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Sir John Bourn, head of the National Audit Office, reported today that while the Environment Agency provides well-managed and professional water resource management services there is scope to improve efficiency and realise net savings of some £450,000 a year on its activities in England, with a further potential saving of between £1 million to £2 million as a result of internal cost reallocation.

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The Agency currently spends around £114 million a year in England and Wales to ensure that sufficient water is available to meet the needs of people and the environment. To do this it collects and monitors data from a network of 14,300 sites across England and regulates the use of water through a system of water abstraction licences, enforcing licence conditions where necessary. The cost of the Agency’s activities is met by charges to two-thirds of the 47,600 licence holders.

The identified gains fall within four main areas.

Of the 14,300 monitoring sites the Agency operates in England a number are used for both water resource management and flood defence functions. The cost of these joint sites is not allocated appropriately between the two functions, and in most regions water resource management effectively subsidises flood defence. The NAO estimates that water abstraction licence holders are paying between £650,000 and £1.7 million a year in excess charges because of this. Better cost allocation would allow licence fees to be reduced by this amount – although the flood defence function would still need to be funded.

The Agency needs to examine more critically the growth and expansion of its network of monitoring sites. Over the last three years 1,500 new sites have been added in England, a growth of 12 per cent in the network, but no one group within the Agency is responsible for control of the network as a whole. This situation increases the risk that there are an excess number of sites. Clearer responsibility for planning the network could allow a reduction in the number of sites; the NAO found that up to a 5 per cent reduction, if realistic, would result in additional annual savings of up to £261,000 to water resources and £174,000 to other functions in the Agency.

The Agency relies on its Operations Delivery Workforce to maintain many of its sites. While Workforce staff are paid the same rate regardless of region, the internal charging rate used varies from region to region – from a low of £13 an hour in the North East to a high of £27 an hour in the Thames Region. If all regions consistently applied the lower internal charging rate, costs totalling £330,000 a year to Agency’s water abstraction function could be transferred elsewhere in the Agency.

The Agency also needs to prioritise visits to water monitoring sites more consistently. Some 150,000 visits are made each year to sites, an average of 13 visits per site. But visits are not prioritised consistently according to risk, importance of the site, or the Agency’s own good practice. The Agency is not able to provide data about the cost of these visits but the NAO conservatively estimates that £190,000 in annual savings could be achieved.

The Agency also needs to assess the potential for savings through the use of new technology. The Agency has introduced continuous electronic data recording at about 35 per cent of its sites where it felt the technology would be cost-effective. There is limited information on the costs of this technology or possible alternatives and on the scope for wider use of technology. The Agency recently established a Technology Evaluation Group to consider these issues.

"It may not always seem like it but some parts of England are extremely dry, with less water available per person than in places like Spain and Portugal. With daily demand of 32 billion litres a day the Environment Agency has a challenging role managing limited resources efficiently. It has done this task well but there is scope for the Agency to make further efficiency gains without adversely affecting the service it provides."

Sir John Bourn


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