Committee of Public Accounts

Press Notice No. 40 of Session 2005-06, dated 9 May 2006


Mr Edward Leigh MP, Chairman of the Committee of Public Accounts, said today:

"The Environment Agency must improve its information systems in order to tighten up its regulation of the taking of 36 million litres of water each day from the natural environment and reservoirs by water companies, farmers and industry.

"But the Agency has dragged its heels in introducing better information systems. And yet it is surprisingly confident that it has achieved annual efficiency savings of some 3% over the last three years.

"The Agency needs to streamline its water resource management activities. It should set up a single team to oversee the monitoring of water levels and explore the scope for reducing the number of monitoring sites. There is not enough focus at present on the regular checking of those sites where water shortages and other problems are really likely to occur. And much more should be done to take advantage of the available technology to automate monitoring where appropriate.

"It is unsatisfactory that the bodies who take water under licence are in the dark about how fees are calculated. Costs are also being incorrectly apportioned between water resource management activities and flood management activities. The Agency must address this inefficiency and lack of transparency."

Mr Leigh was speaking as the Committee published its 40th Report of this Session.

The Environment Agency regulates the abstraction of water by farmers, industry and water companies to check water levels and to monitor impacts on the local environment. It recovers the full cost of this water resource management, some £114 million in 2003-04, through abstraction charges levied on its licence holders. Improvements in efficiency reduce the licence fee and, ultimately, could result in lower costs to consumers. The Agency has kept the annual increase in the licence fee below the rate of inflation each year.

Improvements in efficiency depend upon better cost management data. Agency staff undertake 147,000 site visits a year to retrieve data on water levels, and to maintain monitoring instruments on site. Better cost data would enable the Agency to prioritise such activities more effectively and to determine whether it is cost-effective to install automated equipment to reduce the number of visits required.

The need for better management information was identified by the Agency in 2001, but progress has been slow, and full activity based costing data are unlikely to be available until 2007-08. The Agency has attributed the delay to the need to improve finance and human resource systems first. The Agency's asset management strategy will not be implemented until April 2006, partly due to the time taken by the Agency to acquire the necessary expertise to oversee the project.

One impact of the weaknesses in management information is that the Agency has incorrectly apportioned between £650,000 and £1.7 million of its flood risk management activity costs each year to water resource management. Reallocating these costs correctly would reduce the licence fee costs by up to 55 pence per 1,000 metres cubed of water abstracted. The Agency has reallocated £300,000 in 2005-06 and expects to re-allocate a further £1 million in 2006-07.

Regulatory work needs to be risk based. The Agency has added 1,500 sites to its monitoring network in England in the last three years (a 12% increase) partly to be better prepared for flooding incidents. No one group within the Agency has, however, been responsible for controlling the size of the network in terms of reviewing the need for existing and new sites. The Agency now intends to appoint Area Environment Managers to oversee the network and the costs charged to water resource management.

Click here to view Report