UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 121-ii

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

ENVIRONMENT, FOOD AND RURAL AFFAIRS COMMITTEE

DEFRA PRIORITIES

Wednesday 30 April 2008

MS HELEN GHOSH, MR BILL STOW and MR STEPHEN PARK

Evidence heard in Public Questions 218 - 370

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Environment, Food and Rural Affairs Committee

on Wednesday 30 April 2008

Members present

Mr Michael Jack, in the Chair

Mr James Gray

Lynne Jones

David Lepper

Miss Anne McIntosh

Dan Rogerson

Sir Peter Soulsby

Dr Gavin Strang

David Taylor

Paddy Tipping

________________

Witnesses: Ms Helen Ghosh, Permanent Secretary of State, Mr Bill Stow, Director General for Strategy and Evidence Group, and Mr Stephen Park, interim Director of General Finance, gave evidence.

Chairman: Good afternoon, ladies and gentlemen. Welcome to this evidence session with the Permanent Secretary of Defra on Defra's departmental priorities. Can I formally welcome Helen Ghosh, the Permanent Secretary of Defra, Bill Stow, who is described as the Director General for Strategy and Evidence Group - I like the idea of evidence, so we will be looking for lots of that from you, Mr Stow, this afternoon - and Mr Stephen Park, the interim Director General of Finance for Defra. I am going to ask Anne McIntosh if she would start our questioning.

Q218 Miss McIntosh: Can I start by drawing attention to my declaration on the Register of Members' interests? Can I ask how you would describe your chief priorities for the forthcoming year?

Ms Ghosh: What we have done in framing our plans for the CSR/07 period is very much to go back to our overall strategy and, in particular, our two public service agreements which were announced in October around climate change and the natural environment and also, of course, given the range of responsibilities that Defra has, to ensure that we are protecting appropriately what we call our license to operate areas: for example, ensuring that we have enough funding, particularly in our executive agencies, to respond to emergencies, whether it is animal decease or on the flooding side in terms of flood response through the Environment Agency. So that is what drove our strategic priorities in terms of framing our budgets for the coming year.

Q219 Miss McIntosh: For our own clarification, the outgoing Chief Scientist said that climate change was the greatest threat this country faced; the incoming Chief Scientist said that food security was the greatest threat. Do you have a view as to which is the greatest threat?

Ms Ghosh: Of course the two things, as John Beddington and, indeed, Bob Watson, the Chief Scientific Adviser for Defra, has made clear, are very, very closely related. If you look at international food security issues and the likely impacts of climate change, particularly in some developing countries, the impact of climate change is likely to have a very significant effect, and so we regard dealing with the damaging effects of climate change, since it is one of our two top level priorities, as the first priority, but we are doing work now, as you know, led by the Prime Minister and working closely with DFID, both on food security issues internationally and increasingly thinking about world economy and demand impacts on domestic food supply. So we are working on food security issues, but we feel that the context for a lot of this debate is actually in climate change.

Q220 Chairman: Can I interject and ask you a question. When, in December 2005, the Vision Document came out and we published a report on it and other commentators mentioned the lack of any reference in that document to food security, your department, along with the rest of government, was dismissive that this was not really an issue. That was only about two and a quarter years ago. Why were you so dismissive of it as an issue then and so enthusiastic about doing something about it now?

Ms Ghosh: I think people use the term "food security" in a variety of different ways. Sometimes it is used to mean self-sufficiency - should the United Kingdom be self-sufficient in certain kinds of food - and this Government has consistently taken the view that in a free market world, given the trade flows that we have, the issue is not how much do we produce domestically but is there a ready supply of food available through the normal trading routes that we normally use? I think it is completely true to say that the issue of food security in, if I may call it, the new sense, the increased demand particularly from the developing economies for wheat, for meat, differences in consumer patterns in this country and elsewhere, has made the issue of food supplies internationally extremely important, and I think that is why both the Prime Minister and Hilary Benn are very interested in this broad issue, and that is how the incoming Chief Scientist has framed the debate: not self-sufficiency, but how can we ensure both in this country there is good food available at a reasonable cost and internationally. In fact, I have to say, policy develops, strategies move on, events change. That is how we are framing the debate.

Q221 Chairman: Beautifully taken from the "line to take" document about these things.

Ms Ghosh: Not at all

Q222 Chairman: I think it is, because the commentators at the time in 2006, when comment was passed on the Vision Document, did actually make the distinction between self-sufficiency and security of supply. The obvious drivers of demand, the developing nations were known about and yet there was, effectively, a dismissal of this as an issue, and I am interested to know what are the factors that have suddenly alerted the centre of government to something which other experts were flagging up when that Vision Document was first produced? What has changed?

Ms Ghosh: I take it, by the way, you are talking about the CAP Vision Document.

Q223 Chairman: I am indeed. Unless you have produced any other ones that we were not aware of.

Ms Ghosh: No. Of course, we have always been conscious - the "F" in our name stands for food - of the issues around international food supply. We believe that the approach that we set out in the CAP Vision Document, and which we will be carrying forward into the health check and into the debates over the coming five years or so over CAP post 2012, all argue in the direction of anti-protectionism and, as far as possible, free and open trade, and that is the approach that we are taking in the international debates about trade. We have consistently, through the period both from the Vision Document through the proposals we are putting together now on CAP health check, had those issues in mind. I do not think any commentators in autumn/winter 2005 would have been able to predict - and I think it is instability - the fluctuations in the cost of certain staple goods that we have seen recently, and what we are doing is monitoring both inputs and outputs, the inputs into agriculture in terms of fertilizers, and so on, and the outcomes in terms of wheat prices and, therefore, the prices on animal feed, and what we are doing, which is what a flexible and responsible department should do, is responding to that by working closely with other departments and with international institutions.

Q224 Miss McIntosh: Now that we have established they are your priorities, should you not be seeking to increase the budget rather than decrease the budget for climate change and food security?

Ms Ghosh: As I discussed in this committee before, there are a variety of ways in which the UK is going to achieve its climate change objectives. A comparatively small lever is how much we spend, although we are actually, in financial terms, maintaining our spending on climate change areas but, I think probably even more importantly, putting more and more of our staff resource and, as it were, intellectual resource into the issue. In terms, for example, of international negotiations and what we can achieve in the next phase of Kyoto, that is about people. It is about people, it is about influencing, in terms of using the best evidence that we have got, and we already have a wonderful evidence-base, that we are always building on, on climate change through places like the Hadley Centre, so that is our number one approach. We are putting significantly more money on the domestic side into the Act on CO₂ Campaign, because clearly behaviour change domestically is the way that we achieve the kind of system behaviour change that we need. We are continuing to finance organisations such as the Carbon Trust and Energy Savings Trust, who have had significant increases in recent years. The Energy Savings Trust, for example, we are getting now to focus on the Green Homes Scheme. So we are putting a lot of money into climate change, but the fundamental thing we need to do as a department and as a government is influence internationally and make sure that the policies that we have across the UK Government fit with achieving our overall climate change objectives. Of course things like the Climate Change Bill currently going through would be another key tool. So it is not so much money, it is how we focus people, arguments and campaigning.

Q225 Miss McIntosh: I will think about that one. Why is the department forecasting an overspend of £155 million for the period 2007/2008?

Ms Ghosh: I am happy to say, as indeed I suggested when I came in front of the committee last autumn, I think it was, that we are not forecasting an overspend. That was very much a mid-year position. As a result of the financial controls and some of the reprioritisation we put in place, we are optimistic that we are going to come in with a balanced budget in 2007/2008. That has been helped by the fact that, for example, we have over achieved on our head-count reduction target. We had a head-count reduction target of about 1,400. We have achieved about 1,600 thanks to efficiencies as a result of improvements in the Rural Payments Agency, so we are not forecasting an overspend.

Q226 Miss McIntosh: So the figures you published alongside the 2008/2009 main estimate report showing an outturn of 3.973 billion is not valid? In the Spring Supplementary Budget published in February this year, the department reported a total budget spend of 3.818 billion for 2007/2008. Then, publishing your supplementary budgetary information in April, it showed an estimated outturn of 3.973.

Ms Ghosh: I suspect, and this is a discussion that I have had with the Chairman and others, that what you are talking about there is estimates, which is very different from our departmental expenditure limit budget. The estimate is a question of the call we make on Parliament for cash, which in our case, for example, as we have discussed, is a gross figure rather than a net figure. What I am describing is the departmental expenditure limit, the budgets on which we operate within the department and which was the subject of the hearing we had last year and the subject of some media speculation. In terms of our departmental expenditure limit budget, we are optimistic that we will come in on balance.

Q227 Mr Gray: I probably completely misunderstood you, and I am no accountant, but did I understand you to say that the estimate which was put to Parliament, which is part of the negotiating procedure which enables you to get the money which you need to run the department, you are quite content that that figure should have been 125 billion, or whatever it was, higher than you are confidently expecting that you will actually use? Is that what I understood you to say? Where does this figure 3.973 billion come from? What is that figure?

Ms Ghosh: I think I will ask my finance director to report.

Q228 Mr Gray: Do, but your main estimate says your estimated outturn is 3.973 billion, and Anne's question was why is that different?

Ms Ghosh: From my description.

Q229 Mr Gray: Unless I misunderstood you completely, and I remember going through these very discussions when I worked in the department, you said, "Because that is the figure we use for parliamentary estimates"?

Ms Ghosh: Yes.

Q230 Mr Gray: In other words, that is the figure you put in in order to try and get Treasury funding basically. That is what it boils down to.

Ms Ghosh: No. We put that figure in in order for Parliament to vote us cash. The best example to use for the purposes of Defra is that we have a cash flow issue. So, for example, we pay out money on Europe's behalf in order to pay into farms' Single Payment Scheme and Rural Development Programme for England, so we had to have a cash flow that is covered by the cash you give us. We then get the money back from Europe, but we need to have from you a cover for the cash that we spend, and I think that is the distinction between the estimates, the voted money you give us, and the departmental budget which we are working on, which is essentially the CSR settlement we get. In the SR settlements we get, we get a departmental expenditure.

Q231 Mr Gray: I think the technicalities may be defeating some us round the table and possibly some---

Ms Ghosh: I suggest we send you a note.

Q232 Mr Gray: Would it be possible---

Ms Ghosh: I would be happy to do that.

Q233 Chairman: You can always come along to one of our regular sessions---

Ms Ghosh: We have tutorial sessions on this.

Chairman: ---so we would be able to try and understand these in a little more detail.

Q234 Miss McIntosh: Can I be clear? If Natural England were to say to the committee that they had been kept short, for example - I am not saying they have, but if they had---

Ms Ghosh: No, they have not.

Q235 Miss McIntosh: ---then you are confident that the cash flow has succeeded, but this is a mythical figure?

Ms Ghosh: The estimates are a mixture, and this is where I think our tutorial with the Chairman and some other members was useful. They are a mixture of, as it were, the budget that we have to spend - whether it is to give money to Natural England, to give money to Natural England for their non European activities, to give to Carbon Trust, to give to the Environment Agency, to run ourselves - it is a mixture of those things which have to be within our estimates, it is money we spend, and then other things which are not within our budget, of which the biggest item for Defra is the gross amount of money we pay out on behalf of Europe and then, as it were, later on we get the money back, that is what creates a disconnection between the Parliamentary estimate and what we spend.

Q236 Chairman: Mr Park is going to enlighten us.

Mr Park: I will certainly try, Chairman. I think the confusion is the use of the word "estimate", estimate as in parliamentary terms, whereas as I think what you were referring to was an estimate with a small "e" which comes out of the COIN system. The answer may or may not fit the question, because we---

Q237 Chairman: You have used a term there, the COIN system. Would you like to explain to colleagues what that is?

Mr Park: I will certainly try. My apologies if this is gets too convoluted.

Q238 Chairman: We will stop you if it does.

Mr Park: Thank you. The Treasury obliges all departments to submit monthly inputs of data that track the spend in the department against the control totals and against the estimates. So COIN is a monthly return that we put in which, as well as reporting what we have spent, also reports what we will spend for the year, so an estimate of outturn rather than a parliamentary estimate.

Q239 Miss McIntosh: Just to be clear, you published one figure in February in the Spring Supplementary estimate for 2007/2008 of 3.818 billion. Then, two months later, in the Treasury's supplementary budgetary information, Defra showed an estimated outturn of £3.973 billion. If I have followed the Permanent Secretary's answer, surely in that two months there would not have been an overspend as you have just said. On your own figures that you supplied to the Treasury there is overspend of £155 million.

Mr Park: I am sorry, Chairman, I do not have the comparison between the Spring Supplementary estimate and other numbers here. I think it would probably be better if we gave you a written response.

Q240 Chairman: You said to us that you had to make an additional cash call of 155 billion between these two periods. That would be compliant with your important point about the fact that we are talking about estimates in the parliamentary sense, which is a call on cash as opposed to the total figures of expenditure which the department is making. Does that provide a rationale?

Ms Ghosh: I still think it would be easier if we wrote to the committee explaining the various stages. Can I take it to a strategic level? Because the question of coming in on your departmental expenditure limit budget is something that actually you can only be certain of---. There are all sorts of issues that the NAO has to confirm and flows, for example, from local government that we have to check up on. I said we are optimistic that we are coming in on balance. Any statement we made in February does not relate to the NGO position. May I make one other comment? The only additional funding we have been given, as it were, real funding into our budget that we have been given in the course of the year, is £22 million from the Treasury which they agreed to give us to finance our voluntary early retirement scheme. We have made no additional cash call on the Treasury. At some stages in our supplementary estimates we have transferred money, say, from programme into admin, but we have not demanded any more money and we have come in, as it looks at the moment, within our a public expenditure limit.

Q241 Chairman: The important point is that we are still living in a situation that when this committee asks for financial information it is not that you were not providing it---

Ms Ghosh: No.

Q242 Chairman: ---but the format is very much couched in terms of, if you like, the parliamentary mechanisms for the approval of moneys; and you have made the important point that those moneys are about the total cash flow (in other words, sanctioning expenditure from your department), whereas by and large what MPs are interested in - you started out the year going to spend X, Y or Z on various programme - is how are you doing, where will you end up and, if you are above or below, why? What is the answer?

Ms Ghosh: Exactly.

Q243 Chairman: What I would say to you is, when you do write to us, bearing in mind we are very straightforward people, if you have to write to us formally by all means, but could you please send the guide that puts it in layman's terms to us: because part of the exercise of transparency is being able to put a language forward that normal people will understand?

Ms Ghosh: Yes, certainly. We have not yet had feedback from the committee on this, but we very much tried to do that in the note we sent you recently on our estimates for the coming year. So we have tried to translate it into the difference between estimates and departmental expenditure limits, and we even included what we call the "rugby boards picture", which shows you what is in estimates and what is in the budget.

Q244 Chairman: I appreciate that, but even the word "estimate" has a connotation of, "This is what we think we will do", not, "This is a call for cash".

Ms Ghosh: A capital "E" estimate as opposed to a lower case "e".

Q245 Chairman: If you start off with the word "budget" or "forecast", then I think we can follow through the logic.

Ms Ghosh: Certainly.

Chairman: So we are going to have something on the first question that you are going to write to us in those terms about, for which I will say thank you in advance and move on to Peter Soulsby.

Q246 Sir Peter Soulsby: Can I take you to one aspect of the budget that I think we do have an understanding of, because it is something we have explored with you before, and it is the question of NGO flexibility?

Ms Ghosh: Yes.

Q247 Sir Peter Soulsby: I know it is something that in the past the department and the Treasury have had rather different views on and there has been perhaps a little bit of discussion in previous years to reach a common understanding. I wonder whether you can reassure us that that common understanding has now been found?

Ms Ghosh: Absolutely.

Q248 Sir Peter Soulsby: And that the situation you have, I think, of some 29 million that you are wanting to have that flexibility for is something that has been agreed between yourselves and the Treasury and we can be reassured that we are not going to have the situation we have had in previous years?

Ms Ghosh: The issue of NGO flexibility does not, as far as we know, arise in relation to 2007/2008 for the main department. This issue of NGO flexibility that we have mentioned in our estimate return is a special deal for the Forestry Commission. This is the first year where the Forestry Commission has come onto our books as part of our budget. That is, as I say, a special deal, there is no question that the Treasury will change their minds on that, and so we can budget on that and the Forestry Commission can---

Q249 Chairman: Where were they before they came onto your books?

Ms Ghosh: They were with the Scottish Executive. It was a separate vote, I am told. I do not know what committee they reported to.

Q250 Chairman: We thought they were under your policy umbrella.

Ms Ghosh: No, forestry as a policy is under our umbrella, forestry in England, but they did not come onto our budget. They have now moved onto our budget and that 29 million relates solely to the Forestry Commission.

Q251 Sir Peter Soulsby: So that means that when the outturn for 2007/2008 has been finalised you do not see anything else being subject to flexibility, it is just this single issue.

Ms Ghosh: It is that single issue, and we have budgeted in terms of our budget for 2008/2009, on which we wrote to the committee, as it were, using the budget we have got for 2008/2009. There is no assumption about NGO flexibility, there is no assumption about overhang from 2007/2008 and we are not currently anticipating any overhang from 2007/2008. That is purely saying this is the first year of our CRS/07. What have we got for admin, what have we got for programme, what have we got for capital and we need to have a 50 million departmental unallocated provision. So that makes no assumption that we are getting any money from the EYF.

Q252 Dr Strang: Could you describe for us the process of allocating your 2008/2009 CSR total to Defra's departmental strategic objectives and your associated public bodies? When you do that, could you indicate how you take into account the strategic priorities, for example, that the Secretary of State set out to this committee? How involved is it in this process? How much detail do they get into?

Ms Ghosh: I will ask Bill, in his capacity as leader on strategy and evidence, to talk a bit about the detail of the process. The main strategic priorities I described to Miss McIntosh. We had within our CSR settlement some areas which were, as it were, pre-spoken for, ring fenced or already committed. Obviously, the additional flooding money we had got was that. We were given additional money for PFIs for waste infrastructure, we were given additional money for the Environmental Transformation Fund, which (actually I should have mentioned earlier on climate change) is a significant contribution both internationally and nationally to research around technology on climate change. We also have made the commitment, although we did not get any additional money in CSR, to match-fund the voluntary modulation for the Rural Development Programme. So we had to find from within our, basically, flat cash programme budget the additional money, our element of the doubling of the RDPE. So we had some things that were already, effectively, commitments. Then, of course, we had essentially a flat cash budget to assign between the rest of our spend and an administration budget for running ourselves that was going down five per cent, five per cent, five per cent, and that is where we began the process. I will hand over to Bill to say how we structured it and how we worked with ministers.

Mr Stow: We used a number of techniques really. First of all, as well as having the two PSA targets, we have the eight departmental strategic objectives, and underlying those we have 30-odd what we call indicative objectives, which are more like fairly specific targets. The first task was to try to work out how much our different programmes contributed to the different DSOs, which were new - so this was a re-run or a new exercise because the DSOs were new - and so we ranked, in a way, different programmes against their contribution to departmental strategic objectives. At the same time, as Helen says, you not only have the ring fenced funding but you also have some funding that is committed, committed legally, because things are constantly rolling forward, and so that is not really in play at least for a year or two ahead. We used, as one of our main tools, a diagram that showed the level of commitment against the level of contribution to the DSOs. That showed us, which was a good thing, that actually our programmes score highly on their strategic alignment; it also showed, which was less good, that a high proportion of our spend, if you look just six months to a year ahead, is already committed so that the target area that you are looking at to make savings to compensate for the increase in budgets its quite small. We then looked at, obviously, the things that scored less well - a number of our smaller programmes scored rather less well - and through the Board, with the Director General, we turned the question round a bit and said, "With the money we have got, what is it we are going to do?", rather than just focusing on that marginal area that we were going to make savings, and that helped us then think about what the overall strategic direction of our budget needed to be. Through that process we also had regular discussions with Hilary Ben and we had two away-days with our whole ministerial team where we went through the position that we faced, the options that we put to them, which added up to more than the total adjustments that we had to make, and we worked through that with them and reached conclusions in that way. So it was a process of trying to align with our strategic objectives as far as the current levels of commitment allow. It takes quite a long time often to unwind programme expenditure, because often people's jobs are dependent on them, and if you cut things very quickly, then you have to make redundancy payments and so you lose the benefits in the early years, and so on. So it is quite sticky, which makes it more of an art than a science to align it completely with your strategic objective, but that is the direction we are heading in.

Q253 Dr Strang: A brief follow-up to that. You received your CSR settlement in October?

Ms Ghosh: Yes.

Q254 Dr Strang: But the Defra Board did not make its allocations to your associated public bodies until March. I am wondering why that took so long, if that is a fair question. Secondly, have you had any sort of problems arising from the fact that the allocations were made just a few weeks before the start of the financial year?

Ms Ghosh: I have to say, it was 21 February, because it was my birthday, when we made them. Two things: we wanted to make sure we got it right, which was why we were spending some months doing it discussing with ministers, but all the time, and particularly through Bill, we were keeping our key delivery bodies in touch with what was happening. So, in fact, by the time we arrived at, "We can now give you final allocations", we had had a number of discussions. These did not come as a surprise to people. For example, the balance between capital and current spend that we were allowing them, and so on, was something we had discussed and they were, I think, content with that. You had a number of meetings.

Mr Stow: Yes, I had three sessions in all with our delivery bodies collectively and then the particular sponsors for Environment Agency, Natural England, we were in fairly constant discussion with them, because we need to understand the impact of particular levels of budget on these organisations, and so there was a very good dialogue, I think, with our arm's length bodies.

Q255 Chairman: Just out of curiosity, what are the reporting mechanisms to ministers in terms of your continuing financial performance? How do you involve them in that?

Ms Ghosh: We give to ministers the same report that we get at the management boards. So, in fact, we were at lunch-time with Hilary and ministers and Stephen had sent in the April Board report on finance. We do that on a monthly basis to them and we discuss it at one of our weekly Wednesday lunch-time meetings. So, they are kept in extremely close touch with what is happening in our finance, and Hilary personally has taken that interest since the moment he arrived simply because we have had to manage our budget this year extremely closely to cope with £60 million worth of emergency spend and so on, so he has been very, very closely associated with it.

Q256 Chairman: Do the other ministers other than the Secretary of State, Mr Park, have detailed discussions with you on a regular basis as to how their portfolio of responsibilities is performing in financial terms?

Mr Park: No, my meetings are with the ministers collectively rather than individually.

Ms Ghosh: But the directors general for each policy area have exactly those discussions, and so, for example, as Bill said, we had lots of discussions with Hilary and ministers collectively to settle our budgets for 2008/2009, but, equally, every director general - so Mike Anderson on climate change, it was then Katrina, and Peter Unwin on Natural Environment - had parallel discussions with the relevant ministers to make sure that they were happy to talk through detail, and so on. That is mainly done through the directors general, who will all have their own financial adviser.

Q257 Chairman: Within the terms of the overall envelope of expenditure that turned out to be CSR or the new comprehensive spending round, did your plans of expenditure balance precisely back to the breakdown that you agreed with the Treasury for each of the three years in the CSR?

Ms Ghosh: What we have done so far is we have set a detailed budget for this year that we have just begun, 2008/2009, and it had to balance. We did no over programming, we made it a completely balanced budget. Those are the budgets that we have given to our directors and programmes and projects and, equally, we have delivered a balanced budget on the administration spend - so head-count people, travel, all of those sorts of things - and we have put in a £50 million reserve for emergencies, because last year we had no reserve for emergencies and this year we do. The process we are currently going through, and again it will be much lighter touch because the strategic direction is set, is agreeing budgets for 2009/2010, i.e. the second year, and discussing those with the delivery bodies, and that is a process that is going on. We promised that we would give them those budgets by the end of August, but we obviously will be aiming to do it much more quickly.

Mr Stow: With their agreement.

Q258 Chairman: Is that, again, going to be the same balanced budget as for this year?

Ms Ghosh: Absolutely.

Q259 Paddy Tipping: Tell us a bit more about the discussions with the delivery agents: because a lot of your money goes to them. How does it work? Just explain what happens when you are round the table?

Mr Stow: As I said, during the process I had three rounds with them and in those rounds I tended to open by describing where we had got to in the process, what the level of certainty was around the numbers we are talking about, and so on, and spelling out the consequences of that for them, and then usually there was a sort of question and answer session, though when we came to talking about the position for 2009/2010 and 2010/2011, which was more recently, it was more of a consultation session - which way would they like us to play this - and the message that came through was a mixed message really. Yes, they want early certainty but they want certainty. It was our judgment that we could not provide immediate certainty because we did not know at that stage what was going to be held over into this year and might then move over into the following year. There were a number of uncertainties and so we said, "Okay, we will finalise the budgets in August." When it comes to the individual dialogues with individual bodies, I have not been involved in those but I used to be because I was the DG for Environment, and so that would involve direct talks between the relevant DG and Barbara Young, say, and that is much more a dialogue about, "We think we can probably manage to give you so much. What does that mean in terms of how you will manage that budget?", and so on - so a much more detailed conversation - but collectively that is not quite the place for those sorts of detailed conversations.

Q260 Paddy Tipping: Some of the delivery agents have been gainers, the Environment Agency, for example?

Ms Ghosh: Yes.

Q261 Paddy Tipping: Some have been losers, big losers, Natural England, WRAP, for example, stand to lose quite a lot. What is the nature of the relationship?

Ms Ghosh: I think those are two rather different issues. Natural England has only lost in terms of its spend in terms of the efficiencies. We always anticipated we would get out of creating a single body. We have created a single body out of three bodies. We expected, and I am sure Parliament expected, to get some dividend from that. So, in fact, their budget, the five million difference, effectively we expect you now to be producing efficiencies, but, of course, we had those discussions with Helen Philips, and so on. In the case of WRAP, this was very much related to a strategic issue for us, which was, given the relative maturity now of the sort of advice market, whether it is advice on energy efficiency or resource efficiency, actually the market out there is quite booming, and the extent to which Government needed to finance, as it were, individual advice to individual companies we decided was getting less, so in fact we consciously took some money out of those sorts of brew of money, for example, which Bill will know more about than I do, we consciously said, "As a matter of policy we will make some savings there, so that, for example, we can put some money into the Green Homes Service for the Energy Savings Trust." So we swapped individual advice to SMEs into things where we thought we would get more bang for our buck. So that is WRAP, which is a different situation from Natural England.

Mr Stow: This is obviously a very important part of our relationship with our various bodies, but it is not the only part. We have been working very hard at improving the whole nature of the relationship and getting it onto a more mature level, and so there is a lot of work through what we call our government delivery programme that is aimed at doing that. We are negotiating individual deals with a number of our agencies about how we will each behave, for example, so I think that is also helping the relationships, which I would say now are probably as good as they have ever been, with our different partners.

Q262 Paddy Tipping: Do the agents see it as relationship is of equals, that their voice counts and that what they say is being heard?

Ms Ghosh: You would have to ask them that.

Q263 Paddy Tipping: I have.

Ms Ghosh: And they say.

Q264 Paddy Tipping: It is a mixed response.

Ms Ghosh: It is a mixed response at the end of the day. It is the case that NDPBs and obviously our own executive agencies that are part of the department are here to deliver in large part the objectives of government, and, therefore, in some cases, actually the relationship should be one where we are buying what government or Parliament set them up to deliver. It is interesting, and I think what is so exciting about working in Defra is that if you take the Environment Agency or Natural, they are also there as statutory advisers, so, equally, they are there as sort of watchdogs, and certainly the SDC is a powerful, fierce watchdog. So they are all the time doing two things, but some of the time it is absolutely clear that they are there to deliver, efficiently and effectively, and it is for them to decide in some cases exactly how, what Parliament and the elected government want them to do, so it is always going to be a bit mixed.

Q265 Paddy Tipping: I am sure that is right. It is a circular relationship as well. They then say, "This is what we are finding to meet the change of policy"?

Ms Ghosh: Yes.

Mr Stow: The programme/project way of working which we have now very largely adopted in the department on a lot of our programmes boards, project boards, and so on, the relevant agencies will actually be there inside the tent working with us, and that is an absolutely crucial part of the way we are thinking about how we make effective policy in the department.

Q266 Paddy Tipping: Turning to your own budget, the main budget as it were, it is a really tight budget. You have made some pretty hard choices. Can you give us some examples of things that you are stopping doing because, basically, you cannot afford to do them?

Ms Ghosh: Do you mean the programme spend that we have in the department as opposed to hand out?

Q267 Paddy Tipping: Yes.

Ms Ghosh: Bill, you work in the lead on that.

Mr Stow: Helen has mentioned probably the main strategic decision we took, which was that we would reduce the level of funding of advice to individual businesses and help for individual businesses, so that covered WRAP, it covered the Carbon Trust and it also covered Food from Britain. So, looking right across the piece, that was probably, I think, the biggest thing that we consciously said, "We are going to stop doing this." There were a number of much smaller things that we have also either stopped or cut back significantly, but that was the biggest one.

Q268 Paddy Tipping: All we could tell was that you could not go ahead with the new Veterinary Surgeons Act because of financial constraints?

Ms Ghosh: No. I think there is an issue. A lot of the things we do are actually about people and about lawyers and the money we have to spend through our admin budget. If you take the example of legislation, as the committee is very well aware, we have got quite a lot of legislation on the stocks at the moment. We have got things like the Marine Bill, which you will be doing an inquiry into, and that has certainly required historically quite a lot of legal input, and the Climate Change Bill. Clearly, even as bills are going through, they require revision, and so on. We have still got a lot of work to do in terms of the implementation on the Animal Welfare Act, and so on, so there is an awful lot of legal work, and the conclusion that we have reached (and I think Jeff Rooker has said to the committee), given the other calls on our legal resource, and in particular because discussions with the veterinary profession suggest that they are not absolutely sure what they want this legislation to be about, suggest that it is of relatively low priority, we will have to (and this is part of the hard choices) keep prioritising things and say. "If we give money to X, what are we going to spend less money on?" I have been listening with interest, for example, to the reports on Farming Today this week about bees, and obviously we are keeping a very close interest in the issue around bee health, but the fact is, if we put more money into research on bees in our tight budget and the tight fiscal position, the choice is what do you spend less money on? That is what we will need to be doing.

Q269 Paddy Tipping: Let me ask you about the Animal Welfare Act, because it is a flagship legislation.

Ms Ghosh: It is.

Q270 Paddy Tipping: There is a lot to be done by regulation.

Ms Ghosh: Yes.

Q271 Paddy Tipping: And you are not meeting your timetable to bring forward these regulations.

Ms Ghosh: Jeff and Hilary have recently been talking to the team about this, and we have agreed a resource. We have, in fact, agreed some additional people resource into that team to make sure that we can fulfil our parliamentary commitments on that. So that is what we are going to do.

Q272 Paddy Tipping: So when I am told that the animal team has been cut from 30 to 20 and the Animal Act Implementation Team from four to one, you are reversing that trend now?

Ms Ghosh: On our project and programme basis what we are doing is saying for the purpose the project, which is to deliver the regulations, we are putting some more people in and then they will go away again, which is the beauty of our project and programme team approach.

Q273 Chairman: I am glad you mentioned bees, because I have been getting up early in the morning and listening to the same programme that you have. I think it was on Tuesday, the assertion was that you had been cutting back on the amount of inspection at a time when disease in the case of verroa was now rampant.

Ms Ghosh: I do not think so.

Q274 Chairman: What!

Ms Ghosh: I am sorry, I am not a technician on this. I do not think that particular disease is rampant.

Q275 Chairman: What, verroa, in bees, not rampant! It is endemic in the bee population. There used to be a wonderful line on the Defra map which every year some hapless minister would draw and say "this was a verroa-free zone", and every year the bees ignored that, or at least the mites did, and they kept crossing the line until, in fact, the whole of the United Kingdom has become now a zone for verroa disease. It is endemic.

Ms Ghosh: It is not one of the diseases on which our bee unit is focusing.

Chairman: No, because it is endemic. What!

Mr Gray: You cannot be serious. We have had debates on this in the House of Commons. Verroa bacilli is by far the biggest threat facing the bee population in the world. It is a massive problem here in England and you are telling me that your bee lot are not focusing on verroa. I find that absolutely astonishing.

Q276 Chairman: I was hoping you were going to bring clarity to try and address some of the criticisms that were made in Farming Today about the department's expenditure to deal with the disease threat to bees because, in addition to disease, the question of training bee-keepers was also raised as a key issue and, bearing in mind the central role of pollination of bees and the well-being of our crops is at stake, perhaps you could tell us what on earth you are actually doing?

Ms Ghosh: I will certainly do that. We have not cut either the funding in cash terms or the number of inspectors. There is exactly the same number of inspectors now as there was five years ago. As you know, as you will know from, I am sure, earlier inquiries, we also employ seasonal bee inspectors; so that is a process that we are ramping up at the moment. What we are doing (and this was, I know, the subject of some parliamentary interest) is making sure that just at the moment we target the bee inspection resource on instances where colonies appear to have collapsed for some reason. We do not believe, again, as I know a series of PQs have highlighted, that we have colony collapse and disorder here, but, nonetheless, we are using our bee inspectors to go and look. If a bee-keeper reports that it looks like a collapse, we are going to look at it: that is how we are targeting our inspection resource. Obviously, if it were the case that we felt that there was an issue or we needed to increase the level of inspection, then we would think of diverting resources into the area, but at the moment I am advised by the bee unit at our central science laboratory that they have enough resource, but we are monitoring the position.

Q277 Chairman: Are you rebutting the lines of criticism in Farming Today, because I am sure you just did not listen to it on holiday?

Ms Ghosh: What I am saying is that we have not---. I think the generic criticism in Farming Today is, "You have cut the number of bee inspectors and you have cut the amount of money you are putting into bees in general." We have not cut either. What I am saying is what we are doing, particularly in the light of the concerns there have been on part of the bee keeping community on apparently some colony collapse issues, which may as much be to do with bad weather and the growth of viruses as the bees all stay in their hives, we are making sure that the inspection resource we have focuses on those extreme cases. Jonathan Shaw is our minister on this and I know he is answering, or about to answer, a series of parliamentary question on this.

Q278 Lynne Jones: Can I come in? You said that you had not cut it in cash terms.

Ms Ghosh: No, we have not. What we have done is kept it steady. It will therefore have gone down in---

Q279 Lynne Jones: So it is a cut then?

Ms Ghosh: No. I will say exactly, as is the case, we have not cut it in cash terms. In real terms it will have gone down slightly, but we still have exactly the same number of inspectors.

Q280 Lynne Jones: But it does sound as if you are shutting the stable door---

Ms Ghosh: No. There is no evidence that horse has bolted. What we are doing is---

Q281 Lynne Jones: You are waiting until bee-keepers say there is a problem before you are going to look at it.

Ms Ghosh: What we are trying to do is have an evidence-based policy, which is what we are here to do.

Q282 Chairman: I think it might be quite helpful to have a comprehensive note on what you are doing, because clearly there is a lot of concern in the world of bee-keepers about the challenges of disease and the limited response in terms of the treatments that are available for verroa, and there are other diseases which bee-keepers face which you are also supposed to be addressing. So when the Minister signs off all these PQs and you have total clarity on the policy, perhaps you could write to us and let us know what is going on, because I think the committee would be very interested.

Ms Ghosh: Yes. One comment I will make on verroa, and it is in the briefing, it says, "Verroa has been deregulated and is not under statutory control."

Q283 Chairman: That is because it is endemic. You just cannot stop it.

Ms Ghosh: It is not one of the diseases on which the bee inspectorate is focused.

Chairman: The former minister is described by The Independent newspaper as being in charge of bees, but there we are. The world has moved on and I shall move on to David Lepper.

Q284 David Lepper: I want to ask about Natural England in a moment, but can I come back to what Paddy Tipping asked about? You have said now that there are more resources being dedicated to the regulations relating to animal welfare?

Ms Ghosh: Yes, indeed. We have agreed that they can expand the team in order to do those regulations and then, when they have done the project, those people will move to something else.

Q285 David Lepper: Is it possible to give us any indication, for instance, of when the regulations in relation to pet fairs might be available?

Ms Ghosh: I am afraid I do not have that information. I will come back to you.

Q286 David Lepper: All right; thank you. Natural England: you have said already, in answer to an earlier question, that bringing those three organisations together as one in Natural England has lead to efficiency savings, and the cut in Natural England's budget reflects that.

Ms Ghosh: Yes.

Q287 David Lepper: So it is clear, is it, that Natural England will not have to cut back on any of the work that it should be doing in order to accommodate those cuts? They will all be met by efficiencies.

Ms Ghosh: They will be met in various ways by efficiencies. There is always the debate that we have when thinking about budgets going forward, as it were, things that organisations would like to do and things that they will be able to do. We have had no feedback from Natural England that there is anything significant they will not be able to do as a result of the reduction in what is effectively an admin part of their budget.

Q288 David Lepper: The responsibilities they took over on their formulation from other agencies will continue.

Ms Gosh: We are confident they can deliver.

Q289 David Lepper: You also mentioned the huge legislative programme coming up including the Marine Bill and a particular aspect this Committee will be focusing on will be access to coastal areas. Natural England has estimated it will cost something like £50 million over ten years for Natural England to do the work necessary on the proposals for public access. There is going to be some debate about how extensive those proposals are and that possibly is a controversial matter. Let us assume that Natural England has made a reasonable estimate, £50 million over ten years. Will they get the resources to do that work?

Ms Gosh: This is something the Committee will want to discuss with Natural England officials in more detail. My understanding is that the proposition is that any additional costs of coastal access will be met from within what we can predict as existing budgets. We will not be giving explicit additional funding but for example through RDPE, which is significantly increasing over the next seven years. We are not giving them an additional pot of money which is for coastal access and that is the arrangement on which we are going forward. You will be able to explore that in more detail with them.

Q290 David Lepper: I am sure we will do but you would not anticipate a situation, for instance where legislation, a Marine Bill, having been passed with coastal access agreed on whatever terms it is in that Bill, and those organisations which have been lobbying so long for that right find themselves frustrated because the work is delayed and delayed before they have that access.

Ms Gosh: The pilot studies that Natural England carried out before they advised us on what form the right should be, suggested that on the basis of negotiation, on the basis of existing access, on the basis of the tools they could use, for example through Pillar 2, it was possible to, as it were, join up the coastal path without significant additional spend and that is the advice they gave to ministers and on which we have gone forward. They will understand much more the patchwork of mechanisms they think they will use.

Q291 Chairman: You mentioned that the department have, for the first time, an unallocated provision of £50 million. How did you decide that £50 million was the right number?

Ms Gosh: The Treasury proposed that £50 million was the right number. Experience this year, which was of floods and then foot and mouth and then some bird flu, which amounted in the end to about £50 million suggests that is probably about right.

Q292 Chairman: Is that built in at £50 million for each of the three years in the CSR?

Ms Gosh: We will have to have £50 million in each of the three years. Having set the budget for this year we would need to equally make provision for £50 million in the next year. Depending on the outcome of events in the course of the year it may be that part of the £50 million, if we do not spend it all, is available to carry forward but that would be a debate very much for seeing what had happened by the end of the year.

Q293 Chairman: I was going to ask do the same rules on end-year flexibility apply to that.

Ms Gosh: I do not know. That would be a debate to have with Treasury at an appropriate time in the year.

Q294 Chairman: Do you always just accept what the Treasury say in situations like this?

Ms Gosh: They have the power to give or withhold money. I do not think we could argue with them about it.

Q295 Chairman: It makes a sensible budgetary approach, based on the experience of what certain unplanned for contingencies cost you in the previous period, but I was interested to know whether you had yourselves carried out some kind of internal exercise to determine what a proper contingency reserve, because that is what this is, should be. Now, for example, and we will come to talk about it in a little more detail later, you have, as a department, to accept the financial responsibility for disallowance.

Ms Gosh: We do.

Q296 Chairman: I am intrigued that the £50 million you reeled off for foot and mouth, blue tongue, avian influenza but there was not a contingency for errors which might result in disallowance.

Ms Gosh: We have a contingency provision effectively for the impact of disallowance in the ring-fenced funding we have within our budget in each of the three years which is able to be carried forward of a total of £270 million over the CSR period so we have that in a separate pot. We have effectively two contingencies.

Q297 Chairman: One labelled disallowance and one labelled the rest.

Ms Gosh: That was given to us as a ring-fenced amount so it has not impacted in any way on our other budget decisions. We have not had to take money out of anything else to pay for it; we were given it. If at the end of the process we do not need it and we successfully argue the European Commission into a position where they do not disallow as much as we have made prudent provision for, then the Treasury would take it back so it is not something that impacts on our budget.

Q298 Chairman: If there were to be, and we hope there is not, something that came along which was a contingency that caused for a call on government in excess of the £50 million you have, is it a question of you going back to the Treasury with a call on the general reserve, should that be necessary or has the Treasury said you can have £50 million as a contingency fund but anything else you meet out of cuts elsewhere in your budget?

Ms Gosh: To be clear, it is £50 million within our flat cash budget. We started off saying we will take £50 million out.

Q299 Chairman: You have shown your budget to the Treasury, tick in the box. £50 million is our reserve, our contingency fund. The question I am asking is as you are being so very careful with your money if contingencies occur that exceed £50 million would you have to meet those out your total envelope, in other words so other programmes would have to be reduced, or do you still have power to go back to Treasury. If some brand new never heard of before animal disease descends upon us and you find yourself having spent £100 million dealing with it, whatever it might be, do you have to meet the £100 million or do you go back to the Treasury and say we never thought of this one?

Ms Gosh: As you will be aware from your Treasury experience, that would depend on the scale of the emergency we had to deal with, the unexpectedness of it and what state government finances were in at the time. The experience of this year suggests, and indeed I think a prudent Treasury will always say this to departments, their first expectation is you will meet costs from within your existing programmes. If you can demonstrate that is absolutely impossible, then you may make a call on the contingency reserve. As you know, that occasionally happens. It did not happen this year and we were able to contain these costs, I am happy to say, within our existing programmes. There might always be a circumstance in which you would go to the Treasury but the Treasury might or might not be in a position to help.

Q300 Miss McIntosh: Could I ask why you decided to stop the funding for Food from Britain after the coming financial year? What do you think the impact is going to be on the British producers who used to benefit from that?

Ms Gosh: I believe - and I think I am probably going to get my study wrong - that the idea that in the long run Food from Britain, or the kind of activity carried out by Food from Britain, should become the responsibility of the industry is something that has been part of our strategic approach for a number of years. Therefore, when we were looking at the choices we had to make about our funding over the next three years we thought again about this issue. Was now the moment, given other funding pressures, to transfer the activity? The conclusion we reached was that now was the moment to transfer the activity. What is happening at the moment, and my food and farming team is closely involved in what is happening there, is that negotiations are going on, for example, between UK Trade International, the Food and Drink Federation and others about taking forward the activity. Obviously it is an incredibly successful area. It is something where our exports are doing extremely well. There is obviously a close economic interest on the part of the producers in maintaining it and now seemed the time to us to withdraw our funding and find a solution supported by the industry and that is what is going on at the moment.

Q301 Miss McIntosh: Do you know if in other countries like Denmark their Department for Agriculture similarly support their industry?

Ms Gosh: I do not know the answer to that.

Q302 Lynne Jones: There has been some reference to the support organisations that have the aim of cutting CO² emissions and you have set up this Delivery Landscape Review. You said earlier that this was because of the maturity of the advice market. Given the importance, and it is one of your main objectives, of reducing CO² emissions presumably you anticipate that the cuts in programmes such as WRAP and Carbon Trust, and so on, will not lead to any detrimental effect on the delivery of CO² emissions within business and the public sector. You have decided to make those cuts in advance of the Review. As a result of the review what savings do you think you can make? What efficiencies are going to be achieved coming out of this Review that are going to ensure that business and public sector organisations actually continue and perhaps do even better in their CO² reduction targets?

Ms Gosh: The focus of the Review is on the question of the number of organisations we currently support who are in a similar sort of field. The Carbon Trust, the Energy Savings Trust, WRAP, are all in different but quite similar ways supporting different sectors: citizens, companies, raising consciousness in a similar sort of field. The fundamental issue that the Review is looking at is, is that sensible or has it just arisen by chance. The fact that both the private sector market in terms of advise and particularly leading companies, and indeed small and medium enterprises, are already out there grasping the nettle and setting an excellent example in terms of carbon reductions and other environmental efficiencies means we have got over the hump of having to proselytise and tell everybody to be doing things and actually there are already sources of advise that they can get. Actually the machine is now moving and that is why we have reached the view we have. At this stage we are still giving significant funding to WRAP and to Carbon Trust. WRAP this year is getting £43 million and five years ago it was getting £30 million and in 2001/02 it was getting £6 million. We are still financing these quite substantially but we just need to look through the review of whether it is a sensible way of spending the money through all these organisations.

Q303 Lynne Jones: Before the Review was carried out you decided that WRAP would get a 30 per cent cut, or thereabouts, whereas the Energy Savings Trust would get a large increase.

Ms Gosh: Because we specifically wanted the Energy Savings Trust to do work with individual householders on the Green Home Service. That was a very specific project we wanted the Energy Savings Trust to do.

Q304 Lynne Jones: That was a political priority. I am interested in one particular organisation because it is based in my constituency and that is the National Industrial Symbiosis Programme. Although you said earlier that delivery organisations were kept informed about your discussions on the budget, they last year were led to believe that because they had been so successful in the amount of carbon reduction that had been brought about by their per pound expenditure they were going to have a substantial increase in their budget and yet they have ended up with a substantial cut. This is an organisation that is not providing direct advice but is about bringing different companies together. I wonder whether that was a wise decision. It is reasonable that these budgets should be brought together but you have substantially cut that very successful programme which has been delivering.

Ms Gosh: That particular organisation was one which I know ministers discussed specifically. There are issues, as I have said, in order to finance some things we have had to make decisions about others. I can assure you that we did specifically discuss, at one of these ministerial events that I described, the position there and the good work they were doing but reached the conclusion we did about their finding.

Q305 Mr Grey: What is it?

Ms Gosh: This company has too many of something or it has some waste and another company says they could use that. It is basically a swap, a marriage broking service between company A and company B: "I have too many desks. I need some desks", and they do a marriage broking service rather than send things to landfill.

Q306 Mr Grey: I am glad it has been cut by the sound of it. It sounds like a useless quango to me.

Q307 Lynne Jones: It has been very successful. In terms of its expenditure the actual savings that have been achieved have been substantial. Whilst I understand the particular problems you have, it does seem to me that a programme such as that you need to make sure in your Review - and I am not necessarily advocating how it should be done - that some mechanism is in place to ensure that the work they are doing is continued and expanded because of the importance of the outcomes they have achieved.

Ms Gosh: When we are discussing with ministers budgets for next year I will certainly take that back, in particular, to Joan Ruddock who is responsible.

Q308 Chairman: Talking about environmental delivery, I notice that the department, now headed by your former Secretary of State, is number one on the Sustainable Development Commission's latest chart of top performing environmental departments and you are still struggling mid-table.

Ms Gosh: The Department of Health is top in the latest STC report. The Foreign Office is coming up. In the Department's Sustainability Leader Programme we are mid-table though we have improved. We were three stars last year and we are four stars this year. We fell down on three areas: energy efficiency, waste arisings and water use. Our energy efficiency falling off is for two reasons: one, because we have closed down a number of buildings and moved into a smaller number of buildings so the energy use of any single square metre in the department, which is now occupied by two people on a computer where previously there was only one, has actually reduced the efficiency per square metre but we are working on that. On waste arisings we have around the department a Bin the Bins campaign so we have no bins next to our desks any more. We have to take all our rubbish to recycling bins of various kinds which we hope will discourage people from throwing things away. Water is a bigger challenge to us because you need to do physical things to buildings to reduce water usage but we are focusing on that. This is all within a programme we are funding, and which Hilary Benn asks us about every week, to improve our overall carbon footprint. For example, we have just done, which is a first for Whitehall, a carbon footprint map of our total activity: offices, scientific laboratories, travel and anything we do that produces carbon. We will use that as a base line for an action plan we will produce in the summer. We are not complacent; we are working hard. We are delighted that some of the big departments with big carbon footprints are doing so well in terms of hitting government targets.

Q309 Chairman: You are supposed to be the market leader.

Ms Gosh: In some areas we are the market leader.

Q310 Chairman: Given that you have spent all this time putting out your priorities and working out your budgets and where you are going in a very precise fashion, where are you going to be in a year's time on the league table? What is the target?

Ms Gosh: I would like to be a five star department, i.e. in the top group. The STC report was looking at 2006/07 and not 2007/08. I would be hoping to see a significant reduction, and we will be putting out these targets in the summer so you will be able to hold to us to account for this in our overall carbon footprint. I think we will see success on waste but we may need some investment around water. The other thing we are doing is investing in green IT. We will be getting shortly laptops, IT systems, which automatically do things that shut off so that you do not have to worry about human error in failing to turn your screen off at night, that will happen automatically, and there will be very low energy screen savers and so on. We are about to be the first ever outstanding BREEAM award, BREEAM being the environmental awards programme, for our building at Alnwick. That is the first time any building has got outstanding and it will be us. We are leaders in some areas but we need to catch up on some of that basic housekeeping stuff.

Chairman: We shall hold you to account.

Q311 David Taylor: Do you not think you could have greater contribution towards energy savings if instead of persistently outsourcing every IT development within sight and within the department you were able to use your own in-house skills and thereby avoid costly over-sized delay and over-budget systems of the classic kind that Defra has made its own?

Ms Gosh: If I go back to the green IT programme that we have, that is absolutely in partnership with IBM. A key element of carbon footprinting on IT is the cooling you have to do to keep your servers cool. We have been working with them and we have been achieving significant improvements in that. Actually they are being very positive partners with us in our greening of the department. Their service to the department in terms of all the measureables is significantly improving.

Q312 Dr Strang: How does the department plan to shift its recourses to match the two new PSAs that you take responsibility for, especially as you have already indicated most of the additional spending has been on waste management and flood defence.

Ms Gosh: To take the second one first, in terms of the natural environment PSA that we have I suppose the largest single new investment we are putting in that is the match funding of voluntary modulation, which is about £350 million in year one and rising through the period. That is a significant investment we have taken out of the flat cash budget. In terms of climate change, the title climate change means mitigation, international negotiations, Climate Change Bill, setting our carbon budgets for the five year periods, but it equally means adaption. Under our PSA also comes a requirement, and it is obviously in the Climate Change Bill, to adapt and so spending on flood defence and flooding issues is something that is a key part of adaptation. As I said earlier, one of the most significant things we have done is we have put a lot more people into that area of the department's activity. Whereas we only had one director before we now have three and we have made significant investment in staff to do that kind of negotiation and we continue to make the investment that we have made historically in climate change related research including things like the UK Climate Impact Programme in Oxford which will be a very good tool on adaptation.

Q313 Dr Strang: There are no specific PSAs covering agriculture or rural affairs as I understand it. Does that mean these areas will be downgraded?

Ms Gosh: Not at all? I will hand over to Bill to talk about how they are going to happen. The structure of the new performance agreement the departments have is that you have the two big PSAs then you have a series of departmental strategic objectives, some of which are subsets of the PSAs and some of which stand on their own. For example, strong rural communities continues to be one of our departmental strategic objectives, as does an economically successful and environmentally positive agriculture industry. Of our eight DSOs, we have one, for example, on handling environmental emergencies which covers animal health so we will also be reporting on how everything we do feeds into those departmental strategic objectives. If you take the case of farming, farming is part of both helping us mitigate climate change and adapting to it. People from my farming team and from farming organisations are involved in the climate change work.

Mr Stow: Underpinning the DSOs we have changed the way we allocate money within the department, as we were saying earlier, to programmes and projects. We have a dozen or so programmes that are held at board level, one of which is on sustainable food and farming and another one on successful rural communities. For both of those the board will be regularly monitoring how they are doing, whether we have the resources in the right place and so on. That is another safeguard that shows we have a broader interest in the department than in just our two PSAs.

Q314 Dr Strang: I do not want to split hairs but does one conclude from what you said that the PSAs tend to have a higher priority and focus in your approach than the departmental strategic objectives?

Mr Stow: It is fair to say that the new structure of PSAs, of which there are only 30 for the whole of government, is a very deliberate effort to join up government departments in the delivery of these PSAs so we have a number of delivery partners, particularly for the climate change one. The Prime Minister himself will be monitoring those through the Prime Minister's Delivery Unit and so on. Yes, they do have greater salience in that sort of way but within the department we are treating the HD departmental strategic objectives and these board programmes as key priorities for the department and when we think how we are resourcing things these are key priorities.

Ms Gosh: In terms of the number of people we have in different parts of the department, we would be happy to send you that. We still have very, very large numbers of people both in farming and animal health. Of our 3,000 headquarter's team, 800 of those work on food and farming and animal health, which is probably still more than work on climate change partly because that is a key licence to operate area and one that is very important to the department and indeed to the government. Although we have shifted resources, there are still very substantial resources going into those areas and we have increased the budget for the Animal Executive Agency and so on.

Q315 Dr Strang: This is a throw-away remark but I was at a meeting this morning where the veterinary profession were complaining that they did not feel they quite had the clout now in the department they had before. I do not know if that is fair but I leave that with you.

Ms Gosh: As a relative newcomer to the department, my impression is that the veterinary profession have a lot of clout in the department. Obviously they are in the lead on any animal disease outbreak. They play an absolute key part in developing animal health policy and they absolutely enrich our science base which I am very proud of. We have not cut the number of vets, indeed we are just about to recruit some more. We are very clear we need to keep up that professional guard.

Q316 Lynne Jones: Why are you cutting the Warm Front Programme?

Ms Gosh: Clearly I have to speak with some care here because there is an application for judicial review going through. As I think I have said to the Committee on previous occasions, despite the fact that funding for Warm Front has risen very dramatically over the last few years, we are still spending £800 million over the period on Warm Front, and if you add in the value of things like the Carbon Emission Reduction Target adding those two together alone we will be spending something like £2.3 billion on, as it were, fuel poverty, energy efficiency targeted on lower income households over the period. We would say that the fact that the funding for Warm Front over the period will be tapering does not mean anything. It means nothing in terms of a reduction in the government commitment to fuel poverty targets. If you look at resources as a whole, particularly if you add in things like winter fuel payment to pensioners, you could actually say that our support is something like £20 billion over the period. We will defend very strongly any suggestion that we are losing our focus on fuel poverty.

Q317 Lynne Jones: The Warm Front Programme is a direct grant and there are also some limitations on it in terms of who it reaches. You are cutting that at a time when fuel prices are going up and when climate change is an important issue, therefore it is much better to spend money on insulation and energy efficiency than on helping people met their bills. It seems bizarre given that you have a statutory requirement under the Warm Homes and Energy Conservation Act and yet you are cutting this budget. It does not seem the right thing to do.

Ms Gosh: As you know the Warm Front budget has escalated very rapidly to its current levels from a comparatively low base. We will still be spending £800 million over the three years. The extent to which we are cutting the Warm Front budget is not very great. As I say, what we are doing is saying what we have to do, in terms of looking at the government's policy on fuel poverty, is not just one way of dealing with the issue but looking at the whole picture in terms of support that we are giving to lower income households on fuel poverty. So far Warm Front has helped 1.6 million households and last year I think it was 240,000. We have helped, and are still helping, large numbers of people.

Q318 Lynne Jones: But it is a very small budget in terms of the condition of our housing stock. Although you say it has increased dramatically, it is still a very small budget in comparison with what is spent in Germany in terms of them bringing their housing stock up to a good standard of energy efficiency.

Ms Gosh: If you add in the energy efficiency requirement on the energy companies, we are actually going to be spending 2.3 billion over the CSR period on it which is a substantial amount of funding. As I say, we believe that we have to look at it in terms of the total support being given and the wider context which is why we made the decision we did but it will still be £800 million to Warm Front over the period.

Q319 Lynne Jones: Even with CERT it is still a small amount of money in relation to the huge problem we have in the condition of our housing stock and in particular that occupied by poor people.

Ms Gosh: We believe we have made a reasonable decision and set a reasonable priority. As you know, there are all sorts of factors involved and energy prices are as much a factor in this because of the way fuel poverty is assessed.

Q320 Lynne Jones: When do you expect the fuel poverty targets to be coming back on course?

Ms Gosh: I am not going to make any commitment of that kind.

Q321 Lynne Jones: But there is a commitment.

Ms Gosh: The government has in place what it believes are reasonable policies and a reasonable level of funding but because of the issues around fluctuating energy prices clearly making the prediction that you described would be a very dangerous thing to do.

Q322 Lynne Jones: You do have a statutory target but you are not able to tell me that you are going to be back on course over a three year period on achieving that statutory target? That is not adequate.

Ms Gosh: We have made a reasonable set of policies in place to achieving it.

Q323 Lynne Jones: But you cannot tell me whether it is going to be anywhere near. It might be reasonable to say we may not be spot on but within a 90 per cent certainty surely you should be able to give me some indicator.

Ms Gosh: No, because of the various factors that are involved at that moment when the statutory requirement comes into place, the various elements, prices, incomes, and all the activity that will have gone on between then and now.

Q324 Lynne Jones: I am asking for the trajectory.

Ms Gosh: As I said, what we believe we are doing is committing a reasonable level of resource to achieving that outcome for all the reasons I have described.

Q325 Lynne Jones: But you are not able to give me any concrete evidence that you are going to be anywhere near achieving the target. You are way off at the moment. You should be able to at least indicate that you will be moving back in the right direction.

Ms Gosh: I believe that we will only be able to test that against the evidence of events.

Q326 Lynne Jones: Why have a target in the first place?

Ms Gosh: Because parliament agreed we would have a target.

Q327 Lynne Jones: But you are going to ignore it.

Ms Gosh: No, we are absolutely not ignoring it. £2.3 billion of resources is going in to achieving this over the CSR period of which £800 million is resource towards Warm Front. We are absolutely not ignoring it. We think we are putting in a reasonable level of resource to achieve the target.

Q328 Chairman: Let us move on to animal disease issues. In your now much more precise budgeting arrangements can you tell me for each of the CSR periods what is your current projection on expenditure connected with bovine TB?

Ms Gosh: We have not yet set budgets for future years as I described before. As you know, as part of the CSR settlement we agreed with the Treasury as part of the zero-based reviews that over the period overall we would take £120 million out of the animal health budget. In terms of spend on TB, which to some extent is demand-led, although there is an ongoing level of surveillance activity, we have assumed for this year broadly a flat level of spend. We have not taken any money out of TB for this year but we have not set our budget for future years.

Q329 Chairman: You told us earlier that you have a fit between your department's expenditure and the global totals that you had been given by the Treasury for each of the CSR periods. Bearing in mind you spent last financial year £76 million, so it is quite a significant item of your budget, in order to achieve balance you must have a number on a piece of paper somewhere to say this is what we think we might have to spend.

Ms Gosh: As I say, we made a conscious decision and this would be something that our directors of the relevant bit of animal health will be doing in deciding how to profile their budget for the year that we would assume broadly the same level of spend for this year. We were not assuming any significant difference. We are not pulling funding out.

Q330 Chairman: We know the incidence of the disease is rising against the background where we know that ministers have yet to make their mind up on what their new strategy is going to be. Against a background of uncertainty as to what effect that strategy will be, you are just saying level expenditure?

Ms Gosh: If it turned out to be different, then clearly we would have to transfer funding from elsewhere in the department. At the moment that was our assumption and that is the planning assumption on which we are basing.

Q331 Chairman: Does that mean the money would come from within the animal health budget or when you say elsewhere in the department it could be from anywhere?

Ms Gosh: In the first instance we would probably say is there any other element of the animal health budget, whether in some element of a compensation regime or a surveillance regime, where the demand is lower or where we think that on a risk basis we can spend less, that is what we would do. By the very nature of a budget which is a fixed amount, if there is any increased demand in one part you need to start looking across the department to decide whether there is somewhere else from which you would be spending it. We would probably start off by looking within the animal health envelope.

Q332 Chairman: You have been having discussions with the farming community about them making some kind of possible contribution in financial terms to the control of animal disease. What have you penciled in as the first likely date when you are going to see some of that money?

Ms Gosh: I know we have made no assumption about any of that money in the CSR 07 period. The only assumption we have made about reductions is the £120 million that I described where I think we are already ahead of what we were expecting reductions to be, mainly through increasing the efficiency, in other words reducing the costs. We have not factored in any cost-sharing element into our CSR07 plans. We are going through a consultation period, carbon proposals and it would require a Bill. We are some years away from that.

Q333 Chairman: If it did arrive, on that basis you have extra money you can do what you like with.

Ms Gosh: It is most unlikely, on the timetable that is on the table, that it would have any impact within the CSR07 period.

Q334 Chairman: Throughout the whole period?

Ms Gosh: Throughout the whole period.

Q335 Chairman: If that be the case, let us move on to matters connected with disallowance. You have made provision for £348 million for the financial year 2006/07 for potential disallowance. I am not quite certain how you arrived at that particular number. Perhaps you could give us a flavour. 348 is a terribly precise number. How did you work it out?

Ms Gosh: We worked it out in a variety of ways. I know it also includes some elements of disallowance hangover from the previous schemes but broadly speaking what we did, looking at the problems we had with the SPS in the first year, we made some prudent estimates. I have to say that clearly our main strategy will be, both at political and official level, to argue this down with the Commission so I do not want to quote individual figures within it. The disallowance in relation to the SPS essentially has two features. It is either a straight forward fine for paying after the 30 June because we have not hit the 96.4 per cent target or it is disallowance for payments made without due validation or with some element of inaccuracy. In the first year where we did fail to achieve our payment of the requisite amount by the June date that was a straight forward percentage calculation. In relation to inaccuracy, we made some estimates. As you will recall, we did interim payments that year and we did interim payments in order to get money out to farmers without having appropriate cover from the Commission because we believed that our customer service giving farmers the money was the more important thing. We have made some calculation on the basis of that. Last year as things improved at the RPA we hit our payment deadline of June 30 so there was no late payment. Where we made interim payments they were mainly but not entirely within EU rules. They were compliant so we do not expect significant disallowance in relation to those, although there were some issues around data and entitlements that are likely to be the subject of disallowance. This year progress is better still. We have now paid 84 per cent of the fund out. We are expecting to pay 90 per cent of the fund out by the end of May and we are therefore hoping, as last year, that we do not attract any late payments. The issue this year would simply be around inaccuracies. We have not made interim payments because we started getting payments out so much earlier. It is an agglomeration of all those factors: reasonable assumptions about likely percentages, the parallels with other countries, the experiences that other countries have had and we have reached that view. That is our prudent view. We have cover from ring-fenced money from the Treasury for £270 million of that. We are all the time assessing at what point the disallowance might come through. We believe that we have sufficient cover in our budgets to meet, if it were more than £270 million, and in particular having a departmental allocation provision, that it is something which for the purposes of thinking about our budgets we can assume essentially is covered.

Q336 Chairman: When does the Commission estimate that the matters will be concluded? They seem to have been hanging over you like the sword of Damocles for a long time.

Ms Gosh: It is very slow. There are some decisions they are going to make, not necessarily around us, this summer that might give us a clue but, s far as we are concerned, getting a final figure is moving to the right rather than coming closer. We are continuing to make sure we make a reasonable provision.

Q337 Chairman: You put £90 million into the CSR 07 for each year in terms of disallowance. How have you based that number?

Mr Park: The £348 million that was the balance sheet amount was created as non-cash. What then needs to happen is that provision unwinds over a number of years and the £90 million in each year of the CSR period represents the unwinding of that provision. The £90 million is expected to be cash whereas the £348 million was an accounting entry.

Ms Gosh: Effectively it goes back to the £348 million. They did not just pick 90, 90 and 90. On the basis of the estimate we made on this basis, they said let us make a provision which is 90, 90 and 90.

Q338 Chairman: Disallowance comes about because of error or delay. Is £90 million a year a price worth paying for error and delay?

Ms Gosh: No, it is not. For all the reasons I have discussed at length with the Committee we very much regret that there was error and delay. There is always I should say, and historically this has been the case, with a very complex scheme like the single payment scheme, rather like benefits, you would always expect there to be some level of disallowance and historically built into our budgets has been an assumption that it would be around 2 per cent. We would never expect to get to zero but over many, many years an assumption has been with the CAP it would be about 2 per cent.

Q339 Chairman: Do you have a programme where you are trading off reduced contingency for disallowance against improved efficiency to try and minimise?

Ms Gosh: As you know, we have invested substantially in the RPA in terms of their improvement programme. It has always thus far been something that looks like excellent value for money in terms of the payback. We do have in our heads, in thinking about both the customers and in particular the customer service but also the trade-off between the one and the other, the idea of the disallowance cost against the investment cost.

Q340 Chairman: If we take CSR 07, do we see a falling trend over the three years in expenditure on the RPA because you had to make lots of contingent investments on its IT to get that bit sorted out? At some point in the middle of CSR 07 the transition will be complete, will it not, to a flat rate area payment scheme? I presume at that point you will have got the system working as it should have done right at the beginning.

Ms Gosh: As Tony Cooper, the interim chief executive has said ---

Q341 Chairman: Is he still interim?

Ms Gosh: We are just going through an appointment process now. Since he was doing such a good job I encouraged him to stay on but because under the Civil Service rules strictly speaking we had not gone through a fair and open competition we have to keep describing him as interim but he has been here sine summer 2006 but he is still doing a good job.

Q342 Chairman: You envisage a falling off.

Ms Gosh: As we have taken some funding out of the RPA for this year as efficiencies come through and the investment comes back, we are expecting the RPA line to go down. As Tony has said, what we are anticipating at this stage is having worked extremely hard this year to get data errors out of the system and the entitlements basis good and overpayments and underpayments sorted, we would expect whatever payment pattern we have in the 2008 scheme to be the model basis on which we move forward. We are expecting stabilisation. What steady state looks like is what we will do in the 2008 scheme.

Q343 David Lepper: You told the Public Accounts Committee that over the CSR period you expected the RPA to lose a further 1,000 staff working on the Single Payment Scheme. Is that still the case?

Ms Gosh: That is still the case. Although we do not have for the CSR period specific head count targets, what we all have are administrative constraints.

Q344 David Lepper: Those estimated 1,000 staff are lost to the department completely?

Ms Gosh: Yes, lost to the department completely. What we mean is that at the RPA staff, to use an old-style word, establishment would be 1,000 people lower. As the posts became surplus, what we would do, in the way that we would always do in the department, you may get some natural wastage, people would move, but in the first instance they would be offered posts, if they were suitable, elsewhere in the department or in the rest of the Civil Service. I do not know what levels of natural wastage the RPA has at the moment. A large number of those you would probably get through the normal turnover in that kind of operation or department.

Q345 David Taylor: When you were last involved in that process, not you personally but your predecessor, in terms of head count a lot of the head count reduction metamorphosed into agency staff who were greater in number. What level of agency staff usage do you have in the RPA at the moment?

Ms Gosh: Very, very many fewer. I am very happy to send the Committee the updated figure. What Tony has been doing over the last year is converting most of the casual agency staff into permanent appointments so that is a proceeding that has been going on this year both for economic and customer service reasons. The answer is substantially fewer than we had at the height of the problems but I would be very happy to send you details of that.

Q346 Chairman: I was asking a moment ago about animal welfare savings and you told us that the £121 million was going to be achieved by greater efficiency, is that correct?

Ms Gosh: Yes.

Q347 Chairman: On page 245 of the Pre-Budget Report, paragraph DI2.4 it says: "... an increased sharing of responsibility for animal health and welfare with the industry including further utilisation of cost sharing mechanisms. This will generate annual net cash-releasing savings of £121 million by 20010/11." Could you explain the seeming inconsistency between what the Treasury believe is going to happen and what you have just told the Committee?

Ms Gosh: I am very happy to send the Committee a note. What that describes is an assumption that what we would do by the end of the CSR period is raise £120 million by charging people more for things we can already charge them for, the kinds of tests and so on.

Q348 Chairman: That is not what it says here. It says "an increased sharing of responsibility" it does not say a review of the charging mechanisms. It talks about responsibility.

Ms Gosh: What I described is absolutely true. The new proposals on cost sharing, for example, if this was the conclusion that ministers reached, by raising a levy is something that would only come into place when we had legislation. The new responsibility of cost sharing propositions, industry levies or however it might be done, a new body if it is a new body, do not impact on the CSR 07 period. It is rather like estimates and estimates. That is not talking about responsibility sharing in the same sense but is actually talking about using our existing powers to charge more. That is what that is talking about.

Q349 Chairman: That is a remarkable use of language. I am used to the fact that words do not always appear to mean what they say on a piece of paper but I am afraid "an increased sharing of responsibility for animal health and welfare with the industry" seems to me to be an elegant use of words to sum up a direction of travel of your policy. I am not for a moment disagreeing with your statement to us earlier, which I am sure was given in all good faith, when you said we are not certain whether we are going to get the agreement with the industry and, as far as I am concerned, we have not written into our budget any kind of net increase in monies coming in because of what we may do with the industry but that is not the way the Treasury are putting it.

Ms Gosh: It is not the way the Treasury are putting it. I am simply telling you what it is we are actually doing. I would be very happy to sent the Committee a note.

Q350 Chairman: I think I would write a note to the Chancellor.

Ms Gosh: That is not describing our policy on Responsibility and Cost Sharing. That is about making use of the existing powers we have to charge to get more income or look for other ways of saving money on the animal health budgets. When I described efficiencies, we are making savings on the animal health budget as much through efficiency so we are busy saving, and I will be happy to particularise, a significant amount of that £120 million already. We will be happy to write to you but that does not hang on legislation or the new structures.

Q351 Chairman: We will look forward to the letter and the reaction of the Treasury to it. You have to achieve a 5 per cent annual efficiency saving in your department across the CSR 07 period. Is that going to be achieved by a dominance of changes in core Defra or is it going to be equitably put across both core Defra and the bodies that you fund?

Ms Gosh: That 5 per cent, 5 per cent, 5 per cent relates to the administration budget essentially for the core department, so it is people, it is procurement, it is travel, it is professional services; it is all those things. It does not have an impact on the programme spend that we give out to the Environment Agency or the bodies we have described. It does not, on the whole, or I think it is does not at all, have an impact on the budgets of any of our executive agencies because they are, as most executive agencies are, funded through programme because it is delivery of services. The admin budget, which is where we have to find the savings, is the core department. Clearly we will be looking, since we are always looking for savings on programme spend as well, for efficiency. If Tony Cooper makes efficiencies at the RPA, that gives us greater scope on programme spend but the 5 per cent, 5 per cent, is at the core department so we will be looking at it in a variety of ways. We will be looking for it through better procurement in grouping together the procurements we do. We will be making sure we do keep a control on our head count numbers since they are one of the key drivers of our admin spend. We will be making sure that we minimise the use of external professional services. We will be doing a variety of things to contain the minus 5, minus 5, minus 5.

Q352 Chairman: Could the achievement of those targets be a combination of redundancy or compulsory redundancy or both?

Ms Gosh: We have said to staff that we have made no provisions in the coming year for any kind of voluntary redundancy schemes. Indeed, the fact we have slightly over-achieved on our head count reduction means we have some head room within our admin budget for this year to recruit and refresh our skills base. We will be planning the number of people we need and the skills we need on an annual basis through our new programme. There may be instances where we have staff who have skills we no longer need and equally there may be skills we do not have in the department. We have not ruled out the fact that we might do some targeted, but obviously it would have to be affordable, departure schemes in the future if there was a group of people with particular skills that we did not need any more but we do not have any plans for general VER/VES schemes.

Q353 Chairman: Have you a budget for redundancy payments?

Ms Gosh: No, we do not have any budget at the moment for redundancy payments and that is why I said we are not planning any in this coming year.

Q354 Chairman: I am slightly confused. If you are going to achieve these targets, you may have to do it over the period of the CSR 07.

Ms Gosh: If you take people as the real driver of admin spend, and for us people are the real spend of our add mind budget, what you need to do is to make sure you have some idea over the period of how much money you will have and about how many people you will be able to afford so we have given indicative budgets to directors.

Mr Stow: This year we have cut the pay budget for each of the programme areas by 3 per cent with a bit more out of the centre which means that we think we will be able to manage that through a natural wastage process. That is around the level of current voluntary departures. We have given indicative budgets which go down further in the following two years but we have a process now for shifting resources around on a constant basis rather than in one big bang every three years. We will have an approvals process for new priorities which will mean at the same time we cut existing ones. We do need to do some more in the area of workforce planning, as Helen said, because although the absolute numbers we have may be right numbers they may not be quite the right people so we may have gaps in some areas that will be thrown up by our new flexible way of working.

Q355 Chairman: We have a few moments before the vote comes so if we have to curtail activities we may drop you a line on some of these other points. I wanted to turn to the information which the Committee has been provided on your overall levels of savings in terms of your quarterly reporting schedule and your move towards efficiencies. In terms of waste implementation, the Office of Government and Commerce tables show that the financial savings for the waste implementation so-called Procurement Project were £102 million below target by the end of December. Why has progress been so slow in this area?

Ms Gosh: I am very happy to report to the Committee on the latest set of figures. I actually saw the latest set of figures on all three elements of our efficiency, what we might call our Gershon efficiencies, yesterday. I believe from those figures we are confident that we are over-achieving on both the cash savings we are committed to and the head count savings and are on track to deliver our relocations. I think the situation has changed since then but I am happy to let you know the latest set of figures we are about to supply to Treasury.

Q356 Chairman: You are in the process of self-validating your improvements, is that not the case?

Ms Gosh: I do not think we tell them and they believe us. There is a process of external validation of our efficiency.

Q357 Chairman: Who does that?

Mr Park: The NAO but I will let you know. We do not just pluck the figures out of the air.

Q358 Chairman: You were like a greyhound out of the trap to say there is an external validation and then, between the two of you, you do not know who is doing it.

Ms Gosh: We supply the figures to the Treasury. We supply the figures that we get in good faith on the basis that we have agreed with the Treasury for the purposes of the efficiency programme. Given the fact, for example, that the Treasury always uses the NAO for validating the figures we put in our PSA delivery targets, I am assuming that there is a validation process. They will not just take these at absolute face value and, therefore, these figures that we supply are subject to scrutiny. I am very happy to let you know what the scrutiny is but we are conscious that we have to be accurate.

Q359 Chairman: I am surprised to learn that the finance director does not know who is doing the external scrutiny because it is a bit like a company saying "We think we have some external auditors who come along and we think they do some work for us but we are not actually sure who they are." Normally a company will discuss with the auditors the process of audit and the methodology. That is part and parcel of a company's letter of appointment to its auditors, the methodology that is going to be employed, and there is a discussion as to how the audit should be done. That is partly helpful to the company in ensuring it can layout its financial information in such a way as it satisfies the auditors, and they are aware of what the criteria is that auditors are actually employed to do their job. I am rather surprised that you seem unaware of the auditors and clearly not aware of the methodology they employ to validate the work that you are doing.

Ms Gosh: I do not think this is surprising at all. The Gershon efficiency programme, although we have to supply information - and we are very happy to describe to you the process in which we collect it - is a programme that is led and driven by the Treasury. They have to assure themselves through their audit processes. I can absolutely assure you that we understand the nature of our audit, both with the NAO and European auditors and so on, and Stephen could give you an excellent account of that. This is not part of a departmental budgeting process. It does not form part of the departmental accounts. It is part of a cross-cut of data that the Treasury asks us to provide to support their programme, the programme they lead, to say have we or have we not delivered the Gershon delivery programmes. It is, in fact, for the Treasury to both agree with us in advance the nature of the data we give and to make sure it is right. I am doing my best endeavours, and will describe to you how we collect the information, but I do not audit it.

Q360 Lynne Jones: Are you saying basically that these figures are extracted from other figures which are audited and you understand the audit process for that.

Ms Gosh: Yes. It is a Treasury programme and there will be a basis on which my efficiency team have agreed with them that we extract the data, for example from local authority information systems. We will have agreed where the data comes from. On things like our head count, that is data we hold within the department and I am monitoring very closely all the time. Indeed, I know how many posts have been relocated so that is actually quite straight forward information as far as we are concerned.

Q361 Chairman: I am surprised that you are not conversant with the way that the audit process is carried out.

Mr Park: It is not actually our audit. We are subject to the audit but we do not agree the terms of reference.

Q362 Chairman: You have the financial targets that you are trying to achieve and you, therefore, have to show what you have done to achieve them.

Ms Gosh: That is what we do.

Q363 Chairman: Then somebody externally comes along and says is that a valid number.

Ms Gosh: Indeed, and that is for the Treasury to do.

Q364 Chairman: I would have thought, from the point of view of somebody managing the department, you might have been interested in the audit process. There are very few finance directors of a plc the equivalent size of Defra who would not be interested in the way their auditors audited the company's accounts.

Ms Gosh: Our auditors do not audit these accounts. They are not part of, if you use that analogy, the company accounts.

Q365 Chairman: The Treasury are auditing your performance.

Ms Gosh: Against a particular set of targets which, as we have discussed before, is as much an issue of what otherwise would have happened. It is not money that is within my control. It is local authority money on waste implementation and therefore, it does not have any salience for the accounts that we give to parliament or the accounts that we give to the Treasury of how much I spend. It is a cross-cut of a set of information that is put together for a very particular purpose. It does not actually relate to my role as accounting officer. It has no salience in terms of my role as accounting officer.

Q366 Lynne Jones: You mentioned head count. According to the figures that you have submitted you seem to have 945 extra staff at the end of March 2008 than was originally agreed in the 2004 Spending Review. You may tell me those figures are inaccurate, I do not know, but is this a problem for you. What impact will it have in future budgets?

Ms Gosh: This was obviously before my time. The original Gershon targets that were set were for an overall saving from the department and its agencies over the three year period of 2,500 staff of which at least 1,000 were due to come from efficiencies at the RPA. At the same time we actually got some new tasks for which we were given additional head count cover. What I did as a result of the clear problems that the RPA, and it becoming absolutely transparent that we could not expect them to make those savings, was negotiate a new target net of savings at the RPA which we would achieve. The 1,400 target that we have achieved was the subsequently negotiated target. What that is doing is taking us back to the CSR 04 target. We have achieved 200 more than that, of which 200 in the event, because of the improvements there, came from the RPA. It is because they are going back to the original target which we renegotiated with the Treasury.

Q367 Lynne Jones: The discussion earlier on the RPA is relevant.

Ms Gosh: It is relevant. If they were to come and do a snapshot again, the idea that we really would have 1,000 savings out of the RPA, we will have done but on a slower track because of the problems with the SPS.

Q368 Lynne Jones: The department has set up a Strategic Knowledge Capability Review and appointed external consultants. I understand they are expected to report this month. When are they expected to report and can you give us any information on the main conclusions and any budgetary implications?

Ms Gosh: I know we have commissioned some external work on how we manage risk across the department and how we deploy evidence in relation to that. What is the context you are describing?

Q369 Lynne Jones: I can refer to information from the Science Advisory Council. They have set up a sub-group and they describe it as a Science Capability Review. It has also been described as a Strategic Capability Review.

Ms Gosh: It is certainly the case that Bob Watson, our new CSA, has been working with the Science Advisory Council and with others - and this is going to be the subject of an inquiry that you do - to look at our science capacity and our research spend. That is something that Bob is already working on.

Q370 Lynne Jones: You have appointed external consultants.

Ms Gosh: This is a piece of work I think which is about a point that the SAC raised for us which comes back to risk which is do we have an evidence base about how the various risks that the department faces all join up.

Mr Stow: We are currently setting up what we call a research centre which is bringing together a group of external researchers to help us with that and that is out to tender at the moment. I do not recognise it from what you are reading out but that we expect to set up within the next four months or so. It is quite a long process because of the way that academic research is procured.

Lynne Jones: There is certainly some confusion here because there is certainly a reference to external consultants having already been appointed and expecting to report.

Chairman: Can I suggest, if there is confusion, that you write to the Committee in more detail about this and if Lynne has any further points we can write to you in advance of that letter to make certain we can get a comprehensive reply to the area of questioning. Thank you very much indeed for answering our questions. I am sure we shall be taking further advantage of your offer to brief us on funding issues and in due course to have you back before the Committee. I thank you very much Mr Stow and Mr Park for your contribution to our affairs this afternoon.