1.  The Environment Agency plays a central role in putting the Government's environmental policies into practice. We welcome the Sub-committee's interest in its work.

BACKGROUND

  2.  The Agency was established under the Environment Act 1995. The Act defines its principal aim: in discharging its functions the Agency is required so to protect or enhance the environment, taken as a whole, as to make the contribution that Ministers consider appropriate towards achieving sustainable development.

  3.  On 1 April 1996 the Agency took over all the functions of the former National Rivers Authority, Her Majesty's Inspectorate of Pollution and 83 local authority waste regulation authorities. Its main responsibilities are to manage and regulate the water environment, and control industrial pollution and wastes. So as to promote integrated river basin management, its functions include water resources, flood defence, fisheries and navigation on certain rivers. The Agency also makes available environmental information, promotes understanding, and advises on policy development and implementation. It covers England and Wales.

  4.  The Agency was established to deliver a more coherent, consistent and integrated approach to the protection and enhancement of the environment. This should make a major contribution to achieving sustainable development, as well as providing a more streamlined service to the public and to industry. It is charged to deliver environmental requirements without imposing excessive costs on business or society, and to be responsive to the public, local authorities and regulated organisations.

  5.  The Agency is a Non-Departmental Public Body (NDPB). It operates at arm's length from Government. Ministers appoint the Board, set the policy framework within which the Agency functions, agree its annual priorities and targets, and have statutory powers of direction. They also pay grant-in-aid, approve most of its charges, and operate certain financial controls through a Financial Memorandum.

  6.  DETR is the Agency's lead sponsor. MAFF has policy responsibility for its substantial flood defence and salmon and freshwater fisheries activities in England. MAFF provides grant for approved flood defence capital projects, but most funding for them comes from levies on local authorities. The National Assembly for Wales has policy responsibility for and funds all the Agency's activities in Wales. All three sponsors thus affect the Agency's priorities.

  7.  The Agency is one of the largest NDPBs. It has an annual budget of over £600 million and more than 10,000 staff. Flood defence accounts for nearly 50 per cent of its expenditure and over 40 per cent of its staff. Annex A presents further information on the Agency's finances.

THE FIRST THREE YEARS

  8.  The Agency has made a significant contribution to implementing environmental policies and contributing to their development. For example it has required each water company to agree with it a 25-year plan for maintaining public water supplies; contributed extensively to the Government's review of the water abstraction licensing system; advised on the Periodic Review of water company price limits and on the introduction of Integrated Pollution Prevention and Control (IPPC); and made integrated, interactive environmental information available for public use through the Internet. Its 1998-99 annual report records a 28 per cent increase in the cleanliness of rivers over the previous three years, and substantial reductions in many of the key pollutants released from the processes it regulates. It has taken significant steps towards integrating the different approaches to waste regulation which it inherited from its 83 predecessors, boosting resources, systematising licensing, improving training and piloting a risk-based approach to inspection. Due to fresh European and domestic legislation, the Agency has been and will continue to be given significant new duties compared with its predecessors.

  9.  At its inception the Agency had the demanding task of making major transitions, at the same time as building on the work of its many predecessor bodies. It had to devote a lot of time and resources to creating a single cohesive body, so as to promote an integrated approach to environmental protection. This has entailed making major organisational changes, rationalising terms and conditions of employment, moving staff to different locations and shaping a common culture. Since putting the new structure in place the Agency has been in a position to maximise the use of its resources to protect and enhance the environment, within the constraints of the present funding arrangements.

  10.  The Agency's responsibilities bring it into contact with many other public bodies. Its Management Statement requires it to develop effective working relationships with local authorities, and other regulators such as the Health and Safety Executive and the Scottish Environment Protection Agency, and to maintain links with other organisations.

DETR PRIORITIES FOR THE AGENCY

  11.  The Department wishes the Agency to continue to develop a reputation as a firm but fair regulator. In particular it should:

—  encourage high standards of compliance and take firm action against companies which fail to comply with their consents and ignore Agency warnings;

—  work with DETR to develop more effective ways to enhance environmental protection, using its extensive technical expertise and experience in implementing policy, so as to contribute towards achieving sustainable development;

—  be at the forefront of moves to open up public bodies to the people they serve, including extending public consultation on controversial decisions;

—  strengthen its partnership with local government, including democratic scrutiny at a local level; and

—  develop effective relationships with regional chambers, and give its statutory Regional Environment Protection Advisory Committees a more positive role.

  12.  The Department's functional priorities for the Agency in 1999-2000 are to:

—  run its waste regulation function smoothly and consistently;

—  prepare for the introduction of IPPC and complete its reviews of Integrated Pollution Control authorisations;

—  implement water pollution control directives and advise on the Periodic Review, the Water Plan and other water-related issues; and

—  help to implement the Government's change to the water abstraction licensing system.

FORTHCOMING DEVELOPMENTS

  13.  The Environment Act 1995 requires Ministers to give the Agency guidance on its objectives. The existing guidance, The Environment Agency and Sustainable Development, dates from 1996. We are about to review it in the light of the recent publication of A better quality of life: A strategy for sustainable development for the United Kingdom. This emphasises the social dimension of sustainable development, alongside economic issues, the environment and resource use, and includes new indicators of progress. The review will also take account of the Agency's Environmental Strategy, which seeks to offer an integrated approach to the management of the environment, based on sustainable development principles. The revised statutory guidance will be subject to Parliamentary approval, which we hope to seek following public consultation in the first half of next year.

  14.  In parallel with revising the sustainable development guidance to the Agency, we intend to update its Management Statement. This defines the relationship between DETR, MAFF and NAW and the Agency at a strategic level.

  15.  We are also reviewing the legislation relating to the Agency, so as to identify any obstacles preventing it from taking an integrated approach to the environment. We are concentrating on the practical workings of the legislation on the ground, rather than the philosophical approaches underlying different regulatory regimes. The review is not looking at detailed legislative provisions within specific policy areas, or at suggestions for new powers.

  16.  The aim of the review is to identify any significant barriers to integration, and establish whether administrative or managerial action could overcome them, or whether legislative change is merited. Public consultation on it has shown a prevalent view that the Agency needs to take further action to promote integration, and a spread of opinion for and against legislative changes. Following a survey of their members, the CBI have recommended the Agency to take steps to achieve better integration of its functions, and the Government to move towards a more integrated goal-seeking legislative framework.

  17.  Next year we intend to commence the first Financial Management and Policy Review (FMPR) of the Agency. We would be pleased to take into account any relevant points from the Sub-Committee's report. The review will be conducted against the framework of current policy developments, including regional initiatives and the Modern Local Government and Modernising Government White Papers. We will be consulting widely among those with an interest in the Agency's work.

  18.  All NDPBs are subject to regular five-yearly FMPRs. The first stage is to consider whether there is a continuing need for the body's functions, and whether it is the best way to carry them out. The FMPR of the Agency will thus examine the rationale for its present responsibilities. FMPRs then look at the whole system of management and control within the NDPB, including such issues as past performance, aims and objectives, internal organisation, strategic planning arrangements, and output and performance measures. They also consider financial management, accountability and relationship with Departments. Any proposals for legislative changes stemming from the above-mentioned review of legislation relating to integration would need to be placed in the wider context of the FMPR.

  19.  An independent group is reviewing all aspects of salmon and freshwater fisheries policy in England and Wales. Its report to Ministers later this year will make recommendations on institutional arrangements, including the future role and status of the regulator.

  20.  We are recruiting a new Chair for the Agency, to take over when the present incumbent retires at the beginning of next year. The Chair has a key role in determining the Agency's strategic direction, ensuring that it discharges it statutory duties, and inspiring its staff. The new Chair will be involved in the appointment of a new Chief Executive in 2001.

  21.  We would be pleased to assist the Sub-Committee's inquiry further and to comment on any particular issues that you may wish to pursue.

  *Miscellaneous: includes income from rechargeable works, pollution incidents and sale of assets.

October 1999