Source · Select Committees · Public Accounts Committee
Recommendation 3
3
Accepted
Set out value for money of capital and maintenance budget options for flood defence.
Recommendation
Defra has not established what the appropriate balance is between building new defences and maintaining existing ones. The Agency is responsible for maintaining its existing assets and has assessed that optimal value for money is achieved when 98% of its high consequence assets are maintained at their required condition. A lack of funding means the Agency has not been able to maintain assets at this level. 203,000 properties are at increased risk because assets are below their required condition, more than the 200,000 better protected through the capital programme. Because of the slow start to the capital programme, the Agency spent £310 million less than planned in the first two years. Neither Defra nor the Agency considered whether to use some of this underspend to meet the shortfall in maintenance funding and instead agreed with HM Treasury to defer it to the remaining four years of the programme. For 2023–24, Defra has provisionally agreed with HM Treasury to transfer £25 million from the capital programme to maintenance. This is only enough to get to 94.5% of assets in target condition, still well below the Agency’s target of 98%. Recommendation 3: For the remaining years of the capital programme, the Agency should set out the value for money of different options for the balance between capital and maintenance budgets, and whether there is a case for transferring funds between the two. This should be reviewed annually. The results of the review should be reported to the Committee as soon as completed and used to inform Defra’s and HM Treasury’s funding decisions.
Government Response Summary
The government agreed to the recommendation and committed to continuing to identify the optimal balance of capital and maintenance. They will write to the Committee by Spring 2025 with an updated value for money assessment after the next spending review.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. capital and maintenance in order to maximise value for money. The department agreed with HM Treasury to move £25 million from the capital budget into its maintenance budget for 2023–24. Rebalancing budgets is best done in a managed way. Longer term fixed budgets provide stability and certainty, which allows costs efficiencies and productivity improvements through packaging of delivery. However, unexpected events or fluctuations in project delivery, such as storm damage and inflation, means that rebalancing midway through an investment programme can increase value for money. Such switches are always done on the basis of a rigorous assessment between the Agency, Defra and HM Treasury of the value for money, and outcomes achievable. The department and the Agency will continue to work together to identify the optimal balance of capital and maintenance, and, following the next spending review, will write to the Committee by Spring 2025 with an updated assessment of value for money and impacts for the remainder of the 6-year programme.