Spending Review 2013: Looking for agriculture, environment or rural? Don’t bother

Chancellor Osborne today set out his Spending Round for 2015-16.  Widely mislabelled as a Comprehensive Spending Review, the review only relates to one year – the year in which the next General Election will take place.  It doesn’t offer much hope for the countryside, but there could be some interesting implications for rural property and land in general.

The headlines include:

  • Osborne had to achieve £11.5 Bn overall in cuts
  • The overall emphasis is on growth and public service reforms, with an emphasis on localism, efficiency and fairness
  • A big requirement is to keep mortgage rates low – probably good news for property and housing markets (and a wider-scale disaster if they are allowed to rise)
  • £50 Bn capital spending infrastructure in 2015, covering roads, railways, broadband and flood defences (but see more below).  More on this will follow on Thursday, but likely candidates include improvements to the A14, HS2 and the Mersey Gateway Bridge
  • Schools and tax inspectors will benefit from increased funding
  • Ed Balls for Labour says we should be spending £10 Bn on infrastructure now, while the Institute for Fiscal Studies says we are stuck with austerity until 2018

Important points for the countryside include:

  • Defra subject to further cuts of £37 million by 2013, with its overall budget going down from £2.2 Bn in 2011-12, to 1.9 Bn in 2013-14, £1.7 Bn in 2014-15 and £1.6 Bn in 2015-16 (a year on year cut of 9.6% from 2014 to 2016)
  • Defra has recently been likened to a fourth emergency service for its role in flooding, animal and plant disease (think Foot and Mouth Disease and Ash Dieback), food scandals (how we miss those horseburgers) and Bovine TB.  Flood defence spending is to be maintained in CASH terms, but of course the REAL terms story will be different
  • Defra’s settlement includes £40 million for South West Water in 2015-16 to defray south western water users’ bills
  • Meanwhile Defra has to achieve £54 million in efficiency savings in 2015-16.  This will be achieved by reduced EU fines for non-compliance and greater efficiency in its Arms Length Bodies (Rural Payments Agency, Environment Agency, Natural England) for example by sharing back office functions
  • Meanwhile Defra is to prioritise spending on ‘economically high value areas’ (geographic? Subject?).  This could be one to watch
  • Energy and Climate Change comes with a new emphasis on renewables and a commitment of £430 million for Renewable Heat Incentive, proposed new tariffs and a higher budget cap for RHI payments
  • Food Standards Agency to see a cut in funding from £94 million to £86 million from 2014-15 to 2015-16
  • Funding for science is to be maintained and enhanced, £4.6 Bn in 2015-16

For property and land, big news will come on Thursday with the announcement of Infrastructure Plans.  For the moment we know:

  • £100 Bn infrastructure spending planned for the next Parliament.  This is for transport, science, schools, housing, broadband and flood defences although it looks as if parts of large scale broadband investment may become a voucher scheme for small businesses
  • This should equate to £300 Bn infrastructure spending to the end of this decade
  • £9.5 Bn to be spent on the transport network in 2015-16
  • This will also cover 180 new Free Schools, 20 Studio Schools and 20 University Technical Colleges and Business Centres in all the major trading centres in China

On a smaller scale, Defra and DECC (Department of Energy and Climate Change) have both been targetted with spending £3 million each in the government’s Small Business Research Initiative in 2013-14.  This scheme runs across government and all departments are expected to make better use of it.  It should allow innovative companies to solve specific public sector needs in new innovative ways, so perhaps an opportunity or two here.

Search diligently through the key details document, HM Treasury, Spending Round 2013 for the words environment, climate, rural, agriculture and farming and you won’t find much.  Climate change comes up in terms of fairness – we are committing £969 million to supporting low carbon growth and adaptation in developing countries.  Other than that you’ll only find climate and environment in the appropriate department’s names (Defra and DECC), and you won’t find farming, agriculture or ‘rural’ at all.  Well done on rural proofing this one government!

So what should the land manager, farmer or rural business consultant take away from all this?

  • Of far greater significance for farming as a whole will be the CAP reforms, now possibly in the final inches towards an agreement today
  • With voluntary modulation looking like 15% in England, this could add up to 20% cuts in Single Payments for English farmers
  • And after Cameron’s little regarded EU Budget deal, it looks like 22% less funding for rural development as well
  • Meanwhile Thursday’s Infrastructure Announcement is the one to watch – will there be a new road, fibre-optic cable or railway coming to a field near you?  And will it be an opportunity or a threat to your business?

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