False prospectus underpins Natural Resources Wales

In April next year Natural Resources Wales, with 2000 staff, will assume the functions of three very different organisations: one entirely Welsh body, the Countryside Council for Wales; a largely Welsh body with some shared Britain-wide functions, Forestry Commission Wales; and a completely integrated Wales and England body, the Environment Agency. The amalgamation has depended on a business case which forecast savings of £158 million over ten years. Even before the new body has opened its doors this forecast is falling apart. So why is Natural Resources Wales being created?

The policy began to develop two and a half years ago within the Environment Department of the previous Assembly administration. Its Minister, Jane Davidson, and her senior civil servant, Mathew Quinn, had enjoyed a high reputation amongst environment movements largely on the strength of their aspirations and the ambition of their targets. However, delivery was proving more difficult than declaration and our biodiversity target had not been met. Our wind energy program was becalmed and our ambitious target to reduce Wales’s carbon emissions by 3 per cent per annum had no prospect of being met.

On top of that there lurked a looming crisis, with the department trying to avoid taking responsibility either for or against a £1 billion gas power station in Pembrokeshire. Its two regulatory bodies, the Countryside Council for Wales and the Environmental Agency, were at daggers drawn giving completely contradictory advice and probably would be again if Wylfa or the Severn Barrage were allowed to proceed. It’s not hard to understand why the prospect of merging the two began to look attractive in Ty Hywel.

On the other hand Countryside Council and the various environmental groups that it supports were likely to be resistant to what would appear to be a take-over by the Environment Agency which has more than double the staff. I can see no other reason for inclusion of Forestry Commission Wales. A three-way merger looks more balanced and holds out the prospect to the Countryside Council for Wales of managing 6 per cent of Wales’s land.

In December 2010 the Environmental Department attempted to get the then Labour/Plaid Cabinet to agree this proposal. Agriculture was unhappy about Forestry’s inclusion and Finance was unhappy with the costs and so the proposal was withdrawn. What then followed over the months leading to the Assembly elections was a strange process of Assembly osmosis. A very small group of people have to write manifestos on a wide range of policies. On many issues they have long established policy but in other areas there is a blank canvas. Upon that canvas the influence of one or two politicians and civil servants can be profound and ‘groupthink’ can emerge.

For whatever reason, three political parties all made the same commitment to this merger. However, Labour included an important caveat, possibly as a result of last minute lobbying by the First Minister. This was that the proposed merger was subject to a detailed business case.

With the benefit of hindsight I now think that the Forestry Commission and Mathew Quinn’s department had a very different understanding of the caveat. We thought the business case was a test that the policy had to pass. On the other hand, they behaved as though the policy was a test that the business case had to pass. They had initially assumed that there were considerable savings to be made by separating Wales from England in the Environment Agency. However, finding savings to justify the incorporation of Forestry proved difficult.

Forestry Commission Wales believed that some very optimistic assumptions were made because a positive business case depended on it. We requested that the case be examined by the Wales Audit Office before it was presented to the Minister. This request got a very frosty response from Mathew Quinn who instead appointed an external consultant, Nigel Reader, a Board member with Natural England. He pronounced that the case was “robust”. It is significant that he has now been appointed to the board of Natural Resources Wales (see panel, below).

After the business case was published there followed a consultation process. In an article in the Winter 2011 issue of agenda I argued that the case was hugely optimistic and even so could only make the thinnest of arguments for forestry. The supposed benefit of £158 million over ten years is almost entirely produced from the Environment Agency. The business case shows no benefit from Forestry for five years and only £11 million after ten years. That case depended upon what we saw as highly unrealistic assumptions on pensions, ICT and the costs of continuing to buy in services from the parent bodies. In spite of our warnings the Minister, John Griffiths, accepted the “robust” case and presented it to the Assembly. His recommendation was accepted.

Now, some four months before the Natural Resources Wales begins its work, real figures are beginning to replace estimates and the “robust” case is disintegrating. As I write, the staff do not know what pensions will be offered or imposed upon them. What we do know is that none of the options in the business plan can be used. It seems likely that most staff will continue in their present scheme. That may suit some but this was considered unacceptable in the business case as it would involve maintaining staff in different schemes within the same body – an expensive and arguably unfair system.

On ICT, the business case assumes a basic joint system will be available on day one, with it gradually building more capability, allowing efficiencies and savings to grow. We now know that nothing will be ready on day one but it might, crossed fingers, be ready after six months. Even if they meet that expectation it still means that costs will increase and benefits diminish and be delayed.

As to buying in residual services, the business case assumes that as Wales will not require additional services the costs should be the same or very similar than at present. The naivety of this assumption is staggering. Wales now has to enter new contractual arrangements, often with the private sector, in which we usually have no alternative providers. In other words they have us over a barrel. The new real costs are being closely guarded but I have heard that the Environment Agency functions alone are coming in at £28 million a year as opposed to the predicted £24 million. If that is borne out it alone knocks a £50 million (allowing for inflation) hole in the headline benefit over the decade.

Board of Natural Resources Wales Professor Peter Matthews (Chair) has held a variety of r positions in the environmental field, including chair of the Northern Ireland authority for Utility Regulation, deputy managing director of Anglian Water International, president of the European Water Association. He is a visiting professor at Anglia Ruskin University.   Dr Mike Brooker holds two non-executive positions at the Wales Audit Office and Natural Environment Research Council and was from 2001 to 2005 Chief Executive of Glas Cymru/Welsh Water.   Rev Hywel Davies is the Director for Tearfund Wales and a Minister in Llangefni, he was chair of Menter Mon and Vice Chair of Anglesey Local Health Board and is a Independent Member of the Betsi Cadwaladr University Health Board. He has served on a number of public bodies, including Sports Wales.   Dr Ruth Hall is a non-executive member of the main Environment Agency Board. From 1997 to 2005 she was Chief Medical Officer for Wales.   Dr Madeleine Havard is the Board Member for Wales for the Environment Agency. She has held a number of academic posts and served on several voluntary and statutory bodies.   Harry Legge-Bourke is a partner in the family-run Glanusk Estate centred in southern Powys, which has: farming, forestry, fishery and major event operations.  A former officer in the Welsh Guards (1992-2001), he also runs and owns a number of companies providing security, crisis management, procurement, training, data and document storage. He is Chairman of the United Usk Fishermans Association.   Andy Middleton is a Countryside Council for Wales Member and founder director of the TYF Group, a sustainability education, consulting and adventure organisation and Wales’ first carbon neutral business.   Morgan Parry is Chair of the Countryside Council for Wales, and a member of a number of statutory environmental bodies. His background is in science, local government and the third sector, from where he promoted the understanding of sustainable development in Wales.   Nigel Reader is a Board member with Natural England and of the Marine Management Organisation. He was formerly director of finance with the Environment Agency and the National Rivers authority.   Professor Lynda Warren has served on the Countryside Council for Wales, the Joint Nature Conservation Committee and the Environment Agency. She is Emeritus professor of Environmental Law at Aberystwyth University.   Sir Paul Williams, was formerly Director General Health and Social Services Welsh Government and Chief Executive NHS Wales.

The Minister was presented with a false prospectus and that false prospectus was presented to the Assembly. I must assume that if the Assembly had been given more accurate figures they would not think it a good idea to disrupt the work of a highly regarded institution struggling to cope with a devastating disease on Larch, another huge threat to Ash, a massive wind farm programme and an ambitious government target on increased woodland (without an instrument to deliver it). To do all of that within an administrative system that is now going to be more expensive than the one we had before is surely an idea that would be rejected.

Developing an idea or policy with a very small number of people and then ignoring all well placed voices to the contrary is not an isolated phenomenon in the experience of Welsh devolved government. Neither is promoting the silent or compliant and excluding the warner and the straight talker. Indeed, it has become a well-established practice. The way most of the European Structural funds were wasted, the demise of the Welsh Development Agency, the creation of 22 health authorities, the support of the Wales Ethnic Minority Association (AWEMA) are just some examples that follow the same pattern.

But let us be fair, there are similar examples of poor governance in other parts of the UK. The Welsh distinction is that no politician or civil servant has ever paid a price for conspicuous failure in Wales. In Westminster politicians and civil servants often avoid the consequences of their actions but often they do not. The two DEFRA ministers responsible for the plan to sell the Forestry have been sacked and thanks to Branson’s deep pockets the Civil Servants who messed up the West Coast rail franchise are suspended.

In England and in Scotland a failed policy can end your career but not so here. When John Griffiths had to decide if the case before him was really sound, he would know that there was no danger to him if it proved to be a disaster in the longer term. However, if he didn’t go through with it there would surely have been paradoxical accusations of weakness in not pushing through the policy. In short, we have a system which punishes caution and fails to punish failure.

Though I am sure he would never admit it, I think the First Minister probably agrees with much of that analysis. Privately he would argue that the solution is a much larger legislature in which scrutiny is enhanced and regular ministerial reshuffles are possible. The trouble is that isn’t going to happen any time soon. What you could do is value those who tell you the truth (as they see it) rather than those who tell you the ‘truth’ you would like to hear. In Welsh its Y rhai heb flewyn ar ei tafod (Without hair on their tongue).

One last point on that business case which originally acknowledged a risk to the forest estate. Before publication, and without any consultation, that risk was removed. Since it now seems quite likely that Natural Resources Wales will run short of money in the next few years it will have three choices: to cut back on staff and services, to get more funding from government, or to sweat its assets. The Forest Estate is worth hundreds of millions of pounds.