Q37 Mr Khan: Reducing regional variations in hourly charges?

Baroness Young of Old Scone: We have looked at those regional variations and, alas, the idea that somehow the lowest charge if applied across the board would produce savings, does not hold water, because in correcting the methodology and making it more standard between our regions we have in fact come to the point where the charges vary remarkably little between regions and are above the £20-24 per hour rather than the £13 per hour, which is the minimum level looked at by the NAO. So we have made more standard the costing methodology and the result is there is very little variation between the regions.

Q38 Mr Khan: More consistent cost allocations?

Baroness Young of Old Scone: We are clear that more consistent cost allocations are important, and we have commented on how we will therefore take money away from water management costs and put it into flood risk management costs, but in overall terms to the Agency it does not save money, it simply reallocates it to a different head.

Q39 Mr Khan: For those potential cost savings you have agreed with the NAO, what is your timetable for achieving them?

Baroness Young of Old Scone: In two of the examples where the NAO gave us targets, in fact they were illustrative recommendations. They said, "If you were able to ...", for example, "... reduce the cost of asset management by 5%, it would save X amount of money." Similarly, "If you adopted a risk based approach to site visits which reduced site visits by 5%, it would save 5% of the cost". These were merely illustrative figures. In fact the work which has gone on to look at the scope for, for example, risk based visits has shown where we can and cannot take a risk based approach, and of course because the visits are very different at different sorts of sites, a straight read-across from a 5% reduction in visits to a 5% saving does not necessarily follow. What we are involved in now is looking at the capacity for making savings in the areas where genuine savings are possible and have either got savings underway that used the NAO methodology or else are looking at what the potential is.

Q40 Mr Khan: Forgive me if this sounds rude, but if you want to give us further evidence, please send a memo; for the purpose of the oral evidence it is really important you be concise because we have lots of questions. Of the estimated savings identified by the NAO, between £1.4 and £2.5 million, you have explained you do not necessarily agree with the top level of that bracket, how much of that do you think you can achieve according to your own assessment of NAO targets versus savings?

Baroness Young of Old Scone: We believe we can save somewhere between £4.5 million and £4.1 million, but that would not be simply on the NAO recommendations. That is on the programme of efficiencies we already had in place in water management.

Q41 Mr Khan: Over what period of time?

Baroness Young of Old Scone: Over the next four years - three years in total, 31/2 years bearing in mind we are half way through the financial year.

Q42 Mr Khan: Do you think one of the reasons why there may have been a delay in making the savings is because the cost of the water resource management is met completely by the charges on holders of the abstraction licences? Would that be a de-motivating factor to you in making savings?

Baroness Young of Old Scone: I am sorry, I did not catch that.

Q43 Mr Khan: The cost of the water resource management, as I understand it, is met completely by the licences. Is that correct?

Baroness Young of Old Scone: The aim should be that the cost of water resource management should be met by licence charges, yes.

Q44 Mr Khan: That has no bearing on the apparent delay in making the savings identified in the Report?

Baroness Young of Old Scone: Clearly where there is cost recovery, one of the important things for the Agency is to make sure it is able to demonstrate to chargepayers it is efficient, and every year we have been able to show our charges have gone up at a rate less than inflation as a result of our efficiency programmes.