Defra and DECC cuts confirmed in Spending Review

A 15 per cent cut to the day-to-day spending of the Department for Environment, Food & Rural Affairs (Defra) for the next year has been confirmed by the Chancellor of the Exchequer George Osborne today (25 November).

Osborne confirmed the cuts in his Autumn Statement and Spending Review, in which he set out, respectively, the state of the UK economy and details of government plans to cut spending over the coming years. The review set departmental budgets up to the 2020 general election.

The government is seeking to reduce departmental spending by a total of £20 billion as part of its quest to create a national surplus by 2020. Osborne stated that this goal is still forecast to be achieved, with the Office for Budget Responsibility (OBR) reporting growth this year of 2.4 per cent, rising to 2.5 per cent in 2017.

The review revealed that public spending will total £756 billion in 2015/16, and will increase steadily to a total of £857 billion in 2020/21.

Defra

In his statement to the House of Commons, Osborne announced the 15 per cent cut to Defra’s £2.1 billion annual budget for the next year. Basic figures released by the department suggest that its budget will fall by £100 million every year until 2020.

Osborne did note that £2 billion of government funding would be used to protect 300,000 homes from flooding under a six-year capital investment programme.

A £3-billion investment will also be used ‘to safeguard England’s countryside through the Common Agricultural Policy’, with £350 million in protected funding for national parks and forests.

To accommodate the cuts, Defra’s administration budgets will be reduced by 26 per cent by 2019/20, saving £123 million.

The spending review document also revealed that the Landfill Communities Fund would be reformed, amending the cap on contributions by landfill operators to 4.2 per cent. £20 million of the additional revenues from the tax following this change will be allocated to the Environment Agency to address waste crime over the next five years.

This funding will enable Environment Secretary Liz Truss to follow up on the promise she made at the Conservative Party Conference in October to ‘crack down on waste cowboys’.

Earlier this month, Osborne confirmed that Defra was among four departments that had agreed average spending cuts of 30 per cent over the next four years. The Department for Communities and Local Government (DCLG), Department of Transport and the Treasury were the other three departments to agree to the cuts.

The impacts of the budget cuts will be set out in Defra’s single departmental plan, which a spokesperson for the department says will be published before the end of the year.

DECC

The Department of Energy & Climate Change’s (DECC) day-to-day budget was also reduced by 22 per cent in the review.

Amber Rudd last week set out the future of the UK’s energy supply, suggesting that gas and nuclear power would be used to replace the coal-powers plants that will be phased out by 2025. The announcement was heavily criticised by environmental and renewable energy groups.

In the spending review, Osborne reiterated this by announcing that spending on energy research would double particularly on small, modular nuclear reactors and shale gas.

The Chancellor also said that support given to low-carbon electricity and renewable energy would double and that low emission vehicles would also be supported. Finally, with the upcoming COP21 climate change negotiations in Paris in mind, he claimed that support for climate finance would increase by 50 per cent in coming years.

The Chancellor summed up the cuts to the two departments by stating that “going green should not cost the earth”.

Among the other cuts confirmed in Osborne’s statement was a 17 per cent reduction in the Department for Business, Innovation & Skills (BIS) budget.

Industry response

Members of the waste and resource industries have begun responding to the spending review, highlighting that the details of the cuts will be significant.

Ray Georgeson, Chief Executive of the Resource Association: “Clearly the devil will be in the detail, but in what is already a smaller department of government a £100 million a year, year on year, reduction in revenue spending in Defra is significant and will be painful. 

“We can only hope that whatever efficiency savings are required do not come at the expense of the need to maintain regulatory vigilance on waste crime, proper enforcement of recent regulation such as the [Materials Facility] Regulations or the vital work still needed to develop our resources sector and circular economy through the work of WRAP [the Waste & Resources Action Programme].”

The Environmental Services Association’s (ESA) Executive Director, Jacob Hayler said: “Budget cuts will of course be challenging for those affected departments to manage, and ESA will continue to work closely with Defra, and colleagues in other departments, to ensure that we meet our shared objectives for growing a thriving waste, recycling and resource management industry.

“At the same time, ESA was very pleased to see that the government has listened to the industry’s strong representations on the need to fight waste crime, and has allocated £20 million to the Environment Agency over the next five years to stamp out this blight on the sector which undermines legitimate businesses and their investments.”

A note of caution on the government’s energy policy was sounded by Nick Molho, Executive Director of the Aldersgate Group, who said: “Without rapid investment in energy efficiency and low-carbon heat at scale, it is difficult to see how the UK will meet its Fourth Carbon Budget at least cost and on time. The government needs to do much more to improve the energy efficiency of our building stock and explain how its new proposals will deliver the increase in low carbon heat that the Committee on Climate Change has been calling for. It is also unclear how the government intends to allow further investment in cost-effective renewable electricity projects outside of the offshore wind auctions announced last week.”

Referring to the spending cuts at Defra and DECC, Molho added: “Government departments such as Defra and its regulatory agencies provide important – and often overlooked – services that are key to the effective functioning of our economy. These include providing access to high quality natural resources such as water and interpreting UK and EU environmental legislation in a way that is pragmatic and can support business innovation. The implementation of the different settlement plans must ensure that these government departments and their regulatory agencies have sufficient resources to continue providing these services effectively.” 

The Chartered Institute of Wastes Management (CIWM) has welcomed the lower than expected ‘headline’ cut to Defra’s budget, but warns that the effective cut to unprotected areas like waste and resources could be significantly higher. Chief Executive Steve Lee said: “CIWM has repeatedly emphasised the need to ensure that Defra remains adequately resourced. The department has already stepped back from waste and resource policy and funding, and further cuts could exacerbate this situation. However, the industry has and will continue to work with the department to ensure that collectively we can move the sustainable waste and resource agenda forward.

“In other areas, we welcome the additional £20m for the Environment Agency to tackle waste crime. This provides the guaranteed, medium term support from the Government that the industry has been asking for. Also encouraging is the £1.15bn funding increase for the Renewable Heat Incentive from 2016 to 2021. Recent figures suggesting the UK will struggle to meet its 2020 EU renewable energy target, coupled with the latest warnings about security of energy supply over this winter, highlight how important it is that the government maintains adequate support for technologies such as anaerobic digestion that convert waste into renewable energy.”

Executive Director of the Environmental Industries Commission, Matthew Farrow, said: “Despite the announcement of expected cuts to departmental budgets at Defra and DECC in today’s Comprehensive Spending Review, George Osborne, The Chancellor of the Exchequer, made some positive noises on addressing environmental concerns. Indeed, his reference to the Paris climate talks is particularly welcome, not to mention his willingness to protect spending on flood defences to protect 300,000 homes.

“The Chancellor did dedicate a section of the speech explicitly to environmental concerns. We will of course need to look at the detail but a cut to DECC’s day-to-day budget of 22 per cent, and with Defra facing a further 15 per cent cut, wide-ranging consequences appear likely.”

The full documents are available on the government’s website.