Source · Select Committees · Public Accounts Committee
Recommendation 9
9
Deferred
Defra underfunded Environment Agency's flood defence maintenance, setting lower 94.5% asset condition target.
Conclusion
Maintaining assets at the required condition needs funding: in preparing for the 2021 Spending Review, the Agency estimated it needed funding of £235 million a year to keep 98% of its assets at their required condition. Defra decided not to fund the Agency to maintain assets to 98%, instead it set the Agency’s maintenance funding at £201 million which should have allowed it to maintain 94.5% of these assets at required condition.12 The Agency told us it prioritises maintenance of assets based on those which are most risk for the public or those which are more critical.13
Government Response Summary
The government agrees and states the Agency is working on evidence to identify the optimal balance of capital and maintenance funding, noting £25 million was moved to maintenance for 2023–24. They commit to continue this work and write to the Committee by Spring 2025 with an updated assessment after the next spending review.
Government Response
Deferred
HM Government
Deferred
3.1 The government agrees with the Committee’s recommendation. Target implementation date: Spring 2025 3.2 The Agency is working on improved evidence to help identify the optimal balance of 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. 3.3 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. 3.4 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.