Update 4 June: Chancellor George Osborne has announced £3.1bn of in-year departmental budget cuts, including a £70m cut for DECC. The Carbon Brief analysis below shows even this relatively small 2% cut to DECC’s budget will pose a challenge to the department.
The limited scope for spending cuts at the Department for Energy and Climate Change (DECC) has been laid bare, in details released to Carbon Brief under freedom of information rules.
With the Conservative government promising to shave £13bn from public spending over two years, while shielding the likes of health, pensions and education, the spotlight will be on unprotected departments. DECC will be one of the biggest casualties, according to the Independent.
Last month, Carbon Brief published analysis of DECC spending, showing how it managed its £3.4bn ‘ departmental expenditure limit‘ in 2013/14. This is the budget set by government and within the direct control of ministers.
Our analysis found that £2.2bn (65%) of spending was devoted to managing the UK’s civil and military nuclear waste and decommissioning legacy. Cleaning up after the UK’s past military nuclear research accounts for around a quarter of these nuclear liabilities.
However, the £1.1bn (34%) of DECC’s spending devoted to core departmental priorities was only broken down in a very limited way, under five budget lines:
- “Save energy with the Green Deal and support vulnerable consumers”.
- “Deliver secure energy on the way to a low carbon energy future”.
- “Drive ambitious action on climate change at home and abroad”.
- “Manage our energy legacy responsibly and cost-effectively”.
- “Deliver the capability DECC needs to achieve its goals”.
The department has now released a more detailed breakdown of its 2013/14 spending under each of these five headings, following a Freedom of Information Act request by Carbon Brief. The charts below show how this spending was allocated, and a brief discussion of each area follows.
There are few budget lines offering realistic potential for savings. Carbon Brief estimates that £3bn (87%) of DECC’s budget in 2013/14 was essentially obligatory. This includes nuclear legacy costs, which can be deferred but not avoided, along with costs related to international agreements and legal liabilities inherited from the formerly nationalised energy industries.
The remaining £440m (13%) of DECC spending could be targeted for cuts, including DECC staff and administration costs or the troubled Green Deal energy efficiency scheme. In the unlikely event that all of these costs were eliminated, it would still only cut government spending by 0.07%.
Click image to expand. Detailed breakdown of DECC’s managed budget during the 2013/14 financial year. * This budget line is shown net of £30m in energy efficiency loan repayments. Source: Freedom of Information Act release to Carbon Brief. Chart by Rosamund Pearce.
Ambitious climate action: 12%
The budget line “Drive ambitious action on climate change at home and abroad” is dominated by a contribution to the government’s five-year, £3.87bn International Climate Fund, which is one-third funded by DECC. Some 98% of this £392m budget line in 2013/14 went towards the fund, which supports climate adaptation and mitigation efforts in developing countries.
The size of the fund has been politically charged, with a Daily Mail article reporting some Tory MPs were “furious” the prime minister was giving funds to “Third World flood defences”. However, this spending has already been pledged on the international stage and David Cameron is a strong supporter of the forthcoming UN climate talks, so it would be politically difficult to cut.
The £4m spending that covers the international climate change team might be targeted once this December’s UN talks in Paris are over, though Paris is expected to be the start of a process rather than a clear end point.
Legacy costs: 10%
The £343m budget for “Manage our energy legacy responsibly and cost-effectively” would be very difficult to cut, with the lion’s share relating to legal liabilities taken on by government in the wake of energy sector privatisations. In 2013/14, it included £247m of support towards the “contractual historic fuel liabilities” of British Energy, the firm which is owned by EDF and runs the UK’s currently operating nuclear fleet.
There was also £54m in subsidised energy benefits due to former coal mineworkers and their spouses. Some £41m went towards nuclear security, tackling the threat of nuclear proliferation and subscriptions to the International Atomic Energy Agency and the Organisation for the Prohibition of Chemical Weapons.
Energy saving: 4%
The majority of spending under “Save energy with the Green Deal and support vulnerable consumers” went towards the Green Deal energy efficiency scheme with £109m (65% of the £137m total). DECC has handed out several rounds of incentives in an effort to boost the scheme. The latest, in March, was worth £70m. Spending is due to increase in 2015/16.
The fate of the Green Deal remains unclear following the Queen’s Speech and it has not featured in DECC’s early statements on energy policy. Amber Rudd, now DECC secretary of state, was responsible for the Green Deal as a DECC minister before the election.
Secure energy: 4%
Some £79m (62%) of spending under “Deliver secure energy on the way to a low carbon energy future”, went towards “science and innovation” and the Big Energy Saving Network, a scheme that helps reduce bills for those in fuel poverty.
Some £19m (15% of this budget line) was devoted to delivering the government’s flagship electricity market reforms. There was also £14m to support carbon capture and storage and £12m for renewable heat and the offshore wind manufacturing fund, designed to support the UK’s world-leading offshore wind industry.
Departmental administration: 4%
DECC spent £140m on administration, IT, estates and communications in 2013/14. These so-called ‘back-office’ functions are traditionally targeted during spending cuts, though there have already been several rounds of reductions over the previous parliament.