Comprehensive Spending Review (Hansard, 27 October 1998)

§ Mr. Nick Brown

I explained in broad terms the outcome of the Comprehensive Spending Review (CSR) for MAFF in my written statement to the House on 29 July 1998,Official Report, columns 341–45. Since then my officials have been translating the baselines for current, capital and ring-fenced BSE expenditure into budgets for the Department's individual programmes of activity. This process is complicated by the need to revise the programme structure to fit the Department's new aim and objectives. A detailed breakdown of planned expenditure will be published in MAFF's 1999 Departmental Report.

In the meantime I am setting out the key financial implications of the CSR for MAFF. Current: running costs The settlement includes £360.4 million in 1999–2000, £358.7 million in 2000–01 and £349.6 million in 2001–02 for MAFF's gross running costs, a change of £+5.2/+3.5/-5.6 million from the Department's 1998–99 running cost ceiling. Using the Treasury's

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GDP deflator, this represents a year-on-year cut in real terms of 1.1/2.9/4.9 per cent. and a cumulative reduction compared with the 1998–99 baseline of 1.1/4.0/8.7 per cent. Included in the Departmental running costs baseline for the next three years is an additional £20.5/29.6/22.1 million for new work (including implementation of the Krebs report, food safety and modernising the administration of CAP payments). That means that the amount available for existing work is £339.9/329.1/327.5 million, a reduction of £15.3/26.1/27.7 million compared with the baseline for 1998–99.

This is a challenging target which will require the Department to find significant savings to cope with price increases, pay awards and other demands over the period. A thorough review of running cost baselines throughout the Department is currently in progress in order to ensure that resources are directed where they are most needed.

As part of the CSR settlement on running costs, MAFF is required to agree with Treasury a set of service delivery targets and an aggregate efficiency target. This work is in hand and will form part of the Department's Public Service Agreement, a new feature of the post-CSR arrangements which will set out in a single published document the Department's aims and objectives, resources, targets and efficiency plans for the three years 1999–2000 to 2001–02.

Current: scheme Scheme expenditure (or programme expenditure as it is also known) includes non-CAP support and compensation payments to farmers (for example, under the agri-environment schemes) and MAFF's payments for work undertaken on its behalf by its Executive Agencies.

The plans a——allow for additional funding over and above the 1998–99 baseline in the following areas:

(i) food safety—a total of £3.9 million (plus £8.4 million in running costs—included in the Departmental running cost figures above) over the next three years to support work on protecting the public which will transfer to the Food Standards Agency, when established, and to help rebuild public confidence in the safety of the food supply;
(ii) animal health—an extra £4.4/4.6/4.4 million for implementing the Krebs Report on badgers and bovine tuberculosis, additional TB testing and on-farm surveillance work related to foodborne zoonoses;
(iii) countryside—an extra £7.6/14.3/19.5 million to fund improvements and enhancements to the agri-environment schemes as described in the Minister's statement on 29 July 1998, Official Report, column 349, including extra funds to enhance the payment rates under the Organic Aid scheme. In addition the sum available for new Countryside Stewardship agreements in 1999 will be raised by £1.0 million to £7.5 million.
(iv) export promotion—£0.6/1.0/1.0 million to restore sums transferred from Food from Britain's core funding in 1996 to support the Sector Challenge scheme.

Since the CSR settlement on scheme expenditure is insufficient to meet all the requirements for additional funding, the Department's plans allow for the following offsetting savings:

(i) £0.0/-2.4/-3.5 million from the closure of the Nitrate Sensitive Areas scheme;
(ii) £-0.4/-0.9/-1.5 million from the closure of the Postgraduate Agricultural and Food Studentships Scheme to new applicants; and;
(iii) £-1.0/-2.0/-3.0 million as a result of seeking to transfer to industry the responsibility for funding some of the MAFF research from which industry benefits directly.

In addition to the Department's expenditure plans assume the transfer to industry of the cost of milk testing for brucellosis and Enzootic Bovine Leukosis in 2000 and extending the range of chargeable work for the inspection of plant imports.

Capital The Department's capital spending plans allow for the following increases in funding compared with the current baseline:

(i) flood defence—an extra £5.0/8.0/10.0 million in grant aid for flood and coastal defences;
(ii) marine research vessel—additional provision of £0.4/11.5/11.6 million for the commissioning of a new vessel to replace the two aging vessels currently operated by the Centre for Environment, Fisheries and Aquaculture Science (CEFAS);
(iii) CAP administration—£2.6/3.4/1.5 million (plus an extra £15.5 million in running costs over the three years—included in the Departmental running cost figures above) to modernise the administration of CAP payments to farmers by setting up a new integrated IT system, incorporating a Geographical Information System;
(iv) Objective 5 (b)—£12.4/13.3/0.3 million for legally binding commitments that must be met in respect of payments under the EU's rural development programme in Objective 5(b) areas;
(v) fishing vessel decommissioning—new provision totalling £10.5 million over the three years towards restructuring of the fishing fleet, to complement the effort control arrangements already introduced.
Under the new public expenditure arrangements MAFF, like other departments, is required to produce a Departmental Investment Strategy (DIS) setting out how its capital resources will be spent and managed over the next three years. The DIS will cover all aspects of the Department's capital budget, including planned expenditure on buildings and IT and the disposal of assets. On the latter the CSR settlement incorporates certain assumptions about assets disposal.These include the sale of the Covent Garden Market site in 2000–01, subject to the passage of enabling primary legislation, and the sale of the MAFF office site at Tolworth also in 2000–01.

BSE

Over the next three years the baseline for ring-fenced BSE expenditure by MAFF and the Intervention Board will fall by £194/223/230 million compared with 1998–99. This reduction assumes that there will be savings on the Over Thirty Month Scheme as a result of green rate adjustments, that the costs of some of the control measures will be recovered from the industry through charges and that the Calf Processing Aid Scheme will close. I am reviewing with colleagues the precise timing of some of these savings in the light of representations I have received from the NFU about the state of the UK farming industry.

Despite the continued fall in the number of BSE cases overall expenditure remains high (£460–500 million a year) because of the precautionary measures that remain in place.