The Environment Agency is facing its most challenging time since it was formed almost two decades ago. By next October, it has to cut 15% of its staff due to a fall in DEFRA funding, bringing staff numbers down from 11,400 to 9,700.The cuts are so deep that departmental ‘salami slicing’ is insufficient. Major restructuring of how the agency works is needed, with potential ramifications for everything from flooding to waste crime.
Despite that, Paul Leinster, the agency’s long-serving chief executive, was surprisingly optimistic about the future during the first half hour of a meeting with ENDS in mid-November.
“You can always cope,” he said. “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 £1bn.
“You can do a lot of good things for people and the environment with that level of resource.”
He also pointed out that the agency coped well with major funding cuts in 2010 and 2011 and dealt impeccably with last year’s extensive floods.
“I think one of the things that gives me hope is we have a senior management team that is experienced. We’ve been through changes together... this is just another challenge facing us.”
Only when asked to clarify whether the current cuts will be easy to deal with did his optimism break. “No, no, no,” he says. “This is going to be painful. This is going to be a significant change for us.
“You shouldn’t take me saying, ‘We’re able to do this,’ as a feeling of, ‘This isn’t going to be a big challenge’.
“This could hit our morale; it could hit our performance. It’s difficult. But as managers we need to make sure we lead the organisation through this.”
Fast changing situation
The agency had been expecting the cuts since June’s spending review, when the chancellor George Osborne announced DEFRA had agreed to a 10% cut in its budget in real terms between 2014/15 and 2015/16.
This passes through to just a £21m cut in the agency’s budget between 2013/14 and 2015/16. But the full extent of that cut’s impact still proved shocking when it emerged this autumn.
At the start of October, Leinster sent an email to all staff explaining staff numbers would have to fall to 10,000 by October 2016. That is down from 11,400 today, and 13,700 in summer 2009 (although that larger figure includes 1,150 Welsh staff who have since been amalgamated into Natural Resources Wales).
Just a couple of weeks after that email, he announced a further budget shortfall had emerged and the cuts would have to be both deeper and quicker than expected: down to 9,700 by October 2014.
It also emerged that the budget had not actually been finalised but the agency did not want to wait until DEFRA’s final decision to react. Details of the exact changes that will occur will be issued to staff for consultation in February. But ENDS has seen internal communications that outline likely changes. The most striking is structural: the agency intends to move from a three-tier structure including national, regional and area operations, to a two-tier one.
However, sitting in a meeting room at the agency’s London offices, Leinster says this will only lead to about 200 jobs being lost. Most regional work will simply move into national or area offices, although staff may be able to stay in their current location.
The change has also been coming, he says. “There used to be regional spatial strategies which we would engage with, and there used to be Regional Development Agencies which we engaged with, and so there was a need to reflect that within our structure. With localism, the whole agenda’s moved.”
Instead, he says the most significant impacts will actually be to the agency’s Environment and Business (E&B) division, which is losing 34% of its grant-in-aid funding (see table 1). The E&B division covers almost all the agency’s work apart from flooding, including the response to pollution incidents.
Regulated businesses, such as waste sites and industrial plants, should be unaffected because work related to them is paid for by permitting charges. There should be no drop in inspection work or audits, nor moves to further risk-based regulation and self-reporting of pollution incidents, Leinster says. But campaigners and some agency staff fear that is inevitable and will increase opportunities for rogue operators to falsify pollution monitoring results. But most other parts of the division’s work will be hit.
“The highest level of impact will be in what Environment and Business grant-in-aid pays for,” Leinster says. “It pays for enforcement activity, because you can’t use charge funding to deal with illegal activities. It pays for some work with migratory fish. It pays for our town and country planning work, so spatial planning. And it pays for some of our navigation work.
“So if we’ve got less money for those... those are the ones that will be impacted and those are the ones that we have to look at.”
The idea that work on enforcement will be slashed will worry many, especially as Leinster says it will mean less work on illegal waste in particular.
Over the past 18 months, the agency has spent £5m on a dedicated illegal waste task force. This led to the agency stopping activity at 1,279 illegal sites in 2012/13 – the highest number for four years. However, 817 new sites were discovered during that year and more are being found by the day. That task force was always due to close in December, so other cuts will be necessary.
The agency does care
Leinster insists the agency will “still be doing a significant amount of illegal waste work. This is not, ‘The Environment Agency doesn’t care about illegal waste anymore’.” But that is unlikely to quell criticism.
Barry Dennis, director general of waste industry body the Environmental Services Association, said in a statement: “We’d be very concerned if the agency’s budget cuts had a negative impact on its efforts to crack down on waste crime. We recognise the need to make cuts in public spending, but these should not be at the expense of the environment or human health.
“Every minute that [illegal sites] are in operation, they will harm the environment, blight local communities and undercut responsible operators.”
Leinster says that the agency “is in dialogue” with DEFRA about the cuts. “It is a grown up conversation.” But he is at pains to say that DEFRA’s political priorities are not shaping the cut. For example, the agency will be reducing flooding work despite its high political profile.
The agency has already cut its river maintenance work in rural areas to focus on protecting homes and businesses, something Leinster admits has led to “significant criticism” from farmers who say it has increased flood risk. In response it is running pilots in which farmers dredge rivers themselves without needing a permit, but that has received equal criticism from environmental groups.
“Flood risk maintenance will be [further] impacted,” Leinster says. “All of our work on mapping and modelling and new developments in things like flood warning will also have to be resized. And we’re looking at a proportionate reduction in the number of people in flood risk management.
“I wouldn’t want to underestimate the reduction in [those levels compared to cuts elsewhere] and the impact that’s going to have. But one of the things it drives us towards is looking at, ‘Are there better ways that we can do some activities? Are there ways that we can streamline?’ That’s our challenge.”
Some 557 of the agency’s flooding staff, or 15%, are to lose their jobs according to internal communications seen by ENDS (see table 2). E&B will lose 659 staff (13%), and it will also suffer from a loss of technical support staff such as scientists. The agency insists that none of these cuts have been finalised yet.
The agency’s flood capability could also be impacted by factors aside the current cuts. In an October online question and answer session, Mark McLaughlin, the agency’s finance director, said the agency “cannot rely” on DEFRA anymore to provide extra in-year money if there is a major flood event.
Leinster says he will hold discussions with DEFRA if flooding forces the agency to hire temporary staff or greatly increase spend, but admits “I honestly don’t know what the answer is” if extra funds did not appear. The body is not budgeting to hold any contingency back. “The national incident room was open for over 70 days [in 2012]. If you then say, ‘2012 is the new norm, we’re going to set that level of contingency aside’, at what stage do you decide you don’t need it and put the money back into normal operations?” This could simply lead to DEFRA clawing back unspent funds.
The agency’s management team are not just looking at where to cut back on operations; they are also considering new ways of working. Leinster rules out any merger with Natural England, but says more may be done to try and increase partnership working and make use of volunteers.
This could include trying to get the public to do monitoring work, such as for invasive species, although Leinster says this would only be in addition to what the agency already does. “We need to be certain that the quality of the work enables us to make the right operational decisions.”
Natural Resources Wales is also considering asking local communities to undertake monitoring.
Hearing Leinster talk about the restructuring does calm some fears about its potential impact. He makes it clear the agency’s management are thinking carefully about what can be cut and trying to put the body on a sure footing so further changes are not needed over the next two years. He also does not get spooked by questions about future strike action, saying he does not want to deal with hypothetical issues and that the agency is being as open with the unions as it can.
However, there is an elephant in the room: the fact further cuts are likely given the government has back loaded its austerity measures into the next parliament. In this year's Autumn Statement, the chancellor, George Osborne, announced DEFRA will have to cut its budget by 1.1% in each of the next two years - a decision that will likely mean further belt tightening at the agency. Is there a point when cuts just cannot be stomached? Leinster will not say.
“If there is less money, there is less money,” he says. “We will fight our corner. We will make our case. We will explain why we believe investment in the things we believe in is really important. We’ll do all of that – of course we will. But if there’s less money, there’s less money. Whether then you look at different models for delivering things [I can’t say].”
He points out that the same question could be put to DEFRA itself as well as to the heads of its other major bodies: Natural England and the Animal Health and Veterinary Laboratories Agency. Leinster says his relationship with DEFRA is “very good…it always has been”. He does not think the agency is being singled out more than any other body.
In many respects, the cuts could not have come at a worse time for the agency. Next spring its chairman, Lord Smith of Finsbury, is stepping down. The agency is also under increased scrutiny due the rising interest in shale gas and the agency’s role in regulating it. Since the cuts were announced, Friends of the Earth has repeatedly questioned how the agency will be able to cope.
That fear will seem justified to some. Over the past few years, there has been strong growth of another gas-generating technology – anaerobic digestion. The agency strongly regulates it, yet that has not stopped several million-litre waste spills.
Leinster dismisses such concerns. The regulatory regime around shale gas is strong, he says, adding, “for me… the vast majority of shale gas activities – the drilling, the casing – are in fact quite traditional technology, and it’s being carried out by people who have done it quite a lot. The thing about AD is that it’s often going into places [like farms] where people haven’t been operating a process before.”
Shale gas is just an issue to be dealt with like any other, he adds. “I remember when we had the fridge mountain. I remember when IPPC [the Integrated Pollution Prevention and Control regime] first came in. I remember when we [had issues] with cement kilns. [Shale gas] is just a hurdle to jump. It’s something else which comes along. We have to get our heads around it. The industry has to get their heads around it. Then it settles.”
Leinster earns £195,000 a year. He says he does not know if he will take a pay cut in response to the agency’s new budget, but he will not be taking performance-related pay. He has not done so since 2010.
He also confirms he has no plans on leaving no matter what happens over the next year. “I enjoy working here,” he says. “I can’t think of a better place to work.”
He puts that enthusiasm largely down to the staff. ENDS has met many agency staff since the cuts were announced who have expressed a drop in morale and a big increase in uncertainty about their future. But Leinster says he thinks the staff are of a character that means the cuts can be dealt with without a drop in performance. “I was hugely proud last year of how we responded to the flood events,” he says as an example. “We put out a call for people on the Wednesday before Christmas and over 600 people volunteered.
“I think our staff do stunning work and that’s in everything from how we regulate the nuclear industry to how we deal with water resources, how we interact with anglers, what we do on navigation, on water quality, on regulating industry, on dealing with illegal waste. We have delivered year in, year out.”