Spending Review: first relief and then a reality check

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Spending Review: first relief and then a reality check

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Reflecting on today’s announcement that DEFRA would be 15% in real terms by 2020 one of the RSPB's economists remarked “when you’re expecting the apocalypse a broken leg feels like a Christmas present”.

He does tend to trade in hyperbole, but Defra’s settlement is better than the 30% we had been led to expect (see here).

It seems the chancellor has been able to make use of newly predicted increases in tax revenue and as a result the consequences for the State’s ability to address its environmental commitments will not, it appears, be as bad as we feared.

Yet, although there is relief, the reality is that DEFRA has overall faired worse than most because it received the largest resource cuts in the last round. It will have been cut by around 50% in real terms since 2010 by 2020 and (DECC by 37%). DEFRA will be receiving the fourth biggest cuts of any department.

The total money cut from DEFRA today will be a 0.03% cut in his overall budget. £100 million is a drop in the ocean of public finance but critical funding for the natural world.

As ever the detail is found in the detail of spending reviews.  The ritual is that once the Chancellor sits down after his statement to the Commons, the detail emerges on the Treasury’s website and our economists then start trying to reveal the true picture.  Here is what they have found so far...

...the figures presented in the CSR ignore “time limited expenditure”. Defra’s day to day spending for this year reported in its annual report was £1.77 billion but the budget reported in the CSR is £1.5 billion. That’s another £270 million (well over the total Natural England budget) that is not mentioned and could be at risk. If there is no more space for, “time limited” spending the total cuts to DEFRA’s budget would be 27% and in the area we had been expecting.

...the government states than it intends to reduce DEFRA’s administrative costs by 26%. If that is possible, that would go a long way towards efficiently making these cuts without harming front line services. It would come to over the extra £100 million they need to save each year (according to the CSR figures) but they don’t mention where they would find the initial investment to make these savings if they are achievable. The admin savings also include reductions in, “unnecessary bureaucracy” which could mean not enforcing environmental protections in a way we might consider appropriate.

This is complicated stuff and my guess is that not all civil servants will have managed to get their heads around what all this will mean.  Is it a 15% cut which will be entirely made up of efficiency savings or a 27% cut that may or may not be ameliorated by significant efficiencies?

What we do know is that this would mean a 50% cut in spending between 2010 and 2020. We also think DEFRA could lose more than 2,000 staff bringing total losses up to 10,000 since 2010 (see graphic above).

My closing thought is this – the challenge of restoring nature in a generation is enormous and erosion of the capacity of the State is unlikely to be helpful unless innovative sources of finance are found quickly.  Civil society wants to respond, but may struggle to grow at a rate to compensate for the reduction in the size of the State while businesses need to step up more.  We need an open and honest conversation about how to close the growing gap between stated ambition and collective capacity to meet it.

If we can’t fill the resource gap then ultimately our prosperity will suffer.  As the Government’s Natural Capital Committee has clearly shown - damaging our environment means damaging our shared home, eroding the soils, minerals, clean water, breathable air and wildlife that support our health and our well-being.

Comments
  • It means when a price/value has been adjusted for inflation.  Simply comparing two values/budgets  can be misleading unless you take changes to cost of living into account. I hope that helps.

  • Could you explain what 'in real terms' actually means? When I hear it, I just know I am about to be lied to.