Committee commends Natural Resources Wales “positive steps”

Published 03/10/2023   |   Reading Time minutes

Since its creation 10 years ago, Natural Resources Wales’ journey hasn’t always been easy. Last year, the Climate Change, Environment and Infrastructure Committee found “widespread concern” and “some controversy” during its first time scrutinising the largest Welsh Government Sponsored Body.

Earlier this year, the Committee explored whether a ‘fundamental baseline review’ had brought some calm following a “chaotic period”. It also asked for an update on work to address sewage discharges and wider water quality work.

The Committee has broadly commended Natural Resources Wales (NRW) for its efforts in addressing its previous concerns. This article looks in more detail at the Committee’s findings and how the Welsh Government and NRW responded.

Is NRW equipped to do its job?

NRW’s ability to undertake its statutory functions with the resources it is allocated has been a concern of the Committee, and its predecessors, for some time.

There has been uncertainty over whether NRW can effectively exercise its duties and responsibilities due to a decreasing budget coupled with additional responsibilities (creating a ‘funding gap’ discussed more below), and ongoing issues around staffing capacity.

NRW has attempted to address these concerns through a fundamental baseline review, which was used to develop Service Level Agreements (SLAs) for key areas, such as Flood Risk Management. These SLAs define the level of service that NRW is able to deliver for the money allocated from the Welsh Government. The Minister for Climate Change, Julie James MS, explained that the SLAs will provide a ‘menu’ of NRWs capabilities:

So, we can have this level of service for this much money and this level of service for this. So, we've got a much better understanding between us of what can be delivered for how much money and how that can be calibrated.

These SLAs will, together with the term of government remit letter, form the basis of NRWs business plan and budget. The Committee has commended the development of SLAs as a positive step towards addressing it’s concerns.

Closing the funding gap

NRW receives core funding for its baseline functions, and additional grant funding for projects outside those functions. Budget allocations (core funding) to NRW remained unchanged in the 2023/24 budget. Here’s where a ‘funding gap’ has been found.

The Minister wrote to the Committee in April with an update on closing this funding gap “on a permanent basis”. NRW has been provided with a further £18.2m of funding to draw down upon in 2023-24. The Minister said her intention is to baseline this £18.2m to NRW’s core budget allocation as part of the 2024-25 draft budget exercise. The Committee says its:

… pleased that after a long period of financial instability, it appears that NRW’s funding arrangements may finally be moving to a more stable footing.

Fully recovering costs of regulatory services

Where NRW’s regulatory responsibilities are funded by charges levied on those it regulates, it is required to fully recover the costs of its services.

However, a Strategic Review of Charging (SRoC) showed under-recovery across most regimes. This resulted in an annual £3m shortfall in delivery of permitting activities as only 24% of costs are recovered. NRW says this shortfall was “met by reducing our service in other areas of our work”, but it’s “not enough to balance the full costs of delivery”. As the charges no longer reflected the full costs of delivering the services, taxpayer funds were being used to subsidise the activity.

In response, in July this year NRW introduced charges for applications for new and amended permits, for a number of charging schemes:

  • species licences;
  • industry regulation;
  • site based waste;
  • water quality;
  • water resources; and
  • reservoir compliance.

NFU Cymru expressed concern at the new charges. While recognising cost-of-living pressures mean it’s a challenging time to raise costs, NRW remained committed to full cost recovery. It highlighted that the charges only apply to new permit applications and are one-off, not an annual permitting charge.

Whilst the Committee agreed with full cost recovery in principle, it advised that NRW consider the cost impact on individual applicants.

An update on water quality and sewerage discharges

Following its work on water quality and sewage discharges in 2022, the Committee followed up on recommendations it made to NRW, including that it must show “demonstratable progress” on work to bring ‘unpermitted’ storm overflows within the regulatory regime. NRW told the Committee it is updating its storm overflow Classification Guidance (not yet published), and that it continues to publish annual water company environmental reports.

In its most recent environmental report NRW downgraded Dŵr Cymru “to a two-star (requires improvement) rating following a further decline in environmental performance”. In addition, Ofwat’s recent Water Company Performance Report ranked Dŵr Cymru as ‘lagging’, meaning Dŵr Cymru will have to return money to customers through cutting their bills.

The Committee also sought an update on the work of the Wales Better River Quality Taskforce (a collaboration of the Welsh Government, NRW, Dŵr Cymru, Hafren Dyfrdwy and Ofwat, with independent advice from Afonydd Cymru and the Consumer Council for Water). Last year the taskforce developed action plans to gather evidence on the impact of storm overflows.

A number of actions in the plan are for NRW to address, including to provide an annual report on the performance and regulation of storm overflows. The storm overflow spill data report for 2022, was published in August 2023.

However, the top action for the taskforce as a whole is still outstanding. A ‘Welsh Government report on storm overflows’ was due to be delivered by March 2023. It will use the outputs of an independent study (due summer 2022) to set targets for the prevention of ecological harm of rivers, but its yet to be published.

What’s next?

The Committee’s report will be debated in the Senedd on Wednesday 4 October. You can watch it live on Senedd TV.

Article by Lorna Scurlock, Senedd Research, Welsh Parliament