manual calculation on the more complex payments that have to be made. That is what the automatic system finds difficult to cope with. Listening to the Chief Executive of the RPA at our supervisory board last week, I hear in his voice the confidence that the external deadline-the June deadline by which we are judged by the Commission-will be reached. But obviously with the history that this Agency has had, all of us have learnt to be cautious. I am sure that honourable Members would appreciate that the efforts to be accurate are designed to protect the public purse.

Peter Unwin: It is also worth saying, possibly, one of the issues is that there are conflicting objectives, obviously, between getting the payments out to farmers quickly and sorting out the historical legacy problems of inaccurate data. The National Audit Office, the Public Accounts Committee and I think possibly this Committee, in previous times, have criticised the Department for focusing too much on speed of payment and not sorting out the basic underlying problems.

One of the things we have been doing this year is to try to tackle those accuracy problems. That is probably the reason why the March target is being missed. It is only once we sort out those historical data problems that we will actually get to the stage where every year we will be hitting targets and hopefully exceeding them. This is the track that the Agency is going down now.

Q192 Thomas Docherty: Can you tell us the value of the payments you have made by the end of March? Not the percentage of number, but the value percentage, because I am hearing stories of some of the bigger farmers not getting paid at all.

Peter Unwin: The outstanding cases tend to be the big and complex ones. If you are aware of the system you will know that the difficulty is that the system we operate under-and this is one of the Agency’s major problems-is an extremely complex one, tied not only to the area of the land, which has to be measured infinitesimally, but also to historical entitlements to land. Those entitlements can be traded between farms, and indeed, between major farms that are buying land, a lot of that trading goes on. It is those areas that tend to cause the complexity, and therefore it is the biggest cases that tend to be the hardest to sort out.

Q193 Thomas Docherty: That is a very long answer to a question I did not ask.

Caroline Spelman: I can give you the value. A ministerial statement has been published today on the single payments system, manual payments. The Minster of State has put that down. "For the Single Payment System (2010) as at 24 March, the RPA have made payments totalling £1.49 billion to 97,255 English farmers."

Q194 Thomas Docherty: Can I ask the Secretary of State why the Select Committee has not got a copy of that statement?

Caroline Spelman: I am so sorry, it is tomorrow. Apologies. I do apologise.

Q195 Thomas Docherty: No, that is fine. Secretary of State, would you authorise manual payments?

Caroline Spelman: They have been authorised.

Q196 Thomas Docherty: For all remaining-

Caroline Spelman: That is how it has been done. That is how the remainder has been done.

Chair : But not by sixth formers?

Caroline Spelman: No, not by sixth formers. I would certainly like to place on the record, particularly because the trade union representative from the RPA came to my meeting of the trade unions yesterday, and it is very interesting to hear the view from the shop floor. It has not been easy for that organisation. It has had a really, really terrible time, and morale, as you can imagine in an organisation like that, is difficult to maintain. In fact, we wanted to send a very strong signal through the new Chief Executive that we do recognise how hard the staff are working with the manual payments to achieve that greater level of accuracy. These are the staff who have lived through some of the most difficult experiences and criticism.

I am not in any way diminishing the difficulty for the farmers, who are waiting for their payments. Obviously, there is more than one party caught up in the problems this Agency has had, but in the interests of getting everyone to try to work well for the right outcome we need to try to say things that boost their morale. Hopefully, the written ministerial statement tomorrow will provide not only the Select Committee with that clarification but everybody who is waiting to hear how and when these payments will be made.

Q197 Thomas Docherty: You talk about the shop floor, but Farmers Weekly, just today, is saying that the Farm Crisis Network is issuing a plea for urgent help. I won’t quote the whole article, which I am sure is in the clippings somewhere, but they say they face an unprecedented number of cases, and that the non-payment of this round has been the straw that has finally broken the camel’s back.

Caroline Spelman: I am very sorry to hear that, and I have just said that I do have great sympathy for farmers anxiously waiting for those payments, but we do have a system to deal with people who are facing genuine hardship. That was set up, to be fair, under the previous Government, but it exists to try and help people whose businesses need to remain viable through these payment difficulties.

Q198 Thomas Docherty: When you came before us last time, we had a brief discussion about the IT network. At that point you had not had a chance to fix a budget for the new IT network. Have you now got a budget for the new IT?

Caroline Spelman: First of all, I should say for the record that I am married to an employee of Accenture, which is responsible for the original information technology system. However, he does not deal with IT or Government or indeed with the UK. But none the less, in the interest of transparency, I should state that. I am sure the honourable Member would understand that one of the reasons why the necessary investment significantly to change this system is hard to make is because the CAP reform proposals may change the basis on which single farm payments are made. So a major investment in IT will have to await the confidence that we have as Ministers upon what basis farm payments will be made in future. From the early discussions of CAP reform, it looks like it will be an areabased payment, much like the one that the UK has pioneered. I think there are a lot of member states looking to our experience here in the UK with some concern as to how to avoid the kinds of difficulties that were engendered by advancing on an areabased payment system. The difficulty they have in a lot of cases is they are paying out to farmers who have not been farming for a very long time. The Commissioner himself attaches importance in his own communiqué to what he calls "active farmers"-in other words, those actually carrying out the farming today.

Thomas Docherty: Well, if it is any consolation, none of the NFU Board have been paid yet, so you might want to be sure they get paid.

Q199 Chair: Secretary of State, can I just spare a thought for the morale among the farmers who have been caught up in this?

Caroline Spelman: Yes, I think I did say that.

Q200 Chair: How would you balance the uptake of Higher Level Stewardship schemes with the cost for the single payment scheme and the unit cost of delivery of Higher Level Stewardship schemes?

Caroline Spelman: In the context of the Spending Review, which is after all why we are here, I really would like to stress the importance of the strategic decision we made to make it possible to increase Higher Level Stewardship schemes by 83%. That does not mean that we are closing the door on entry level schemes; you need both types of scheme. If the Committee has had a chance to read the Uplands Policy statement that we launched in Cumbria recently, they will have seen, in fact, that we attach great importance to those stewardship schemes as part of the mix of income streams that upland farmers in particular need in order to be able to sustain themselves. The uplands are a part of the country where it is very much in the public interest to try to increase stewardship uptake, because these are some of our most precious environmental areas in need of protection. So we balance the single farm payment system with the stewardship scheme, seeing them as complementary, if that is what the Chair is asking.

Q201 Chair: I put it to you that farm incomes have gone down in the uplands quite dramatically since 2009 when the single farm payment was introduced and the headage payments went. You will, I am sure, have had the chance to read our uplands report as well.

Caroline Spelman: Yes.

Chair: I see we get a one-line mention, so we do look forward to your response from the Department to our report. Do you not share our concern regarding, if their income has already gone down and if the take-up of stewardship schemes is quite low, why you are throwing more money at stewardship schemes on that basis?

Caroline Spelman: I would like to say there is a lot we agree with in the Select Committee’s analysis of what is wrong in the uplands, but we do not necessarily agree with all the Committee’s conclusions. In particular we feel, I am afraid, we will have to beg to differ on the headage payments-although this has very little to do with the Spending Review, but more to do with uplands policy, which we could spend more time on on another occasion if honourable Members wish. It takes the policy away from our declared aim of trying to help farmers become more market-orientated and more competitive. On that point we would beg to differ. But we have made it possible to prioritise upland farmers for entry level stewardship schemes, because we believe that this is a very important prioritisation of resources. Many of the upland areas are the water catchment areas, ultimately for our drinking water. I think that this approach to stewardship in the uplands paves the way to payment for ecosystem services. I happen to think that is the direction of travel that is likely to emerge from the greening of the CAP, although it is early days-the recognition that what farmers do over and above producing food sustainably is to provide ecosystem services, which they presently do for free. I think it is significant that two water companies in the South West and in the North West are willing to pay farmers to change the way they practice their farming in the catchment areas because it is in their interest to have clean water.

Q202 Chair: I am sure we will have plenty of opportunity to look at that in the future, but can I just drag you back to the question? Your performance indicators-I have just referred to them-very clearly look at the uptake and the cost of processing each claim. I would put it to you that tenants have lost out extremely badly and I just wondered what you propose to do to rectify that.

Caroline Spelman: I do not dispute that; it is something I agree completely with the Select Committee on and when we launched the document, I made a very strong appeal to landowners to facilitate their tenants to take advantage of the stewardship schemes we offer-absolutely unequivocally and for the public record. Did you want to come in on this?

Peter Unwin: Our figures show that the uptake in the uplands is fairly good. I know the Tenant Farmers Association disagree and we are talking to them to try to sort out which figures are right. But certainly the figures we have from Natural England in terms of uptake are good and that is why the Secretary of State announced the additional money available in the recent Uplands Policy statement.

Q203 Chair: The Minister of State is well aware of areas where the uptake is very poor and where we have recommended mediation. What is the status of your Uplands Policy Review? Is it a consultation? Are people invited to respond?

Caroline Spelman: It is our policy.

Q204 Chair: It is your policy or it is a policy review? Policy review sounds like you are reviewing a policy.

Caroline Spelman: The title I think does not help it, but I did make very clear it is the beginning of our policy approach to the uplands. If we were in a more advantageous position financially, we would love to do more. Essentially, we have identified 23 actions that we propose could be undertaken to help upland communities; it is not just the farmers, but a very important part of that is upland farmers. But resources being constrained, we have found additional money for the uplands and given priority for the uplands within some of our schemes. The £20 million that we propose for community broadband, for example, is an opportunity for other communities-like the one I saw in Great Asby-to make a connection to some of the existing broadband network so that people living in the uplands disadvantaged by not having access to the internet will at last be able to gain access. As the Select Committee knows, together with DCMS, we have a superfast rollout-four pilots in rural areas. We are working very hard to try to find resources across Government to improve the quality of life generally in upland areas.

Q205 Chair: So how much money will be made available for the Uplands Theme over the next two years of the RDPE?

Caroline Spelman: It depends on the uptake.

Peter Unwin: £6 million more for Uplands Entry Level Stewardship (UELS)

Chair: It’s a bottomless pit.

Caroline Spelman: £6 million more will be available for UELS.

Chair: Is it?

Caroline Spelman: £6 million. It does say that in the document.

Q206 Chair: How much is going to be made available to support rural tourism? I think you refer to that in the policy review.

Caroline Spelman: Again, that will depend on uptake under RDPE axis-

Peter Unwin: It is axis three.

Caroline Spelman: It is under axis three.

Q207 Chair: The figures are a little bit woolly and we are trying to get our heads round what the actual figures are. When you say, "up to £20 million" for one-

Peter Unwin: £6 million will be available under axis two.

Q208 Chair: It says "up to £6 million".

Caroline Spelman: It depends on uptake.

Peter Unwin: It depends on uptake, yes.

Caroline Spelman: That is what I said.

Peter Unwin: So the full £6 million is available if it is taken up by the upland farmers. On your tourism point, the axis three money of the RDPE would be available for that, but again, that is locally driven, so we make it available centrally but it will be up to the localities to come forward with proposals to apply for that.

Q209 Chair: But it is now centralised-they have to apply to D efra .

Caroline Spelman: That is because RDAs are being abolished. Just to explain that, it is very important because the Commission made it very clear-as the transition has taken place from Regional Development Agencies to Local Economic Partnerships-that the Commission had to be satisfied, since we are dealing with the disbursement of public money, that we account for taxpayers’ money, whether it is European taxpayers’ money or our own. Therefore, the disbursement has been brought back inhouse, including, I think, some of the staff.

Q210 Mrs Glindon: The Department’s recent announcement about the RDPE says that the fund will be managed nationally and delivered in a way that provides locally accessible support, and that administration will move away from existing regions as the key governance tier. Can you explain how this will work and how the essential local knowledge will be retained in the long term?

Caroline Spelman: The Regional Development Agencies are being wound up, although Defra has contributed resources to make sure that there is a smooth transition; that is in our budget. So we have not abruptly pulled the rug from under their feet, but there is a planned reduction in our budget line. Some of the staff who were administering the RDPE schemes at the regional level-we are just checking the exact number-are coming back inhouse, because they have the expertise and knowledge about how to administer the RDPE budget successfully. In terms of uptake and advice to famers on how to take advantage of the stewardship schemes, this is where one of our arm’s length bodies has the expertise, in Natural England. So it is a combination of Defra at the centre taking on the administration of RDPE with the staff previously working in the Regional Development Agencies and then the advice on the ground to farmers through Natural England and their network of advisers all over the country.

Q211 Mrs Glindon: I recently had a meeting with a representative from Natural England in my constituency of North Tyneside and I understand what you said about the staff being taken up with their expertise, but from that meeting I do know that some staff will have to be lost. Will that not put a dent in the local knowledge that you are referring to?

Caroline Spelman: Generally across Government, we have enjoined all arm’s length bodies with the same advice we have tried to apply ourselves, which is to protect the front line and look for savings to be made as far as possible in the back offices. When I explained earlier that the Environment Agency and Natural England were looking to colocate because they have a lot of offices and they have many in similar locations, this is one of the ways in which both organisations can benefit from back office savings, because it is one set of rates and rent for the same property and the staff are retained. So wherever possible, we are trying to protect the front line. The front line would very clearly be, in the example of the gentleman you referred to, providing advice to farmers on the ground.

Peter Unwin: I do not know whether the person was talking about staff from the RDAs or from Natural England, but about 100 staff in the RDAs are transferring to the Department and there will be savings there, because obviously bringing eight regions together into one unit there will bring economies of scale. Natural England are very conscious of the need to keep local contact and as they move down they are ensuring that they have that. But with the RDAs, one of the issues we have found in the past, frankly, is that some regions have complained, for example, when we have floods and different RDAs have taken different approaches to assistance to landowners because of flooding. That has caused some concern in some of the regions. One of the benefits of having the scheme run nationally will be that we have a consistent national policy, to which different local applicants can apply their particular local circumstances.

Q212 Mrs Glindon: But there will be less funding because the RDAs are not there and the LEPs will not have the same level of economic support.

Peter Unwin: The funding from axes one and three will not be affected by the change in the RDAs. The funding will be the same; it will take fewer people to operate it because they will be centrally located in one unit as opposed to spread over eight RDAs across the country.

Q213 Chair: The issue is very clearly expressed in our Farming in the Uplands report, where we say there is a lack of clarity about the current position and how Rural Development Programme for England funding will be provided now and in the future. We have asked Defra to provide a clear and precise description of how funding will be provided, with or without LEPs. The evidence we have heard from a number of those affected across the country is that there is a great lack of clarity and they are pleading with you to say how that lack of clarity is going to be-

Caroline Spelman: Obviously there is a moment of transition that produces some uncertainty. It was a locally driven decision by local authorities to choose who to partner with in forming their Local Economic Partnerships. For that reason, the uncertainty over who would pair with whom to form partnerships led to our decision to satisfy the Commission that we could be confident throughout that we could account for the public monies that led to the decision that we would take the disbursement of RDPE back inhouse centrally. The service that Natural England provide in terms of advice and encouragement to farmers to get into stewardship schemes will continue as it has before.

For the interest of the Select Committee, it is perhaps important to know that Natural England’s savings, which they, like all our arm’s length bodies, on a pro rata basis are having to make, are very much directed to keeping the front line-keeping the kind of advice of the gentleman who works in the honourable Lady’s constituency-by stopping activities like lobbying and policy development. That is across the board with our arm’s length bodies; all of that is coming inhouse: policy is being evolved in the Department, where I believe it should be; a smaller board of Natural England; a smaller executive board of Natural England; and more joint working with the other arm’s length bodies, like I described, with the Environment Agency but not confined to the Environment Agency. A number of our arm’s length bodies are finding ways to colocate and some of the programmes can then be refreshed and combined-things like Countdown 2010 and Wetland Vision coming together. So I think the arm’s length bodies have done a good job in trying to find ways to make sure we have got the front line staff on the ground encouraging farmers and there to advise farmers on how to take advantage of the stewardship schemes.

Peter Unwin: I should just clarify what I said about the RDAs. When I said that they are coming forward into one organisation, I do not mean centralised in London or any one place in the country. They will still be located in the regions, often in the same towns that the RDAs were located in, but because of the governance system and the back office issues supporting them being in one unit, we will make savings that way.

Q214 Amber Rudd: That is an interesting clarification I had not really followed. If you have a situation like we had in the South East a few years ago with bluetongue, the RDAs and the regional governments would deliver the support from Defra. Under the current arrangements, in terms of the changes to the RDAs, who would be delivering the support the farmers need locally?

Caroline Spelman: It would come from a variety of sources.

Peter Unwin: This is a resilience question generally applying to animal health and floods, for example. The main issue there is around the change in the Government offices, where CLG, who are responsible for resilience across Government, have now established three national hubs that will coordinate issues on that sort of case. For example, in the recent major flood exercise we had earlier this month-Exercise Watermark-that was the first test for those three hubs as to how they would operate. Also of course, in the case of animal disease outbreaks, you would have the staff from Animal Health who would do a lot of the work with farmers and other stakeholders in terms of dealing with the outbreak.

Q215 Amber Rudd: Thank you very much. Could I ask about food security and food production in your business plan? It states that the aspiration is to promote increased domestic food production, but there has been some criticism from the NFU about whether it is high enough up on the agenda in terms of having a proper strategy about increasing food production. The four sub-points that are listed underneath the aim of promoting increased food production-about food labelling, food retailers and evaluating the effectiveness of a voluntary approach-do not go into this whole issue of promoting increased domestic food production. Is that still the key aspiration of the business plan?

Caroline Spelman: Very much so. We are working together with the NFU, the CLA and other stakeholders to give active expression to increasing food production, providing that it is done sustainably. I think it is significant that the food and drink manufacturing sector has been one of the most successful sectors in withstanding the downturn-indeed one of the major contributors to the 12% increase in exports. We are very keen at Defra to see British farmers benefit from quite favourable conditions for exports and are working towards understanding better from the companies that export British produce what the barriers are to doing even better than that. So we are very much focused both on producing more food at home, but also more food for sale abroad. I personally believe very strongly that the British brand-Made in Britain-has a very strong connotation for a lot of emerging markets about "Made Safely in Britain", because we have such high standards of food safety and animal welfare that countries that are concerned about food safety-China would be a good example-are very good markets for British produce. I have spoken to the retailers about this, who are very keen, and also to our own producers about how we build capacity to meet that important market.

Q216 Amber Rudd: Do you have any concerns about the Localism Bill in terms of limiting the expansion and perhaps development plans of larger farmers? Some local farmers, who have quite ambitious plans, have said to me, "How are we going to develop anything near Thanet Earth?" How are we going to expand some of our farming in terms of the size and technology involved, given that the Localism Bill may allow people to say, "Not in my backyard"?

Caroline Spelman: I am not unduly worried about the Localism Bill. I think the important thing it does is it gives local people back control over decisions that are made locally. Having done that brief before, I know that they felt, particularly with regional planning structures, that they were often overridden. But I think a couple of things are very important as part of the Localism Bill. Local people will be able to designate and protect green space. Greenbelt remains protected; that is important. It will be easier for farmers to change the use of farm buildings. That may be an important part of their strategy to produce more food and to add more value. If I think about the Berkswell cheese producer in my constituency, which has succeed in getting into the export market, one of the things that it has needed to do is to adapt buildings that were previously to house animals to very high standard buildings for the production and storage of cheese prior to export. So I think these changes that are determined locally in relation to planning are things that will help local enterprises, including among them the farmers who we want to be producing more food sustainably.

Q217 Amber Rudd: The Government’s Mainstreaming Sustainable Development plan refers to the challenges of climate change-protecting the environment and creating a green economy-but it does not particularly mention food or agriculture.

Caroline Spelman: Well, it is critical. Certainly I have made it very clear that I agree with Commissioner Cioloş that one of the main challenges facing the CAP is how we help agriculture across Europe adapt to climate change. This was a subject I took up with vigour at the Environment Council last week. The UK is providing important leadership in this area. We have very strong evidence base on climate change and Defra is blessed in having a chief scientist who is internationally recognised as a leader in this area. What we need to do is work very hard with other member states to make sure that the new CAP genuinely rises to that challenge. I think it will express itself most significantly in access to water. One of the things, again, that the UK is going to be providing some important leadership to is our approach to resource efficiency, which was commended by the European Environment Agency because of its allembracing view about the resources that we require and how we are going to protect them in the face of the challenges that climate change brings.

Q218 Mrs Glindon: The business plan targets indicate you will be publishing Government buying standards by the end of March. Should we expect them tomorrow?

Caroline Spelman: Shortly, I think. Forgive me, but as new Ministers, the experience of purdah is interesting. Purdah is a staggered event, I have discovered. Purdah starts at different times and in different places. So we are working through UKwide announcements that are already caught by purdah, because Scottish purdah has commenced, but announcements that we make about Government procurement that pertain to local government, for example, are affected by the local government purdah, which does not pertain until 14 April. So there are a range of different purdahs, which we have to take into account when we make our announcement about buying standards. But it is very important to us to establish the principle that central Government, as a most important purchaser of food, does so to British standards. We have encouraged our farmers to produce food to these high standards because our consumers want that. We would like the whole world to be producing to these high standards. So I think it is important that Government takes the lead in calling for food procured by central Government to meet those exacting standards.

Q219 Richard Drax: Secretary of State, food production is part of the next question-in particular pig production and the added value that the farmers are losing out on to the retailers. What guarantees, if any, can you give that the Adjudicator will be able to make some difference on the imbalances affecting the pig industry, where the retailers are doing very well and the farmers are losing £20 a pig?

Caroline Spelman: I am deeply concerned for livestock farmers in general, because the rising cost of their inputs is a serious challenge to their viability. The price of feed is rising as world prices of cereals are rising and, as I remember from my early days as Sugar Beet Secretary at the NFU, when you have a problem of horn versus corn, you have a difficult dilemma to resolve. The pig producers, commendably, manage without subsidy and pride themselves on doing so and have actually undertaken, in this country, significant structural changes to try to cope with the pressures that their business faces. So I hope that the Grocery Adjudicator Bill, which will be in the second Session of this Parliament, will give an opportunity for us to examine closely this question of how to ensure that the farmer at the farmgate gets a fair price for the food that he produces and that the value that he contributes to that end product is fairly reflected in that end price. However, we must be careful not to raise expectations to the point that the Grocery Adjudicator is seen as a silver bullet. I think it will take other things as well as the Grocery Adjudicator to help our livestock farmers, pig meat producers in particular-

Richard Drax: And milk producers.

Caroline Spelman: Particularly dairy-have a stronger position. We need to look at a package of things, of which the Grocery Adjudicator is one part.

Q220 Richard Drax: Can you give us any clue as to what sort of ideas you would be promoting on this? How do you see the Adjudicator having an effect at all?

Caroline Spelman: In two ways, I think. For a start, I should make clear that BIS is the sponsoring Department for the Grocery Adjudicator Bill; it is not Defra. So we are dependent on BIS for producing this Bill, but they are keen to do so. When I spoke to the Secretary of State there, initially he wanted to proceed as quickly as possible with secondary legislation, but in fact we were advised that primary legislation would be better because in the event of a judicial review it is a stronger recourse. I think the Grocery Adjudicator, as originally conceived, provides the facility for farmers anonymously to bring evidence before the Adjudicator of where there has been an abuse of power in the marketplace, without running the risk of losing a valuable contract with those alleged to have abused their power. That is one feature of what the Grocery Adjudicator will do. But in a way, that is dependent on the customers coming forward with their evidence. We in Defra could look at the Grocery Adjudicator Bill as a way better to understand what is happening up and down the supply chain. I think it is significant that we do have some retailers who are vertically integrated in that supply chain and others who are not. There is an interesting exercise proactively to be carried out about where the value is distributed in the length of the supply chain. As I say, I think it will take that and many other tools to help our livestock farmers on to a more sustainable footing.

Q221 Richard Drax: Does that tool include legislation?

Caroline Spelman: It is legislation.

Q222 Richard Drax: Right, but against someone like Tesco, for example, where they would be forced by legislation not to take such a large cut of the cake?

Caroline Spelman: The first thing we have to do is get the Grocery Adjudicator Bill, which will be produced in draft. I think this will lead to a very good debate in this House about the scope for that ombudsman role. That is something that honourable Members and I or Ministers from BIS will be able to debate at length to make sure we have the most effective legal instrument possible to make sure there is fairness.

Q223 George Eustice: Are business organisations like the NFU doing enough to play their part in this? I know farmers always complain and say, "We do not even want to report these things anonymously because we might get identified", which seems to me quite extraordinary. I wondered whether, if the NFU had some sort of index tracker done once a month of maybe 500 suppliers and published that, it would actually act as a catalyst to identify bad conduct across the board in some of the weaker supermarkets.

Caroline Spelman: I am sure that the National Farmers Union will read the record of this Select Committee hearing and may well take the honourable Member up on his suggestion. What I would say, as I have regular meetings with the NFU-not just England and Wales but Scotland and in devolved parts as well-is I think they have a number of very good ideas about how to help their own industry become more competitive and more market-orientated and how to secure a fairer share of the value that they bring to the food that we eat. One of the things I particularly commend the leadership of the NFU in England and Wales for is in addressing the pressures on the livestock industry and looking again at the power of producer groups coming together with the bargaining power to demand of the retailers a fair price for what they produce. That is in line with the thinking at a European level to raise the threshold on the market share that individual producer groups may occupy. So I think there are a number of good ideas coming forward from the industry itself, as well as our own and those of honourable Members, that we can all bring to try to help livestock fare better.

Chair: I would like to move to flooding. Could we just possibly have shorter questions and shorter answers to get through all of those required ?

Caroline Spelman: I am awfully sorry to say this, but I thought this meeting was scheduled until 5 o’clock.

Chair: No, it is open-ended. If we could have 10 or 15 more minutes.

Caroline Spelman: I’m so sorry. I do have another meeting, genuinely; I am not making it up. Shall we do it briefly?

Chair: Quick questions and quick answers. The other issues we can deal with in writing, but we do want to turn to flooding.

Q224 Amber Rudd: The Spending Review announcement said that 145,000 homes will be better protected. Good, but do you have plans to help the remaining 5 million plus households who are at risk of flooding?

Caroline Spelman: The projected level of homes to be protected in any year is our best estimate of how many we can, with the resources of the state, protect. But one of the most encouraging examples of civil servants and Ministers working together that I can think of is the new approach to flooding, called "payment for outcomes", which will bring additional resources to bear on how we protect more homes. It is significant that this has received such a warm welcome from the Association of British Insurers, because for a long time they have felt that 100% state-funded flood defences actually limits the ability of those who want to better protect their communities. I know that the Chair of your Committee feels very strongly about the way in which rural areas were often neglected, because on a 100% state-funded basis, quite often the return on investment-the number of homes protected-in rural areas placed the rural areas at a distinct disadvantage. Under "payment for outcomes", every community has the opportunity to bring forward their scheme, which we can join resources on and make the resources stretch further. Our figure of 145,000 is based on the original formula for funding flooding, but with the new approach, the sky is the limit.

Q225 Amber Rudd: So there is some evidence of local businesses and communities coming forward wanting to participate?

Caroline Spelman: There certainly is. I think I can talk about these. There was a very expensive scheme that honourable Members in Leeds very much wanted to see approved.

Chair: It was the former Secretary of State.

Caroline Spelman: Yes, the former Secretary of State. I recently convened a meeting at Defra with the former Secretary of State and Members from all sides of the House who live in Leeds and who perfectly understand that the scheme had not been approved. It is not proceeding; it was not a question of cancellation. But they themselves came forward with a revised scheme with some of their own resources that might actually, with matching, get something done in the Leeds area, which is at risk of flooding. The stage we are at with it is that the Environment Agency, of course, as the regulator, must look at the efficacy of the scheme before we can all cheer and say, "Eureka! We have got it", but it is one illustration. Another illustration I have from Lincolnshire-

Q226 Chair: Could you give us them in writing? I am a little concerned in this largesse that you are throwing around, Secretary of State, of bringing all the community in, that that invitation is going to fall foul of the 2.5% levy above which a referendum will be triggered in the Localism Bill. I know that you will be working very closely with the Communities and Local Government Department on this. Is there anything you can share with us today to reassure us that this will not be the case?

Caroline Spelman: There are a couple of things. If the honourable Lady’s rural areas that have so far been passed over regularly and always getting put to the back of the bill under the old method of funding because of the rural sparseness were given the opportunity to come forward with a scheme, I would wager that the local community would be on the whole more in favour of being protected than not being protected.

Q227 Chair: But it is Government policy that any community wanting to raise this money is going to fall foul of. The local authority would have to trigger a referendum.

Caroline Spelman: It does not have to be local authority money.

Q228 Chair: Where else would it come from?

Caroline Spelman: I was curtailed in explaining about Lincolnshire, but for example, Anglian Water can see that rather than spending £7 million or £8 million in investing in protecting their own water treatment-

Q229 Chair: They would have to go through Ofwat.

Caroline Spelman: But it is perfectly possible to go through Ofwat. Just let me finish the example. If the water company was going to spend a significant amount of money protecting its own treatment plant from saltwater contamination but realised that the local community would benefit by putting that resource into a flood barrier that would not only protect their premises but maybe 10,000 homes, then that is a perfect illustration of what we mean by payment by outcomes. So it does not have to be local authority resources; there are other resources that may be brought forward. Developers may, for example, take the view that they may have an interest in coming forward in providing better protection to parts of the community that have hitherto have been regarded as susceptible to flooding-in providing flood defences that would make the existing community and any new housing built in that community a better proposition.

Q230 Chair: For the first time, flood defence monies that pass through to the local authorities will not be ring-fenced. How confident are you and what measures are you going to take to ensure that these new responsibilities under the Flood and Water Management Act and everything that we are hoping local authorities will do will actually be spent on flood protection measures?

Caroline Spelman: Two things. We have, notwithstanding the hard times, provided more resources to local authorities in order better to protect their communities from flooding. It is an acrossGovernment approach not to ring-fence monies to local government.

Q231 Chair: So there is no guarantee that the money will be spent?

Caroline Spelman: It goes hand in hand with the commencement orders under the Flood and Water Management Act and the guidance that we will give to local authorities. In the past, when these local authorities have received monies for flood prevention, they have often spent more than we have provided them with. This is before my time, but I think Peter would like to come in on this one.

Peter Unwin: In the past, certainly, local authorities have been allocated a certain amount of money and they have exceeded that; they see it locally as a big priority. The other thing I would say in terms of resources coming in from elsewhere is, in some of the big city schemes, existing businesses will see a lot of benefit from flood protection and may want to contribute. And we have seen a number of schemes in places like Suffolk and East Anglia where farmers and landowners have been keen to come in and contribute if they can lever in some extra Environment Agency money. So we think many people as well as local authorities will be looking to contribute to this pot.

Q232 George Eustice: I want to ask you about the proposal to transfer private sewers and natural drains. I know there was a consultation last October, but perhaps you could just explain whether there is any progress or other activity?

Peter Unwin: We are hoping to bring the relevant order forward shortly and the intention is still to bring this in in time to come in in October, when it is due to come in.

Caroline Spelman: The whole of Government is governed by the "one in, one out" rule with respect to domestic legislation, but we have already had the discussion to ensure that we take something out in return for getting this one in and the plan is for the commencement order to take effect from October.

Q233 George Eustice: Are you confident that this will deal with the problem of people who have borne the cost and responsibility of maintaining these sewers? I have heard some water companies argue that it does not remove all of the problems, because the owners will still be responsible for that bit that is on their land. Is that true?

Peter Unwin: We are as confident as we can be before something comes in. Certainly the water companies that are talking to us are very keen for this to come forward; in fact, they have been nagging us and saying, "Are you coming forward in time to get this going on 1 October?" Even those who initially were not overjoyed about it now see the benefit and if it is coming in, they want it to come in and get on with the job. Overall, we think it is going to give a much more stable basis for managing private sewers than the rather haphazard one at the moment where individuals are responsible, often without even knowing, for potentially large expenses on their land.

Q234 Chair: We would be remiss if we did not say that there is real concern that there is no timescale for laying the relevant orders. You have just repeated that you think the new regulations will take effect from October. The industry is saying very clearly they need to know the content of the regulations so that they can prepare. Are you able to tell us when they are going to be laid?

Peter Unwin: We hope they will be laid shortly. Again, there are issues of purdah coming up.

Q235 Thomas Docherty: "Shortly" in Government terms can mean any time between now and 30 October.

Peter Unwin: We are in the final stages of preparing them.

Caroline Spelman: I have worked very hard through the Regulatory Reform Committee to get agreement in principle that they accept that what we are taking out is adequate to cover for the regulation coming in. So that part of the hurdle has been agreed and our proposed date for commencement is October. Since it is England, we have a window of opportunity on 14 April.

Q236 Thomas Docherty: So before 14 April?

Peter Unwin: That is what we hope.

Q237 Chair: Which means either tomorrow or there are only four working days that you could lay them before Parliament. Is my understanding correct?

Caroline Spelman: Before Parliament. Parliament rises next week.

Chair: We are very grateful to you. We have a whole raft of questions we would like, if we may, to submit in writing for your consideration. [1]

Caroline Spelman: Yes, of course.

Chair: Thank you very much.


[1] Ev