Source · Select Committees · Public Accounts Committee
Recommendation 11
11
Accepted
Defra and Agency failed to assess £310 million capital underspend for maintenance shortfall.
Conclusion
HM Treasury gives departments some flexibility to switch money between the capital programme and maintenance funding, for example if capital spending is delayed. Because of the slow start to the capital programme, the Agency spent £310 million less than planned in the first two years. Defra and the Agency did not assess the value for money of using part of this underspend to meet the shortfall in its maintenance budget. Instead, they deferred the spending to the last few years of the capital programme when it will need to spend around £1 billion per year.17 Defra has provisionally agreed with HM Treasury to move £25 million from the capital budget into its maintenance budget for 2023–24. The Agency expects this additional funding will allow it to reach its target of 94.5% of assets at required condition, whereas the Agency’s own target was 98%.18 Building in flood risk areas
Government Response Summary
The government acknowledges the committee's observation on budget management, stating that the Agency is working on improved evidence to identify the optimal balance of capital and maintenance funding to maximise value for money. It also confirms the £25 million transfer to maintenance for 2023-24 and commits to providing an updated assessment by Spring 2025.
Government Response
Accepted
HM Government
Accepted
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.