Fit for purpose?

29th May 2015


Fitforpurpose

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Charmaine Jude

With the Environment Agency continuing to face budget cuts and failing to achieve its performance targets, can it cope with growing demands on its services?

Environmental regulations benefit the economy by about £10 billion a year, according to Defra. Yet the Environment Agency, the main regulator of environmental rules in England, continues to face stringent cuts to its budget and is losing several hundred key staff in the process.

The financial restrictions come as the agency reports higher levels of non-compliance and a significant increase in pollution incidents, raising questions on whether it has the staff and resources to carry out its statutory responsibilities.

The agency is a non-executive departmental public body funded largely by Defra. The environment department has been reducing the grant-in-aid budget the agency receives since 2010, but it was the devastating effects of last year’s winter flooding that focused attention on the cuts in flood defence spending and staff. In response, the government announced an extra £100 million for flood repairs and maintenance of defences, and further funding has been allocated for flood and coastal risk management (FCRM) until 2016.

But while much of the FCRM capital budget has been protected, the agency’s environment and business division, which deals with all environmental permitting regulations, non-compliance, pollution incidents and environmental crime, continues to face budget cuts – although the 2015 budget allocated an additional £4.2 million for the agency to specifically tackle illegal waste activity.

Costs and benefits

The agency was established in April 1996 under the Environment Act 1995, and is one of the largest environmental regulators in Europe. The total cost of running its regulatory and management services in 2014–15 was £1.3 billion. About 66% was spent on FCRM, 21% on water, land and biodiversity, and 12% on regulating industry. According to Defra, the money is well spent. A report published earlier this year by the environment department concluded that, for every £1 spent on environmental regulation in UK, there is a £3 net benefit to society.

The study, Emerging findings from Defra’s regulation assessment, estimates the costs and benefits of 428 regulations derived from domestic, EU and international legislation between 2012 and 2021. The net annual cost to businesses of implementing measures to comply with the regulations over this timeframe is calculated at £4 billion, However, the benefits to society overall, including savings to the government, the economy, public health and the environment, amount to £10 billion a year.

Frida Hök, policy adviser at international chemical secretariat ChemSec, said: “It is important to emphasise the socio-economic savings that come with stricter environmental regulation. The impacts of chemicals on human health, environment and wildlife result in extensive societal costs, which are reflected in, for example, healthcare expenses.”

Defra says the benefits “reflect the introduction of new regulations and the removal of old regulations”, which are being phased in as part of its smarter environmental regulation review. Under the coalition government’s initial “one-in, one-out” (OIOO) rule (replaced in 2013 by one-in, two-out), every regulation implemented by a department had to be matched by savings to business. The Defra report revealed that the OIOO rule delivered £3 million additional savings a year for business.

Assessing performance

Although most businesses invest in compliance and other environmental protection measures, some do not. The agency admits it is failing to meet its own targets on reducing pollution incidents and non-compliance in business. The agency publishes a corporate scorecard, which provides a quarterly overview of its performance against 23 measures covering the five themes in its corporate plan (see panel, p.16). The results for the quarter to March 2014 revealed that serious and significant pollution incidents continued to rise, with 639 category one and two pollution incidents recorded – 44% higher than the agency’s 442 target. The increase in incidents from regulated sources was twice as fast in 2013–14 as those from non-regulated sources and represented 43% of the total.

Non-compliance has also risen, with 3.8% of permitted sites showing poor compliance records, compared with 2.9% in the previous year. Non-compliance in the lowest three compliance bands of Opra – the agency’s operational risk appraisal scoring system – increased from 159 to 182, well above the 124 target for the year. The agency says the increase reflects, to an extent, an improvement in its ability to identify and record non-compliance.

Its environment and business division, which has regulatory oversight for monitoring and compliance, enforcement work and environmental crime, is one the biggest casualties of the cuts. Grant-in-aid funding faces further cuts until 2016, representing a fall of 34% over three years, according to figures released by the agency. The number of staff at the agency has also been reduced, from 13,181 in March 2010 to just 10,250 in October 2014. The workforce is likely to contract further this year, to around 9,700, a reduction of 15%, after staff transfers to Natural Resources Wales are factored in.

In an interview last year, Paul Leinster, the agency’s chief executive, claimed it could cope with less staff: “The important thing for me is that by March 2016 we’ll still be 9,700 people and we’ll still have a budget of over £1 billion. You can do a lot of good things for people and the environment with that level of resource.”

Rising problems?

The environment and business division is responsible for most environment protection measures in England, including air, land, water, waste and biodiversity. Its regulatory inspection and auditing work should not be directly affected by the cuts because this is funded by permit charges. But cuts in grant-in-aid funding appear to be having an impact on the division’s environmental protection work.

Recent figures released by the agency show water quality has fallen, with just 17% of England’s rivers now judged to be in good ecological health, compared with 29% in 2014. Mark Owen, chief executive at the Angling Trust, says: “I am very concerned as to the ability of the Environment Agency to properly carry out its role as competent authority under the Water Framework Directive, given present and potentially further cuts in [its] grant-in-aid.”

The agency says pollution, over-abstraction and invasive species are the main problems. Responding to concerns, a spokesman told the environmentalist the agency had improved or stabilised the condition of nearly 2,000 miles of rivers. “The agency will continue to work closely with farmers, businesses and water companies to reduce pollution and improve water quality wherever, and however, possible,” he said.

Environmental organisations remain sceptical, arguing that further cuts put the natural environment at risk. Rob Cunningham, head of water policy at the RSPB, says: “The agency’s biodiversity staff are particularly vulnerable to cuts because they rely so heavily on direct grant-in-aid, whereas other parts of the organisation raise revenues through charging schemes. While the talk is always of increased efficiency, what this really means is losing people who understand their patch and are able to offer support and expertise tailored to local need.”

The agency cites waste management as the worst business sector for pollution incidents and non-compliance, and says there are still hundreds of illegal sites operating in England, many of which are close to sensitive receptors, such as houses, hospitals and schools. The Environmental Services Association (ESA), which represents the waste sector, says waste crime damages the reputation of its members and undermines legitimate waste and recycling work. Sam Corp, head of regulation at the ESA, argues that cuts to the agency’s waste crime work could undermine its regulatory clout. “Although we recognise the need to make cuts in public spending, these should not be at the expense of the environment or human health,” he says.

Data published by the ESA Education Trust estimates the annual cost to the economy from waste crime “is likely to be in the region of £600 million, and could be far greater”. Earlier this year, the government announced tougher enforcement proposals and additional funding to help the agency tackle waste crime. Corp says the ESA welcomes the extra money but argues the waste sector requires more assurance: “Tackling waste crime requires ongoing resourcing and, while the additional funding is very helpful, we would also welcome a long-term commitment to fund this important work.”

However, the agency’s 2014–16 corporate plan acknowledges that funding for its environment and business division is still falling. This, it states, is “placing pressures on some important areas of work”. The plan also acknowledges that new responsibilities are likely to put further pressure on budgets.

The environment and business division is responsible for regulating onshore oil and gas operations in England, for example, including the emerging shale gas and oil industry. But, with fewer staff in post, questions are being asked about its ability to regulate this new, untested industry.

The agency’s former chair, Chris Smith, believes the regulator will not be able to cope and is calling for a new single regulator for all onshore gas and oil extraction in the UK. In an interview with the Guardian in February 2015, he warned: “The current resources available to regulate fracking safely could not cope with the government’s hoped-for shale gas boom.”

The agency says the shale gas industry is a government and corporate priority. “Funding for setting up the regulatory regime comes from Defra grant-in-aid,” a spokesperson told the environmentalist. “Our work to regulate individual sites is financed through the charges we raise for environmental permits and licences, which is not subject to spending cuts.”

The fracking industry is not completely convinced. A report published in March by a new shale gas taskforce, set up by the government and chaired by Smith, concluded: “The current regulatory oversight for any potential shale gas industry at a national level does not command the public confidence that is necessary.”

Changing the way it works

In recent years, the agency has introduced a number of self-assessment schemes to optimise staff and resources so that regulatory oversight is targeted at the worst offenders. Its monitoring certification scheme (MCERTS) is one. This sets standards for continuous emission monitoring systems, and allows operators to submit their own data to the agency for compliance assessment.

The Opra scheme assesses the risks from industrial installations covered by environmental permitting regulations (EPR). Those considered high risk or which show poor compliance performance and require more inspection visits are charged higher rates than low-risk installations. The EPR assurance scheme that covers the pig and poultry industry allows certification bodies to inspect member farms and collect compliance data for the agency. Farms that join the scheme require fewer compliance audits, saving them around £900 in inspection fees.

A similar EPR assurance scheme (EMS+) has been trialled in other industries to see whether regulatory compliance can be incorporated with certification audits for environmental management systems. EMS+ remains a work in progress, and the certification bodies and businesses that took part in the trials raised concerns about how the scheme would work in practice (see the environmentalist, December 2013).

For businesses, self-regulated and risk-based schemes mean fewer inspections, lower compliance fees, less pressure on staff and less bureaucracy. Pressure on the agency’s over-stretched budget is relieved and its environment and business division can focus on high-risk businesses and poor performers.

The agency’s best practice guides to help businesses and trade bodies deal with complicated technical and regulatory procedures and other onsite activities are being phased out. The Netregs website, a source of technical and supporting guidance, is no longer available for England, although the service still operates for Scotland and Northern Ireland. An agency spokesperson says that guidance on legal compliance is available on the gov.uk website, but added: “We no longer develop or host best practice guidance, in accordance with government policy, although we continue to support trade associations and others who wish to do so.”

Much of the agency’s previously published guidance is either no longer available or has been archived on gov.uk. As one agency officer told the environmentalist: “Our advice is to grab it while you can.”

Environmental sense?

There are limits to the more-for-less dictat, and the key question for the new government is whether continued cuts to the agency’s budget make economic or environmental sense. Using the treasury’s own cost-benefit rule, flood defence projects get the go-ahead if the agency can demonstrate £8 of benefit for every £1 of investment. Given that the agency’s total annual budget is just over £1 billion and Defra’s own study shows a £10 billion a year benefit from environmental regulations, such a return is a powerful argument for sustaining or even increasing the funding the regulator requires to deliver the vital protection services on which we all depend.

The 2014–16 corporate plan highlights the challenges the agency faces as it struggles to carry out its statutory responsibilities with fewer staff and resources. “We will have to prioritise our actions and reduce some of our activities,” states the plan, while acknowledging that pressures on its environmental services and infrastructure are set to increase in the years ahead.


The role of the agency

The main purpose of the Environment Agency is to protect and improve the environment, which it continues to do through its statutory responsibilities as a regulator and through regulatory guidance, good practice, supporting information and supplementary guidance.

Its regulatory responsibilities cover many industrial activities, the waste sector and nuclear installations as well as contaminated land, onshore oil and gas installations, agriculture, water quality, flooding and coastal defences, fisheries, emissions trading and climate change, conservation and ecology.


Agency’s five priority themes

  • Act to reduce climate change and its consequences – we will play a full part in helping to reduce greenhouse-gas emissions, help people and wildlife adapt to climate change, and put climate change at the heart of everything we do.
  • Protect and improve water, land and air – we will maintain and improve water quality, promote more sustainable land management, protect and enhance wildlife, and improve the way we work as a regulator to protect people and benefit the environment, while minimising costs to businesses.
  • Work with people and communities to create better places – we will reduce the risks to people, households and businesses from flooding and help people to improve, protect, value and enjoy their local environment.
  • Work with businesses and other organisations to use resources wisely – we will further our understanding of the best environmental options for managing waste and promote more efficient and sustainable use of resources.
  • Be the best we can – we will improve the way we work with customers and partners and involve communities. We will use compelling evidence and knowledge to support decision-making and use the funding available to us to maximise outcomes for people and the environment, while minimising our own environmental impact. We will continue to drive efficiency to deliver value for money.

Source: Environment Agency corporate plan 2014–16.


John Barwise, MIEMA, CEnv, is a director at QoL, an environmental management and communications consultancy.

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