Informe anual y cuentas de Defra de 2021 a 2022 (versión HTML)

Published 27 October 2022

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Tamara Finkelstein

Reflecting on the past year I am proud of what Defra has delivered during 2021 to 2022, following the end of the EU transition period, continuing to tackle the impact of the COVID-19 pandemic. Defra colleagues have continued to deliver excellent services to the public, managed challenges including flooding and supply chain difficulties, and made progress on reform domestically and internationally to enable our sectors to prosper and improve the environment.

We made progress in restoring and enhancing the environment for the next generation, by taking the Environment Bill through Parliament to create the Environment Act in November 2021. This legislation will improve air and water quality, tackle waste, halt species decline and improve our natural environment. We formed the Office for Environmental Protection to improve the environment by holding government and public bodies to account; its statutory functions began in January 2022. In March 2022, we launched a consultation for new, legally binding environmental targets, which will set the direction for domestic environmental policy.

We made significant progress towards driving nature recovery across England by publishing our Nature Recovery Green Paper in March 2022. The proposals focus on reform of protected sites designation and management, how we will deliver our commitments to protect 30 per cent land and sea by 2030, updated species protections, green finance and reform of Defra's delivery bodies.

We contributed to the government's 2050 net zero ambition by: publishing the England Trees Action Plan and England Peatland Action Plan under the Nature for Climate Fund; supporting low carbon farming and agricultural innovation through the Farming Investment Fund and Farming Innovation Programme; and developing a policy pathway that meets Defra's effort share for carbon budget 6 (an interim net zero target), which is part of the Net Zero Strategy published by the Department for Business, Energy and Industrial Strategy in October 2021.

In July 2021, we published an update on the commitments in the Flood and Coastal Erosion Risk Management Policy Statement. We made record investment in flood and coastal defences, supported households at risk of flooding to access affordable insurance, and reviewed improvements to flood risk safeguards in the planning system and surface water management actions. The UK was struck by storms Dudley, Eunice and Franklin in February 2022. We led the response, protecting 50,000 properties and issuing timely warnings to 100,000 households.

We continued to coordinate cross-government delivery of the second National Adaptation Programme, a five-year programme of action to 2023 to make the country more resilient to climate change. In October 2021, we published our response to the Climate Change Committee's report on progress. This was followed by the third UK Climate Change Risk Assessment report to Parliament in January 2022, which outlined the key climate change risks and opportunities that the UK faces and the scale of the challenge of adapting to climate change.

Following on from the 2020 Agriculture Act, we launched a suite of schemes to support farmers to take sustainable approaches to farming, make enhancements to the landscape and encourage nature recovery. These include the Sustainable Farming Incentive pilot, the first round of applications for the Landscape Recovery scheme and the Farming in Protected Landscapes scheme. We reviewed the evidence that Henry Dimbleby set out in his independent review of the food system, which informed our Food Strategy White Paper published in June 2022. This strategy will help ensure we deliver our ambition for a prosperous agri-food and seafood sector, and that healthier and more sustainable diets can be achieved by all.

We initiated the annual Fisheries and Seafood Scheme in April 2021 to provide financial assistance for projects supporting the English fishing industry. We launched the UK Seafood Fund in December 2021 to support the long-term future of the UK fisheries and seafood sector. In January 2022, we launched a further element of our post-EU exit fisheries management framework alongside devolved administrations - a public consultation on the draft Joint Fisheries Statement. This will help set the future direction of UK fisheries management, making sure that policies deliver a thriving, sustainable fishing industry and healthy marine environment.

We made continued progress in our international work with progress on priorities for nature during the 2021 UN Climate Change Conference (COP26). We obtained endorsements from 137 countries on the Glasgow Leaders’ Declaration on Forests and Land Use and secured a $12 billion public Global Forest Finance Pledge, which commits countries to work to reverse forest loss and land degradation by 2030.

We played a leading role in rest of world trade negotiations for the UK-Australia and UK-New Zealand free trade agreements. Both deals bring benefits to the UK agriculture, food and drink sector, with tariff-free exports on all products, simpler customs processes and being able to maintain our high animal welfare standards.

During the 2021 Spending Review, we secured a £1.4 billion uplift by 2024 to 2025. This will support delivery of our net zero strategy, climate adaptation, flood defences and increased spending on science, digital and Overseas Development Assistance. This settlement provides a firm basis to plan for delivery of our outcomes to March 2025.

In the year ahead, we will continue to deliver across Defra group's broad remit. Major activities include: setting environmental targets and publishing our Environmental Improvement Plan; publishing our response to the Nature Green Recovery Paper consultation; developing the third National Adaptation Programme; rolling out next stages of the Environmental Land Management schemes; progressing parliamentary passage of animal welfare bills; preparing for the Conference on Biological Diversity (COP-15); and contributing to the government's levelling up missions.

Finally, I would like to thank all Defra group staff for their unwavering professionalism and dedication across the delivery of our services and outcomes.

2021 to 2022 has been a challenging and pivotal year for Defra group. The department has played a major role in the government's recovery from COVID-19 and the UK's response to the conflict in Ukraine and the impacts on our sectors.

During this period, we have supported the food, farming and fisheries industries, and responded to changes relating to the EU transition whilst delivering vital services to customers.

The ministerial and non-executive board members remained largely the same throughout the year, providing continuity. The Board met six times in 2021 to 2022. It has increasingly focussed on evaluating progress against the group's Outcome Delivery Plan and regularly discussed Defra's performance through the lens of its business plan, portfolio, finance and risks. This year has also seen the introduction of additional briefings for non-executive directors (NEDs) in their champion areas ahead of board meetings. This has allowed NEDs to provide more targeted scrutiny of board papers informed by policy teams expertise.

Areas on which the Board provided advice and oversight included the Future Farming and Countryside Programme, Climate Adaptation and Green Finance. Colin Day, as Audit and Risk Assurance Committee chair provided active challenge on matters within the Committee's remit.

As lead NED, I have undertaken this year's board effectiveness review: board members rated the Board's performance overall as ‘satisfactory’ or ‘good’ and agreed it operated as effectively or better than in the previous years. Further details are included in the Governance Statement.

In addition to their contributions to board and committee meetings, individual NEDs, through their champion roles have used their relationships within the department to provide insight on and challenge to some of the most critical areas of work. Lizzie Noel as ‘Union’ and ‘Levelling-Up’ champion, has worked closely with relevant policy teams. Lizzie has also helped improve the department's commercial capacity and contract management through her ‘commercial’ champion role. Elizabeth Buchanan has been working on the issue of rural affordable housing. Ben Goldsmith has worked closely with the natural environment and landscapes team and helped highlight the importance of biodiversity. I have continued my role as the ‘Net Zero’ champion and sit on the department's new delivery committee set up in January.

My fellow non-executive board members and I would like to express our gratitude to staff across the Defra group for their fortitude and commitment over the past year.

Looking ahead, Defra will continue to progress its’ ambitious future farming, domestic and international environmental agendas. The non-executive team look forward to the next year as we continue to advise and challenge to help ensure priorities are effectively delivered to achieve the government's priorities and the department's vision of making our air purer, our water cleaner, our land greener and our food more sustainable.

Henry Dimbleby, Lead Non-Executive Director

This chapter describes our department and how we are structured, our vision, our outcome delivery plan, our resources and the key risks that we face in achieving our outcomes. It sets out our continued response to COVID-19 and describes our post-transition position following EU exit. It includes a performance summary that shows our key performance successes across Defra group. Our broad remit means we play a major role in people's day-to-day life, from the food we eat, and the air we breathe, to the water we drink. We are a ministerial department that is supported by, and works collaboratively with, 33 agencies and public bodies. Together we are the Defra group.

Defra is the UK government department responsible for improving and protecting the environment. We aim to grow a green economy and sustain thriving rural communities. We also support our world-leading food, farming and fishing industries. Our broad remit means we play a major role in people's day-to-day life, from the food we eat, and the air we breathe, to the water we drink. We are a ministerial department that is supported by, and works collaboratively with, 33 agencies and public bodies. Together we are the Defra group.

Our Permanent Secretary, Tamara Finkelstein, has responsibility for managing the department and safeguarding public funds provided under the Defra Estimate.

Defra is made up of the Core department and a network of agencies and public bodies. Defra's public bodies vary in size, type, budget, remit and level of independence from the Core department. For more information see the Accounting Officer System Statement (AOSS) - Annex A shows the wide range of bodies that are included in Defra's system of accountability.

Further information on our governance, including the Defra Board and the three committees which support it, is set out in Chapter 4 – Corporate Governance Report.

We are here to make our air purer, our water cleaner, our land greener and our food more sustainable. Our mission is to restore and enhance the environment for the next generation, leaving it in a better state than we found it.

All government departments are asked by Cabinet Office and HM Treasury to produce two versions of their outcome delivery plan (ODP); an internal facing ODP and a public ODP. These plans are refreshed annually and cover the duration of the current spending review period.

Defra group's 2021 to 2022 public ODP was structured around our four priority outcomes (POs), agreed with HM Treasury through the 2020 Spending Review. These POs were underpinned by sub-outcomes which captured what success would look like. We also had a set of four strategic enablers that strengthened our corporate capacity and capability.

Our priority outcomes are:

Our environment outcome is cross-cutting and includes contributions from the Department for Levelling Up, Housing and Communities (DLUHC) and the Department for Transport (DfT). Our net zero outcome reflects Defra's contribution to the Department for Business, Energy and Industrial Strategy (BEIS)-led cross-cutting outcome to reduce UK greenhouse gas emissions to net zero by 2050.

To deliver our priority outcomes, and reinforce the ambitions of the Declaration on Government Reform, we focused on four key strategic enablers:

See Chapter 2 – Performance Analysis for further detail on what we have achieved under our priority outcomes and our strategic enablers.

Our 25 Year Environment Plan (25 YEP) is a living blueprint for the environment covering the next quarter of a century. The plan will continue to evolve and be updated as our policies develop and build on the original actions set out in 2018. The plan leads the world in using a natural capital approach as a tool to support decision-making, helping us make the policy choices that will deliver long-term improvements. This approach considers the often hidden benefits to our economy and wellbeing derived from our air, water, soil and ecosystems, which support all forms of life, and ensures they are reflected in our decision making. The goals of the 25 YEP inform our priority outcomes, particularly for the environment (PO1), net zero (PO2), floods and resilience (PO3) and through our international environment work.

The Environment Act 2021 gained Royal Assent on 9 November 2021, putting the environment at the heart of government policymaking. It sets the legislative framework for establishing long-term, legally-binding environmental improvement targets on biodiversity, air quality, water and resource and waste efficiency on which government will be held to account. It places the 25 YEP on a statutory footing and adopts it as the first statutory Environmental Improvement Plan (EIP). Under the Environment Act 2021, the government is required to conduct the first review of its EIP by January 2023; that review is underway.

In March 2022, we began a consultation on the proposed suite of targets that cover water, air quality and the diversity of our wildlife. These proposed targets include:

Additionally, we have maintained work towards delivering good environmental status for our seas through the UK Marine Strategy.

Delivering our ambitious goals for nature recovery will require a whole economy effort. The government has set an ambitious new target to raise at least £500 million per year of private finance for nature's recovery by 2027, and over £1 billion per year by 2030.

Our focus on the environment extends beyond the domestic context. The UK hosted the United Nations climate change summit, COP26, in November 2021. This bears testament to our global credentials as an ambitious and effective leader on climate change. Almost 200 countries put their name to the Glasgow Climate Pact, marking a decisive shift in the world's approach to tackling carbon emissions, setting a clear roadmap to limiting the rise in global temperatures to 1.5 degrees and marking the beginning of the end for coal power.

This past year we have continued to face unprecedented and rapidly evolving challenges, increasing our risk exposure. We have continued to be at the forefront in managing some of the most severe threats facing the UK which are recorded on the National Risk Register, include flooding, severe weather, air quality, CBRN (Chemical, Biological, Radiological and Nuclear) emergencies, and plant and animal disease outbreaks.

We have continued to demonstrate resilience and adaptability in our changing landscape, mindful of newer challenges such as cyber security, as well as other internal risks such as fraud, legal challenge, and staff resilience and wellbeing. We were able to manage our risks in the context of a changing global picture partly impacted by the continued effects of the pandemic as well as other factors. We have seen changes to our external risks, such as global supply chain fragility, our cooperation with the EU and the delivery of ambitious environment targets. This has required us to continually build programme delivery capability, alongside implementing emergency reserves to help us respond to concurrent incidents.

More detail on management of our principal risks is given in Chapter 2 – Performance Analysis.

COVID-19 required Defra group to mount an unprecedented response. Throughout the pandemic we have worked closely with external stakeholders across multiple forums. This engagement and dialogue with our sectors allowed us to ensure that policies have considered the needs of Defra sector businesses and their employees, so that critical activities could continue during lockdowns and open safely during periods of easing.

We adapted to the pandemic at pace, setting up an Emergency Operations Centre (EOC) in March 2020. This became the critical interface between our stakeholders, Defra policy teams and the rest of government. The EOC was supported across the department by the reprioritisation of work and pivoting staff towards management of the emergency.

We have provided continued input into the development of cross-governmental policy, balancing the urgency of public health protection with the continued operations of sectors critical to England's safety and economy (such as water treatment, waste collection and food distribution). Defra supported the implementation of various bespoke testing regimes which allowed our sector workforces to test regularly, our sector workplaces to remain COVID-safe and our critical infrastructure to continue operating. Defra's Chief Scientific Adviser has worked with the UK Health Security Agency (UKHSA), along with Environment Agency (EA) and Centre for Environment, Fisheries and Aquaculture Science (Cefas), to develop an innovative programme to test wastewater for traces of SARS-CoV-2 and variants across 70 per cent of the population in England. Defra, the EA and Cefas have supported the UKHSA on scientific design and delivery of the programme.

As we continue to live with COVID-19, the Covid Policy Unit is organically evolving into the COVID-19 Inquiry team for Defra, coordinating Defra's response to the Public Inquiry.

During 2021 to 2022, as a UK independent coastal state, we have worked bilaterally with priority EU Member States including Germany, France, Netherlands, Ireland, and Denmark to progress business as usual relations using a framework of Defra's International Objectives. Engagement with member states has included in-person workshops, international visits and virtual meetings at Ministers, Permanent Secretary and Senior Civil Service (SCS) level. We have also established our new trading relationship with the EU through the implementation of the Trade and Cooperation Agreement (TCA), using its various Specialised Committees to engage our priority interests.

Through and after the transition period, we have seized the opportunity of the UK's exit from the EU to continue to build on our long-term commitment to leaving the environment in a better state than we found it. We are reforming our agricultural and fisheries policies to better support our farmers and fishing industries, while continuing to build a healthy, long-term, environmentally responsible approach to our land and seas. We have taken on independent regulatory functions, for example, in the chemicals sector. We have ambitious plans to reform our agricultural and land management, replacing the EU Common Agricultural Policy (CAP) with a series of targeted schemes to support farmers and land managers to maintain and enhance the environment, improve health and welfare of the livestock they manage and invest in the productivity and resilience of their businesses.

Additionally now that we are out of the Common Fisheries Policy and have our new Fisheries Act, we have the opportunity to reform how we manage our fisheries, control our waters and support our marine environment. We are delivering replacement devolved EU funding schemes alongside the new £100 million UK Seafood Fund to support industry/maintain funding for fisheries and coastal communities. We continue to support our fishing industries with our marine life sustainably managed for the future.

We control our own environmental protection measures and oversight and have established independent oversight and scrutiny of them. Most importantly, through this period and beyond, we are working with delivery partners and businesses to ensure that we support them in adapting to operating in the new, post-EU environment.

For an analysis of EU exit expenditure in 2021 to 2022, see Chapter 3 – Financial Analysis.

We work collaboratively with the devolved administrations through common frameworks to ensure a common approach is taken where powers have returned from the EU which intersect with policy areas of devolved competence. There are 14 common frameworks in the Environment, Food and Rural Affairs (EFRA) policy portfolio which reflect established ways of working between the administrations. These are currently operating on an interim basis across the UK whilst they undergo scrutiny in the UK Parliament and the devolved legislatures.

The Inter-Ministerial Group (IMG) for EFRA is the highest portfolio level engagement forum between the EFRA ministers of the four UK administrations. It provides central co-ordination and promotes greater collaboration in areas of shared interest such as agriculture, fisheries, environment, forestry, decarbonisation, and rural affairs, and includes the policy, delivery, technical and legislative matters. It is supported by the Senior Officials Programme Board (SOPB) which acts as a Sherpa group to the IMG. SOPB is the highest official level forum for engagement between the four administrations across the EFRA portfolio. Supported by the Secretariat, SOPB provides coordination, oversight and direction to the work programme agreed by the IMG EFRA.

In July 2021, the UK government published its command paper (government paper presented to Parliament) Northern Ireland Protocol: The Way Forward and in October 2021 the EU published a series of non-papers (informal documents, usually without explicit attribution, put forward in closed negotiations within EU institutions) which set out the EU proposals in the light of the Command Paper. Since then, the Northern Ireland (NI) Programme and other Defra group led policy areas have been engaging with the EU through a series of technical discussions and continues to work towards a negotiated solution. On the 13 June 2022, the NI protocol bill was laid in Parliament by the foreign secretary.

During 2021 to 2022, the NI Programme began to develop the Digital Assistance Scheme (DAS) which is a suite of interventions that aims to support and simplify the movement of agri-food goods from Great Britain (GB) to NI. To support this, a consultative group was set up for representations of the GB to NI supply chain to act as a sounding board and to ensure stakeholder engagement supports ongoing development.

The NI Programme continued to support the Movement Assistance Scheme (MAS), which was developed in late 2020 to provide support to traders moving agri-food commodities and live animals from Great Britain to Northern Ireland as an interim solution. The scope of MAS was intended to cover all additional costs faced by traders resulting from the additional certification required under the Northern Ireland Protocol. We have since expanded the coverage of MAS to include seven more items such as (but not limited to): high risk foods not of animal origin, costs related to scrapie testing for sheep exports and costs related to the export of seed. Since it was launched in December 2020, the scheme has helped with the cost of more than 11,400 certificates and 1,300 inspection hours covered.

The total voted net funding in 2021 to 2022 was £7.52 billion which was broken down as follows:

Control totals included in this document are in line with those presented in the Main Supply Estimates 2021 to 2022.

Further detail can be found in Chapter 3 – Financial Analysis.

As at 31 March 2022, Defra had 12,160 full-time equivalent employees (note). For the same organisations, the comparable figure as 31 March 2021 was 10,532. The table below shows the regional distribution for these two years.

Note: Defra: Workforce Management Information - This is only a sub-set of the full-time equivalent (FTE) employee's data shown in the table below, as it excludes non-departmental public bodies (NDPBs). The 12,160 FTE figure is civil service employment as of 31 March 2022 for the Core department, Animal and Plant Health Agency, Centre for Environment, Fisheries and Aquaculture Science, Rural Payments Agency and Veterinary Medicines Directorate only.

Chapter 2 describes our group performance framework and sets out how we performed in delivering our priority outcomes and strategic enablers in our 2021 to 2022 outcome delivery plan.

In summary, Defra group has maintained a steady level of performance across these outcomes, dealing with the continuing impacts of COVID-19, developing new approaches to delivery after leaving the EU and managing the challenges brought by winter events such as Storm Arwen:

This chapter is structured by the four priority outcomes set out in Defra group's outcome delivery plan for 2021 to 2022. Under each PO we explain how we intended to achieve those outcomes and the success of those intentions. We include key performance metrics, agreed at the 2020 Spending Review (SR), to measure our delivery success towards those outcomes. Performance against these metrics was reported quarterly to the Cabinet Office and HM Treasury. A wider set of metrics was also reported quarterly to our Executive Committee (ExCo) and to Defra's Board, as part of an integrated reporting cycle that brings together operational activity and risk, quarterly outcome monitoring and progress in delivering our priority portfolios and programmes.

As part of the annual business planning process, we continually refine our performance framework so that it covers both our strategic, longer-term outcomes and the performance measures that we use at delivery and operational level. This explains why the list of indicators may change from one year to the next, some may be removed whilst other indicators more relevant to the latest plan have been added in.

Looking forward to our 2022 to 2023 Annual Report and Accounts, which will be based on our corresponding outcome delivery plan, our performance framework will evolve again to ensure we have the most suitable indicators that measure our performance against the new priority outcomes, as published as part of the Spending Review 2021 (SR21).

Through prioritisation decisions, Defra group maintained delivery of the priority outcomes set in our 2021 to 2022 delivery plan despite the challenges of COVID-19, with few significant impacts on organisational performance. Where there have been COVID-19 impacts, these are noted in the relevant section of this chapter. There is information on the financial impact of COVID-19 in Chapter 3 – Financial Analysis.

As set out in Chapter 1 Defra's 25 YEP sets out our approach to improving the environment through cleaner air and water, minimised waste, and thriving plants and terrestrial and marine wildlife. We published our third annual progress report against the 25 YEP in October 2021.

We also passed the Environment Act 2021 which places a legal duty on Ministers of the Crown to have ‘due regard’ to the Environmental Principles Policy Statement when making policy.

The principles are internationally recognised as successful benchmarks for environmental protection and enhancement. The five environmental principles are the integration, prevention, rectification, polluter pays and precautionary principles.

There remains much to do, both in our country and with international partners, to halt and reverse the decline of nature and to address climate change. The interlinked international crises of climate change and biodiversity loss must be tackled together. In 2021 and beyond, the government will make tackling climate change and biodiversity loss its number one international priority. Not only is nature heavily impacted by climate change, it also provides vital tools to help mitigate climate change and adapt to its impacts.

Air pollution has reduced significantly since 2010 but remains the greatest environmental risk to human health. We continue to address actions set out in our Clean Air Strategy to tackle air pollution. This includes setting two new targets for fine PM2.5 under the Environment Act 2021. We want to seize the opportunity to set air quality targets which will focus interventions on improving public health.

In May 2021, new legislation came into force that restricts the sale of the most polluting fuels used in domestic burning. The aim is to move people to cleaner fuels: from wet wood to dry wood, and from traditional house coal to smokeless coal and low sulphur manufactured solid fuels. From 1 January 2022, all stoves placed on the UK market must be Eco design compliant, producing lower emissions and being more efficient.

We continue to work with local authorities to implement mitigating measures to reduce NO2 exceedances in the shortest possible time. One such measure includes the launch of Clean Air Zones (CAZs) including Birmingham CAZ in June 2021 and Portsmouth CAZ in November 2021. Further CAZs are planned in Bristol, Bradford, Tyneside, and Sheffield over the next 12 months.

Clean Air Fund grants have helped to encourage fleet turnover to newer, less polluting vehicles, with specific grant types depending on the type of CAZ being implemented. We have also recently awarded £11.6 million from the Air Quality Grant Scheme to 41 local authorities in England for projects in local communities to tackle air pollution and reduce emissions affecting schools, businesses, and communities.

There has been a long-term decrease in the emissions of all the air pollutants; ammonia (NH3), NOx, NMVOC, PM2.5 and SO2. PM2.5, SO2, NOx and NMVOC have met the 2020 target emission ceiling. However we are not projected to meet the 2030 ceilings without additional measures. The revision to the National Air Pollution Control Programme will set out potential additional measures to achieve the 2030 ceilings.

The trends in five main air pollutants between 2016 and 2020 are shown in the graphs, Figure 1 and Figure 2. See the Emissions of Air Pollutants page on GOV.UK for charts showing performance against emissions ceilings.

In 2021 to 2022, we funded the Coal Authority (£6.86 million) to operate three existing mine water treatment schemes and continue construction of a fourth, plus other actions to clean up our river environments. We funded the EA (£0.42 million) to carry out technical scrutiny identifying future priorities and programme assurance.

We have almost doubled funding for the Catchment Sensitive Farming (CSF) Programme to tackle water pollution from farming. We have also recently increased funding to the EA for 50 new farm inspectors, who will be targeted at high-risk river catchments.

In March 2022, we launched the consultation for the new, legally binding long-term Environment Act Targets. This includes water target proposals for abandoned metal mines, nutrient pollution from agriculture and wastewater, and a target to reduce water demand.

Our overall aim is to bring 98 per cent of bathing waters to minimum standards. We have maintained 99 per cent of bathing waters as of December 2021. The bathing season falls between 15 May to 30 September, throughout this season the EA monitors Escherichia coli and intestinal enterococci in the water.

This year a total of 1,527 kilometres of water environment have been enhanced. This brings the total to over 12,000 kilometres enhanced since the publication of the 2015 updated River Basin Management Plans (RBMPs), exceeding the overall target of achieving 8,000 kilometres by December 2021.

Examples of enhancements achieved include improvement made to farm infrastructure, enhancements of English rivers, tackling pollution, maintaining access to eel and internationally importance species, removal and treatment of highly invasive non-native species, and providing advice and support to farmers.

In July 2021, we published our response to a public consultation on personal water usage, setting out measures to encourage water efficient products and introduce more consistent approach to leakage. This will support the measures set out in the Environment Act to further help us secure long-term and resilient water and wastewater services. In October 2021, we published our RBMPs, consulting on the framework used to protect and improve the quality of waters in each river basin district. The aim is to enhance nature and the natural water assets that are the foundation of everyone's wealth, health and wellbeing, and the things people value, including culture and wildlife.

Performance remains at 16 per cent against the long-term target of 75 per cent. Water quality remains a high government priority with action to improve it taking place across a wide range of policy areas. While there has been no significant improvement during 2021, we have made a significant effort in preventing further deterioration which demonstrates the high degree of challenge in meeting water targets. Successful actions across a range of policy areas include reducing pollution from wastewater, progressing measures to tackle diffuse pollution from agriculture, and through developing legally binding targets under the Environment Act.

There is significant environmental pressure from the extraction, production and disposal of material resources. We have progressed delivery of the Government's Resources and Waste Strategy 2018, including our Collection and Packaging Reforms (CPR) schemes. These comprise Extended Producer Responsibility (EPR) for packaging, a Deposit Return Scheme for drinks containers and ensuring more consistent recycling collections. The CPR programme has developed policy positions informed by consultation responses and engagement with delivery partners, including the devolved administrations. The EPR government response has been published and those for the other two CPR projects are due in 2022.

In May 2021, we increased the single use carrier bag (SUCB) charge from five pence to ten pence and extended it to all retailers. This is expected to reduce SUCB issued by micro, small and medium-sized enterprises by 80 per cent within 10 years. In November 2021, we launched a consultation proposal to ban the supply of single-use plastic plates, cutlery and balloon sticks, and expanded and extruded polystyrene food and beverage containers. We are committed to addressing other sources of plastic pollution, which is why we also ran a call for evidence to help us gather information on other problematic plastic items and help inform future policy making.

In March 2022, we opened a consultation on a target to reduce residual waste (excluding major mineral wastes) kg per capita by 50 per cent by 2042 from 2019 levels.

We continue to support WRAP (the Waste and Resources Action Programme) with grant funding of £9 million in 2021 to 2022 for programmes in the food, textiles, plastics and recycling sectors. This includes food waste prevention action, such as supporting the annual Food Waste Action Week, and Courtauld 2030, a voluntary agreement with business that works to tackle food waste across the supply chain. In September 2021, WRAP published a progress report on the Food Waste Reduction Roadmap, a key vehicle for helping businesses waste less and achieve the target to halve food waste by 2030. The report showed that 251,000 tonnes of food worth £365 million was saved from going to waste over the year.

Through the Fisheries and Seafood Scheme, we have continued to support Fishing for Litter, a litter bycatch removal scheme for commercial fishers which provides fishing boats with bags to dispose of marine litter collected during normal fishing operations.

We supported the proposal by Rwanda and Peru that led to negotiating a legally binding treaty to end plastic pollution being agreed at the United Nations Environment Assembly in March 2022. We continue to work with our partners on a global level on this important issue including through the High Ambition Coalition to End Plastic Pollution. This new treaty will build upon our work to tackle marine litter domestically and regionally with a new Regional Action Plan on marine litter, as well as our ambitious commitments through the G7 and G20 to prevent plastic from entering the ocean.

This year we reduced the number of high-risk illegal waste sites to 194 against a target of 200. We continue to be cautious of these results due to the ongoing transition out of the pandemic which has impacted on reporting levels and site substantiation.

Until we have a formal methodology for calculating the increase in the municipal waste recycling rate, we currently collect data for the closely linked ‘waste from households’ (WfH) recycling rate. In 2020, the recycling rate for WfH was 44 per cent, a decrease of 1.5 per cent to the prior year 2019. The decrease seen in the recycling rate for 2020 reflects the impact of the COVID-19 pandemic. The impacts were increased household waste due to lockdowns, disruptions to kerbside collections and closures of household waste recycling centres.

In May 2021, a new England Species Reintroductions Task Force was announced by the Secretary of State, with the aim of establishing it later in 2022 to provide a collective evidence-based view on potential species for conservation translocation and reintroduction in England.

In July 2021, Defra group announced that 90 projects would receive almost £40 million through Round 2 of the Green Recovery Challenge Fund. The fund aims to kickstart nature-based projects in England to restore nature, support climate change mitigation and adaptation, connect people with the natural environment, and create or protect jobs in the sector.

Between August and November 2021, we carried out a consultation on the approach to beaver reintroduction and management in England and we aim to publish a response in 2022 to 2023.

In March 2022, we published the Nature Recovery Green Paper, setting out our ambition and proposed direction of travel to enable nature's recovery in England, how we will halt the decline in our biodiversity, and protect 30 per cent of our land and sea by 2030.

In March 2022, we launched a consultation on setting new, long-term environmental targets under the Environment Act. The Act provides for a nearer-term target to halt the decline in species abundance by 2030, a world-leading commitment, and introduces Local Nature Recovery Strategies (LNRSs) to underpin the development of the Nature Recovery Network. The consultation also proposes targets to increase species abundance by at least 10 per cent by 2042, compared to 2030 levels; improve the England-level GB Red List Index for species extinction risk by 2042, compared to 2022 levels; and create or restore more than 500,000 hectares of a range of wildlife-rich habitats outside protected sites by 2042, compared to 2022 levels.

In March 2022, we published statutory guidance explaining the enforcement framework and civil sanctions that apply when someone commits an offence under the Ivory Act 2018.

Our long-term proposed target is to create or restore 500,000 hectares of wildlife rich habitat outside the protected area network as set out in the 25 YEP. By January 2021, 38,235 hectares of priority habitat had been created since 2018. We have also created 72,537 hectares of arable field margins over the same period. This means a total of 110,772 hectares of habitat have been created over the three years since 2018.

In 2021, we consulted on the UK Marine Strategy Part 3, which details the measures the UK will use until 2027 to support progress towards Good Environmental Status in the marine environment. The consultation on net gain in Marine Protected Areas (MPAs) closed in September 2021, ahead of a full government response in spring 2022.

The UK has now designated 374 MPAs covering 38 per cent of our seas. Our MPA network covers 40 per cent of English waters within 178 sites. MPAs protect some of the best examples of our marine biodiversity by protecting specific habitats or species while allowing sustainable economic and recreational marine activities to continue. In June 2021, we committed to identify pilot Highly Protected Marine Areas, designated for the protection and recovery of marine ecosystems.

The Offshore Wind Environment Evidence Register, funded by The Crown Estate but developed within the Defra group was published in June 2021, providing for the first time a publicly accessible register of evidence gaps and research projects to support the knowledge base for the sustainable development of new offshore wind farms.

In August 2021, we launched the first set of programmes to receive funding from the £500 million Blue Planet Fund. This will increase marine protection, tackle plastic pollution and the decline of coral reefs, as well as supporting developing countries in nature-based solutions to tackle climate change and providing access to UK scientific expertise. Blue Planet Fund is also supporting the Global Ocean Alliance call to achieve the marine protection target of having 30 per cent of the ocean protected by 2030. There are now over 100 countries supporting this.

In March 2022, we published the Natural Capital and Ecosystem Assessment Programme (NCEA) Defra group's flagship 3-year research and development programme. Part science innovation and part transformation, NCEA spans land, coast and sea, with £140 million NCEA projects over the next three years. The marine NCEA Programme successfully delivered its proof of concept year (2021 to 2022), completing 20 projects across Defra group, (Cefas, EA, Joint Nature Conservation Committee, Marine Management Organisation and Natural England). The programme will fill gaps in the monitoring of marine biodiversity, allowing us to better understand the status of the environment and how it is affected by human pressures. This will enable us to embed environmental considerations into policy-making processes and help meet government targets to halt species decline and protect 30 per cent of the UK's land and ocean by 2030.

In January 2022, we published a government response to the Landscapes Review. In the response, we proposed and consulted on measures to improve the management of England's National Parks and Areas of Outstanding Natural Beauty (AONBs), including strengthened and aligned statutory purposes for National Parks and AONBs and a new national partnership to coordinate existing organisations with greater strategic direction.

The Nature Friendly School and Community Forest and Woodland Outreach projects have continued to work with primary, secondary, special and alternative provision schools with the highest levels of need across the country to deliver activities to increase children's access and connection to nature. The Growing Care Farming Project has enabled the number of farms registered as Care Farms to increase significantly. The availability of educational and therapeutic places increased by 54 per cent to over 675,000 per year. Although the delivery side of the Children and Nature Programme ended in March 2022, the evaluation part of this work will continue into the autumn of 2022. We will be building on our investment in this programme to work with Department for Education (DfE) on exploring opportunities to support education settings to deliver quality outdoor education.

We funded the largest ever ocean literacy survey undertaken in England and Wales; published by the Ocean Conservation Trust (OCT) in June 2021. The survey, which will now be undertaken biannually, measured public awareness, attitudes, knowledge and behaviours related to the marine environment. With the responses from over 8,000 people, the findings will inform future policy and help Defra, partner organisations and stakeholders understand more about public awareness of ocean issues.

We consulted on the draft update to the UK National Implementation Plan, between March and May 2021, for the Stockholm Convention on Persistent Organic Pollutants (POPs). This set out the information available to us for "new POPs" and our plans to monitor and eliminate them in the future.

In June 2021, we published the UK REACH Consolidated Report and Work Programme setting out the activity that the Health and Safety Executive, the EA, and other relevant agencies, will carry out to operate UK REACH.

We have responsibility for ‘rural proofing’ and a role to support government departments to consider the needs of rural areas in designing and delivering policies. We will shortly publish our second report on rural proofing which will set out how policies across government have continued to support rural businesses and communities to thrive and how the government's approach to levelling up will further benefit rural areas.

In 2021 to 2022, considerable progress was made against the five key priorities identified in the first rural proofing report. In terms of improving digital connectivity, 30 per cent of rural premises now have access to gigabit-capable connections compared with 19 per cent in January 2021. Significant steps were taken in tackling rural crime by introducing legislation in the Police, Crime, Sentencing and Courts Act to crack down further on illegal hare coursing. We have continued our work to connect people with nature and the countryside, with important benefits for wellbeing and for rural businesses. One example of this is the England Coast Path which is on target to be fully walkable by the end of this Parliament.

These priorities will remain important in the year ahead. We have continued to improve the evidence base for rural areas by publishing the Statistical Digest of Rural England and commissioning original research into rural issues.

The Office for Environmental Protection (OEP) was created in November 2021, under the Environment Act. Its statutory functions commenced in January 2022. The OEP will protect and improve the environment by holding government and other public authorities to account. It will monitor, critically assess, and report on government's progress in improving the natural environment in line with their Environmental Improvement Plans (EIPs), goals and targets and will enforce against failures to comply with environmental law. The OEP can receive and investigate complaints on alleged serious breaches of environmental law by public authorities and has powers to take legal action in serious cases, if necessary, as a last resort.

In January 2022, we launched a consultation on the practical and legal implementation details of the new biodiversity net gain requirement. This is an approach to development which means that habitats for wildlife must be left in a measurably better state than they were in before the development.

Our environment outcome delivers directly against: SDG 6 to ensure availability and sustainable management of water and sanitation for all, SDG 14 to conserve and sustainably use the oceans, seas and marine resources, and SDG 15 to protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss. It also contributes to: SDG 3 to ensure healthy lives and promote wellbeing, SDG 11 to make cities and human settlements inclusive, safe, resilient and sustainable, and SDG 12 to ensure sustainable consumption and production patterns.

We continued to contribute to the BEIS led cross-cutting net zero ambition. Our key programmes take a dual approach: to minimise emissions or maximise carbon sequestration whilst taking account of our wider environmental commitments. We are responsible for reducing emissions from agriculture, land use (including peat), fluorinated greenhouse gases and waste (including wastewater), whilst simultaneously increasing England's carbon sequestration potential through our forestry policies.

In May 2021, we set out the England Trees Action Plan and England Peatland Action Plan under the £640 million Nature for Climate Fund. Adapting to and mitigating against climate change is one of the biggest challenges of our generation and has already begun to cause irreversible damage to our planet and way of life.

The Net Zero Strategy Build Back Greener was published in October 2021, setting out new policies and proposals to accelerate emission reductions across our sectors. In the strategy, we committed to restoring 280,000 hectares of peatland by 2050 and trebling woodland creation rates in England by the end of this Parliament. We also committed to explore the near elimination of biodegradable municipal waste to landfill from 2028 and implementation of free separate food waste collections for all households from 2025.

The Net Zero Strategy set a goal for 75 per cent of farmers in England to be engaged in low carbon practices by 2030, rising to 85 per cent by 2035. A number of the policies and proposals in the Net Zero Strategy are in early stages of development; progress will improve over time as policies are delivered. Progress in some sectors such as fluorinated gases, will be quicker as they are delivering on policies that are already in place, while new policies in other sectors will be designed to ensure we meet our goals.

For example, we committed to a target to decarbonise agricultural emissions by up to 6 million tonnes CO2 equivalent per year in Carbon Budget 6, through the environmental land management schemes (Sustainable Farming Incentive, Local Nature Recovery and Landscape Recovery) and wider farming offers.

We have contributed towards the 10 Point Plan for a green industrial revolution, which was announced by the Prime Minister in November 2020. Our contributions include:

The Net Zero Strategy (as above) sets out our contribution to carbon budgets 4, 5 and 6 with appropriate internal governance procedures to ensure delivery. On our pathway to net zero, the UK has interim targets called carbon budgets. Carbon budgets restrict the total amount of greenhouse gases that the UK can emit over five-year periods, ensuring continued progress towards our long-term climate target. Carbon budget 4 is for the period 2023 to 2027 and carbon budget 5 is for 2028 to 2032. In June 2021, the government set in law the sixth carbon budget (CB6) limiting the volume of greenhouse gases emitted from 2033 to 2037. CB6 reduces emissions by approximately 78 per cent by 2035 compared to 1990 levels.

The latest emission statistics for 2020 show that Defra's net zero sectors (agriculture, fluorinated greenhouse gases (F-gas), Land Use, Land-Use Change and Forestry (LULUCF) and waste) have seen decreased emissions from 2019, representing a total drop of around 5 per cent. The decrease has been consistent with falling emissions since 2017 for the F-gas and Waste sectors. The fall however can largely be attributed to the COVID-19 pandemic suppressing activity. More contributions to this overarching outcome are set out below.

Greenhouse gas emissions for the waste sector reduced by 6 per cent (1.5 MtCO2e) in 2020 compared to 2019. Throughout the 10-year period, waste figures have reduced by 38 per cent. The gas emissions for the agriculture sector dropped by 3 per cent (1.5 MtCO2e) in 2020 compared to 2019. However, this drop is within annual variability of reporting as emissions from agriculture have remained stable over the last decade.

The total projected greenhouse gas savings included in the EEP 2020 has not yet been published, instead an update reflecting the Net Zero Strategy baselines has been published. We are also reflecting on how yearly targets are developed as linear targets across sectors.

In May 2021, we published the England Peat Action Plan, which sets out the government's long-term vision for managing, protecting and restoring our peatlands, so that they provide a wide range of benefits to wildlife, people and the planet. This includes the Nature for Climate Fund, which aims to provide funding to restore 35,000 hectares of peatland by 2025 through two types of grant. In September 2021, we awarded approximately £16 million via the Restoration Grant to five projects in England to restore peatlands to a healthy state. In December 2021, through the Discovery Grant, we awarded over £4 million to ten leading projects to support them in unlocking the barriers to peatland restoration. The second round of these grants opened in spring 2022.

In the Net Zero Strategy, we set out a longer-term ambition to restore 280,000 hectares of peatland in England by 2050. To support this, we are implementing a range of policies that will mobilise private investment. Defra group allocated the first round of funding under the Natural Environment Investment Readiness Fund in July 2021. A package of reforms to the Peatland Code, including expanding it to cover more peatland types, will be implemented in 2022.

There is an established scientific consensus that burning of vegetation on such sites is damaging and that is why we have taken action to prevent further damage by bringing forward legislation that will limit burning of vegetation. The Heather and Grass etc. Burning (England) Regulations 2021 came into force on 1 May 2021. This legislation represents a crucial step in meeting the government's nature and climate change mitigation and adaptation targets, including the legally binding commitment to reach net zero carbon emissions by 2050.

We need to end the use of peat and peat-containing products in horticulture in England. In December 2021, we published a full consultation on banning the sale of peat and peat- containing products in the amateur sector by the end of this Parliament in England and Wales, and asked for any evidence on the impacts of ending the use of these in professional horticulture and wider sectors. We are using the responses to improve our understanding of these challenges, including asking for views about potential exemptions for sectors for which the transition is particularly difficult.

We have restored 1,633 hectares of peatland in 2021 to 2022 against a target of 4,143 hectares. Through the Nature for Climate Discovery Grant, Natural England has awarded over £4 million to ten leading projects across England, supporting them to begin preparing to restore up to 42,000 hectares of peatland. The grant, awarded in December 2021, will enable regional partnerships from the Somerset Levels to the Norfolk Broads and from Dorset to Northumbria to gather information, build new business models and unblock barriers to developing new approaches for peatland restoration.

We plan to at least treble tree planting rates in England by the end of this Parliament and maintain new planting at least at this level from 2025 onwards. We have already committed to increasing planting rates in England significantly beyond the current rate of approximately 2,100 hectares per year. This is supported by the England Trees Action Plan which made a commitment to treble woodland creation by the end of this Parliament and the Net Zero Strategy commitment to maintain new planting at least at this level from 2025 onwards. The government also announced it will boost the Nature for Climate Fund with a further £124 million of new money, ensuring a total spend of more than £750 million by 2025 on peat restoration, woodland creation and management.

We launched the England tree planting campaign in January 2022 to promote the range of grants and support available through the Nature for Climate Fund to drive behaviour change to support our woodland creation targets. Defra group relaunched some key funds in March 2022: Urban Tree Challenge Fund, Local Authority Treescape Fund, Tree Production Innovation Fund and Woods into Management Forestry Innovation Fund. We also launched the Environmental Targets Public Consultation in March 2022, including a proposed target to increase tree canopy and woodland cover in England from 14.5 per cent to 17.5 per cent by 2050.

During 2021 to 2022, we planted 2,700 hectares (provisional figure) of trees in England. Overall planting was 2,300 hectares of woodland creation and 400 hectares of trees outside woodlands. The pipeline is growing well with some 12,000 hectares of projects in early development through the Woodland Creation Planning Grant, and 4,000 hectares at scheme design stage. To stay on course we need to ensure several critical success factors are in place; this includes communicating with landowners about the tree planting grants on offer and the transition plans to ELM; reducing application time and streamlining regulatory processes; and building up key skills in industry and supply in nurseries.

We continue to support low carbon farming and agricultural innovation through the Farming Investment Fund and the Farming Innovation Programme, which we launched in 2021 to 2022, as well as our future environmental land management schemes, which we are developing ahead of rollout (starting with the Sustainable Farming Incentive later this year).

In December 2021, we made the first reduction in Direct Payments and we are reinvesting the money saved in agri-environmental, productivity and animal health and welfare schemes.

In the Net Zero Strategy we committed that 75 per cent of farmers in England will be engaged in low carbon practices by 2030, rising to 85 per cent by 2035.

The Climate Change Committee's 6th Carbon Budget report highlighted the significant potential for perennial energy crops and short rotation forestry to contribute towards our carbon budget targets by increasing soil and biomass carbon stocks while also delivering other ecosystem benefits. We will explore the potential role of biomass in delivering net zero across the economy in the Biomass Strategy.

Defra is responsible for efforts in England to reduce use and emissions of F-gas. We work with our counterparts in Scotland and Wales to run a joint, GB-wide F-gas system. Northern Ireland remains within the EU's F-gas system, in accordance with the Northern Ireland Protocol.

The UK is ahead of schedule in delivering its international obligation to reduce the use of hydrofluorocarbons (HFCs, by far the most common type of F-gas) by 85 per cent by 2036 under the UN Montreal Protocol - the most successful climate policy to date. We are committed to exploring how we can go even further than this in support of the UK achieving net zero.

The HFC phasedown reduced the amount of HFCs placed on the market and this increased to a 55 per cent drop at the end of 2020, compared to a 2015 baseline.

Our net zero outcome delivers directly against SDG 13 which seeks to take urgent action to combat climate change and its impacts. It also contributes to SDG 15 to protect, restore and promote sustainable use of terrestrial ecosystems and sustainably manage forests.

We committed to double our investment in flood protection to a record £5.2 billion over six years from April 2021. This will deliver around 2,000 flood schemes across England and will better protect 336,000 properties from flooding by March 2027. We are also investing an additional £170 million of economic recovery funding to accelerate delivery in 22 areas.

In July 2021, the government published an update on the significant progress that has been made to deliver the commitments set out in the Flood and Coastal Erosion Risk Management Policy Statement. The further steps that we are taking include:

We are expecting to have better protected over 30,000 properties from flooding in 2021 to 2022 as a result of the £5.2 billion Flood and Coastal Erosion Defence Investment Programme. In addition, all schemes that were included in the Economic Recovery Funding Scheme commenced construction by the end of March 2022.

In April 2021, we issued a Ministerial Direction to all owners of registered large, raised reservoirs to make it a statutory requirement for them to have emergency (on site) plans.

Following the Toddbrook incident we commissioned, managed and published two independent reservoir safety reviews. We accepted all the recommendations from the first review, published in February 2020, and work to implement these is near completion. The second review was published in May 2021 and we are exploring the recommendations so that we have a safety regime fit for the long-term.

In November 2021, we published the final evaluation of the £15 million Natural Flood Management Programme. Programme achievements include slowing and storing water upstream of 15,000 homes in areas at risk of flooding (the equivalent of 1.6 million cubic metres) and improving 4,000 hectares of habitat.

Following our announcement of the 25 areas which would receive a share of £150 million from the Flood and Coastal Resilience Innovation Programme, we began business case approval for these projects in November 2021 and in January 2022, projects started moving into their delivery phase.

A Statutory Instrument was laid in January 2022 on specific changes to the Flood Re insurance scheme to improve the efficiency and effectiveness of the scheme and encourage greater uptake. Changes to the scheme will allow insurers to help flooded households make their homes more resilient to future flooding using products such as air brick covers, flood doors and flood resistant plasterboard, and benefit from discounted insurance premiums if they have these installed.

We administered an extension of the Property Flood Resilience grant scheme for eligible properties impacted by flooding, enabled new or expanded Internal Drainage Boards through the Environment Act and worked jointly with DLUHC to ensure the National Planning Policy Framework better accounts for all sources of flood risk in the planning system.

2021 to 2022 is the first year of a new 6-year programme, with the aim of better protecting hundreds of thousands of properties from flooding and coastal erosion, and investment of £5.2 billion in government funding in around 2,000 schemes. By the end of 2021 to 2022 we had protected 32,908 properties which includes projects like Team 2100 Programme (Thames Delivery), Pevensey Bay Sea Defences, Exmouth Tidal defence scheme and Deal Beach management. This is below our 45,000 properties target due to several factors including the continued impact of COVID-19, winter flood events and supply chain disruption.

During 2021 to 2022, 91.8 per cent of flood defence assets were brought to required condition against the target of 98 per cent. Increased asset damage occurred during multiple significant flood events in early 2021, and COVID-19 restrictions impacted on delivery work. Errors in transitioning to a new system for recording assets has also contributed to the below target percentage.

The Climate Change Committee's (CCC) 2021 Progress Report on Adaptation was published in June 2021. This recognised the progress which has been made in flood and coastal erosion risk management through the publication of a new government Policy Statement and National Strategy on flooding and coastal erosion, alongside significant government investment. The government response to the CCC report on progress in adapting to climate change was published in October 2021 followed by the Government's assessment of UK Climate Change risk in January 2022.

The 2-yearly progress report from the CCC was published in June 2021. It broadly continues to show a mixed picture across government with areas needing improvement and others showing progress. The third National Adaptation Programme is in development and is due in 2023.

Between April 2021 and April 2022, the Defra Emergencies Division led the response to two major flood events (October 2021 and February 2022), ensuring adequate steps were taken to protect impacted communities and infrastructure. We continue to work with national and regional partners to enhance England‘s resilience and preparedness for flood events. We have maintained resilience of the drinking water supply during a number of disruptive events, such as COVID-19, severe weather and a tightening of global supply chains.

Our floods and resilience outcomes delivers directly against SDG 13 which seeks to take urgent action to combat climate change and its impacts. It also contributes to SDG 11 to make cities and human settlements inclusive, safe, resilient and sustainable.

Our ambition is for the UK to be one of the world's leading food nations, renowned for excellence in every aspect of the food system. We are committed to ensure the safety of food available in the UK is not compromised. We will ensure that UK producers can continue to access markets and consumers have access to affordable foods. We will build the UK as a world leader in maintaining consumer confidence in food and drink, leading work on food standards and consumer information labelling, and working with partners on food safety.

We passed the landmark Agriculture Act, the most significant agricultural legislation for a generation. This gave government the powers to move away from the CAP towards a system where farmers are rewarded for delivering environmental improvements, over the next seven years.

Having left the Common Fisheries Policy, the Fisheries Act 2020 now provides the opportunity to reform how we manage our fisheries, control our waters and support our marine environment. We aim to ensure that our actions support sustainable, diverse, responsible and profitable fishing industries and improve the marine environment.

As part of the Agricultural Transition plan, we are gradually reducing and then stopping the CAP's untargeted Direct Payments and instead investing the money in farm productivity and environment, climate and animal health and welfare. We launched the Future Farming Resilience Fund to provide free of charge business support to farmers and land managers during the early years of the agricultural transition. Any farmer or land manager currently in receipt of Direct Payments is eligible to apply. Other initiatives include the Farming Investment Fund (launched in November 2021), Sustainable Farming Incentive pilot agreements, the Farming Innovation Programme (launched in October 2021) and Improving Farm Productivity (launched in January 2022). In February we announced the Lump Sum Exit scheme, resulting in around 800 expressions of interest.

The first round of applications opened for the Landscape Recovery scheme in February 2022. This scheme is for landowners and managers who want to take a more radical and large-scale approach to producing environmental and climate goods on their land. We will continue to operate existing schemes and services whilst we develop new environmental land management schemes.

Our performance in issuing payments to farmers was a noteworthy achievement. From 31 December 2021 Rural Payments Agency (RPA) has paid out 101,300 eligible claims in the first month's payment window. This number represents 98.3 per cent of eligible claims to the Basic Payment Scheme, 62.2 per cent of claims to the Countryside Stewardship Scheme (CS) revenue and 64.6 per cent of claims to Environmental Stewardship Scheme 2021.

We are maintaining momentum in delivering new schemes whilst also reacting flexibly to emerging global issues which impact on the farming community. In March the Secretary of State (SoS) announced a package of measures to help farmers feel more confident in government support during a period of pressure and provide reassurance around food security. This included:

We continued to support initiatives launching two new competitions under the Farming Innovation Programme for large R&D partnerships and climate smart farming; scaling up the Resilience Fund and providing famers who wish to exit the industry with an opportunity to do so.

Productivity of the UK agricultural industry fell 7 per cent between 2019 and 2020. As part of the future farming programme, we are introducing a range of measures aimed at improving productivity. These have been developed in conjunction with industry and include grants, benchmarking, a new entrant's scheme and supporting industry to set up the Institute for Agriculture and Horticulture.

In January 2022 we launched, with the devolved administrations (DAs), our public consultation on the draft Joint Fisheries Statement (JFS). This key element of our post EU exit fisheries management framework commits the UK government and DAs to adopt an ‘ecosystem-based approach’ to fisheries that will contribute to achieving a prosperous fishing industry for future generations while safeguarding, restoring and enhancing the marine environment on which industry and wider society depends.

We are now developing new domestic fishing policies that are in the best interests of England, or where appropriate, the whole of the UK. Bespoke, flexible and transparent approaches at the most appropriate level for practical management tailored to species, locations and types of fishing activities will underpin a vibrant, profitable fishing industry that is resilient to climate change and protects our marine environment.

We initiated the Fisheries and Seafood Scheme (FaSS) in April 2021 which provides financial assistance for projects that support the English fishing industry, with projects ready to deliver by March 2022. FaSS is updated annually to encourage continuous improvements, to reflect new policies and to adapt to changing markets.

We launched the UK Seafood Fund in December 2021. This is a £100 million fund that supports the long-term future and sustainability of the UK fisheries and seafood sector. There are three areas of funding: science and innovation, infrastructure and skills and training. For the science and innovation pillar, launched 2021, grants were awarded under the UK government led Seafood Innovation Fund along with eight innovative research projects funded under the Fishing Industry Science Partnerships (FISP) scheme. The Infrastructure Pillar launched Round 1 in March 2022.

The assessment for 2022 shows that 44 per cent of the total allowable catches (TACs) which relate to maximum sustainable yield (MSY) advice, were set consistent with MSY advice (19 out of 43 TACs). The report published in March 2022 describes the assessment of TACs set during annual consultations for 2020, 2021 and 2022.

We are working to ensure that food and drink are produced to high standards of food safety, animal welfare and sustainability. We continue to support the food and drink industry and consumers through a variety of forums, supportive programmes and funding opportunities whilst ensuring we are delivering policy that drives the UK's high standards.

In November 2021, we helped to secure the UK Chairpersonship of the United Nations Food and Agriculture Organisation and World Health Organisation Codex Alimentarius Commission (note). The UK candidate won by a wide margin, reflecting a successful six month campaign by us, the Food Standards Agency (FSA) and the Foreign and Commonwealth Development Office (FCDO), building on strong support for UK leadership in this important committee.

Note: The Codex Alimentarius, or ‘Food Code’ is a collection of standards, guidelines and codes of practice adopted by the Codex Alimentarius Commission. The Commission, also known as CAC, is the central part of the Joint FAO and WHO Food Standards Programme and was established by FAO and WHO to protect consumer health and promote fair practices in food trade.

In March 2022, we hosted a Regional Food and Drink Summit attended by 120 SMEs and related organisations. The event highlighted the opportunities for growth for food and drink businesses.

We have laid legislation to make gene editing research easier. More resilient crops are key to meeting the challenges of climate change and food security and we are giving our researchers and farmers the tools they need to achieve this.

Moreover, we are considering the evidence Henry Dimbleby set out in both parts of his independent review of the food system, which will inform the government's Food Strategy White Paper that will be published in 2022.

Overall, these actions provide a catalyst for growth for all regions of the UK and increase global recognition of the UK as an innovative food nation.

In 2019 the productivity of the food chain increased by 0.4 per cent while there was an increase of 0.6 per cent in productivity in the wider economy. In the 10 years prior to 2019, the average annual growth rate of the food chain was 0.6 per cent while the wider economy's average annual growth rate was 0.3 per cent. In 2019 two of the four food sectors had a higher productivity than in 2018; manufacturing increased by 1.8 per cent while catering increased by 4.5 per cent.

The value of UK food and drink exports decreased throughout the year. Exports were impacted by the end of the transition period, and border issues at the start of the of the year due to new COVID-19 controls at the French border. We expect to see trade recover as COVID-19 restrictions ease, although the effects of EU exit are expected to take longer to become clear.

We have set out the next stage of our strategy to combat bovine tuberculosis (bTB) and launched clinical field trials on farms in England and Wales which are investigating the use of vaccinations. We also published our Action Plan for Animal Welfare, introduced the Animal Welfare Bills (Kept Animals and Sentience) to the House of Commons, and the Animal Welfare (Sentencing) Act came into force. The government is also backing the Animals (Penalty Notices) Bill, a Private Members’ Bill now awaiting Royal Assent. We launched a Pet Theft Taskforce to investigate the reported rise in pet theft since the start of lockdown.

We are exploring policy options and drafting a call for evidence for a range of farm animal welfare reforms. In September 2021, the governments of England, Scotland and Wales launched a 10-week consultation to inform GB's approach to plant biosecurity over the next five years, with a new strategy to be published in 2022. We increased the frequency of bTB testing for cattle herds to sixth monthly in high-risk areas in summer 2021.

Since November 2021, we have responded to a record number of significant Avian Influenza outbreaks which placed pressure on both our Core department and the Animal and Plant Health Agency (APHA). This prompted new measures that created legal requirements for all bird keepers across the UK to keep birds indoors. This was following strict biosecurity measures to limit the spread and eradicate the disease. We intend to consult on the updated zoo standards later this year.

Bovine tuberculosis (bTB) is a slow-moving epidemic disease. We measure the percentage of cattle herds that are bTB free in England and our aim is to be 100 per cent bTB free by 2038. We have observed signs of improvement in all key measures of disease spread this year compared to last. In England, overall at end of March 2022, 94.9 per cent of herds were bTB free, an increase of 0.2 per cent from March 2021.

The number of high priority forest pests and diseases remains at 14 for 2021, the same as 2020 and with no changes to the composition of the list.

The threat from plant pests and pathogens is significant and growing because of increasing globalisation and climate change. There is unlikely to be any reduction in this pathogen pressure. Protecting our new and existing trees from biosecurity risks is vital to delivering our long-term vision for trees and woodlands. Government action, whether pre-border, at the border or inland has increased, with the Plant Biosecurity Strategy for GB outlining our approach.

We recently completed a public consultation to help inform the refreshed Plant Biosecurity Strategy. Respondents were asked about their views on the range of biosecurity measures currently in place and whether measures could be introduced in the future to strengthen our biosecurity regime. We have delivered veterinary pathogen data for inclusion in 2020 Veterinary Antimicrobial Resistance and Sales Surveillance (UK VARSS) report due for publication in November. This contains results from our new, gold-standard testing programme for veterinary pathogens. Taking a One Health approach to health is crucial, both now and in the future.

We are in the middle of a global fight against a zoonotic disease and there is every chance that the next international health threat will have its origin at the human-animal-environment interface so collaboration, across sectors and internationally will be imperative. As the Border Phase 2 import controls were introduced on 1 January 2022, the Animal Health Regulation (AHR) Export Health Certificates (EHCs) went live in January 2022 and we launched the new £10 million Animal Biosecurity Infrastructure Fund in February 2022.

The volume of export health certificates and licences issued has increased compared to the previous year. This comes as a result of our exit from the EU. As of March 2022, 98.6 per cent of certificates and licences were issued within agreed timescales.

This outcome delivered directly against SDG 2 to end hunger, achieve food security and improved nutrition and promote sustainable agriculture, SDG 12 to ensure sustainable consumption and production patterns, and SDG 14 to conserve and sustainably use the oceans, seas and marine resources.

To support the effective delivery of Defra group strategic plans and ambitions, our portfolio of corporate services provided the necessary capability, workforce skills, IT architecture and resources. These services were agile and robust in challenging circumstances and we continue to ensure they underpin the work of Defra group and deliver excellent value for taxpayers, our partners and customers (including industry, delivery partners, public bodies, Non-Government Organisations and Parliament). We will continue to attract and retain the best talent and develop the skills and capability necessary to address new challenges and take advantage of new opportunities. We aim to be a customer-focused, outward looking and data-driven department. We strive to ensure Defra group's priorities and plans are based on the best scientific, analytical and legal insights.

We play a leading role, working with the Government Science and Evidence profession, to develop a capability framework that will enable the attraction, growth and retention of science talent and increase the number and diversity of science internships, secondments, academic placement and apprenticeships.

Defra group recruited over 9,000 roles in 2021 to 2022. This represented a high degree of internal churn, in addition to growth in arm's length bodies to meet public needs. There have been challenges in recruiting into specific professional roles (for example, digital, project and veterinary) largely due to external workforce market forces (such as salaries and benefits) and skills shortages. To mitigate we have introduced specialised pay and capability frameworks to increase attraction and retention of staff in critical areas, as well as making use of external suppliers and contingent labour markets. In the case of vets, we commenced work to develop apprenticeship routes working alongside professional bodies and institutions.

Across the wider range of professions, we made use of various career entry schemes actively supporting fast stream programmes, care leavers and summer diversity interns. We achieved 100 per cent of our Civil Service Enrolment target (243 enrolments) for apprenticeships. Recognising apprenticeships as an important part of developing our workforce capability, by March 2022 we had 982 people on the apprenticeships scheme (from admin to degree level) across Defra group.

Throughout the year we have continued to support staff working in varied ways as the government's lock down rules evolved. We participated in COVID-19 workplace testing pilots and worked across Defra group to follow government guidelines and ensure our people were able to work safely in any required workplace setting – whether in laboratories, field work, offices or working from home. As part of focussing on future ways of working, we established three ‘early adopter‘ property projects to demonstrate the possibilities of hybrid work settings. These pilots, in London, Bristol and Birmingham, provided a better mix of traditional office settings with greater space for meetings and collaboration. These layouts are consistent with the broader Government Property Agency vision for future workplaces.

During the year we reset our Group Corporate Services transformation agenda, reviewed and strengthened our group governance, and produced service catalogues across all corporate service enabling lines to ensure clarity of offer and affordability.

We opened a further hub in Newcastle and now have offices in Scotland and Wales. We are working to open a site in Northern Ireland in 2022 to 2023. We have started the development of outside of London recruitment.

Our engagement score was 66 per cent in 2021 which was a rise of one per cent from 2020.

Over 2021 to 2022, there has been steady but small improvements in diversity representation across the Defra group. The Defra Group Equality, Diversity and Inclusion (EDI) plan for 2022 to 2023 includes actions to improve progression and inclusive recruitment, with a focus on strategic priorities of ethnicity and disability. The new Inclusion Leadership Group will lead the delivery of activity to drive positive EDI change. Analysis of people surveys will be used to understand what more can be done to improve lived experiences of ethnic minority, LGBT+ and disabled employees.

We continued providing updated laptops to staff (with over 30,000 devices issued), improving our infrastructure, and releasing new features to our collaboration software and network tooling. Our annual IT survey showed 64 per cent of staff felt their IT enabled them to work effectively (compared with around 20 per cent two years ago). Our Defra group Legacy Applications Programme has had early success in updating a number of initial business applications, reducing risk of failure and improving user experience.

We continued to modernise our Digital Data and Technology model, for example setting out our service catalogue and planned approach to product management for Defra group's services.

We delivered a number of important, new key digital services, including fully digital journeys for export health certificates, a digital service to handle avian influenza, the Northern Ireland DAS, and digital services to support policies including Clean Air Zones (CAZ), the ivory ban and the Sustainable Farming Incentive. We also launched the check for flooding service which replaces the legacy Flood Information Service (which had 6.6 million unique users last year).

We also led on sustainable technology across government and industry - highlighted at COP26 where we co-hosted a Tech for Climate Action event involving over 300 of the UK's main technology suppliers. This showcased our sustainable technology work, such as producing industry certification; including IT within the Greening Government Commitments for the first time; and adding sustainability within Cabinet Office spend controls.

Alongside these important deliveries, we continued to modernise how we provide Digital Data and Technology Services (DDTS) within Defra group. For example, we set out our DDTS service catalogue and piloted our approach to product ownership through two successful pathfinder exercises. This updated partnership approach was reflected in our work to develop SR21 bids which secured substantial funding to remediate technical debt across Defra group.

Through 2021, we piloted a new data science capability to enable a significant improvement in the analysis of data for deriving insight useful in policy making and delivery across Defra's objectives. We are linking this with broader initiatives to improve the accessibility and reusability of data and the behaviour and skills to make Defra a data-driven department.

In March 2020, the government committed to transform the animal science facility at Weybridge. The Science Capability in Animal Health (SCAH) Programme will secure the future of this critical national asset and the world class science it delivers. The SCAH Programme represents a significant investment in the Weybridge site over a 15-year period and highlights the importance of the UK having a strong international reputation for animal health science. This investment will improve our scientific infrastructure, enhance our ability to build influence around the world and be at the cutting edge of animal health science, attracting and working with the world's best scientists.

Work is already underway to transform the Weybridge campus, paving the way for a future science hub which supports our well-prepared national disease control and international reputation as experts in animal science. In February 2022, a £200 million investment was confirmed by the Secretary of State for the next phase of this long-term programme to future-proof our animal health capabilities.

We continued to press the EU for swift association to the Copernicus Programme, such as in the Specialised Committee for Participation in Union Programmes in December 2021.

At COP26, hosted in Glasgow in November 2021, we demonstrated the UK's leadership of Earth Observation, at Earth Information Day.

The Earth Observation Centre of Excellence delivered new programmes on upland burn and the Living England map, a habitat probability map for the whole of England, created using satellite imagery, launched on 5 April 2022.

Collaboration on research continued with UK Research and Innovation and its Research Councils, including programmes under the Strategic Priorities Fund valued at around £220 million; and with European partners via European Research Area-networks on projects worth approximately £190 million.

In June 2021, we published our Defra Group Research and Innovation Interests (DGRIIs) 2021. This document sets out our high-level areas of research and innovation interest, with the aim of supporting ongoing and new engagement with the external research community.

Building on Defra group's ambitious environmental and social sustainability goals, a central sustainability strategy team has been recruited to co-ordinate with the 33 arm's length bodies (ALBs). Central to this is the sustainability leadership group, made up of representatives from ALBs delivery partner organisations, who co-ordinate internal sustainability practices and supports the delivering against our Greening Government Commitments.

Bringing together our ALB partners has enabled a diverse range of sustainability experts from across Defra group to join forces to set the vision and strategic priorities feeding into sustainability strategy.

While we continue to green our IT, buildings, fleet and commercial activity, we are now improving the way we make sustainable decisions by integrating the requirement for sustainability assessments (along with guidance) into our business case templates and added a requirement for proposals to our Executive Committee to set out sustainability implications.

We have calculated a new Defra group baseline data year to further understand our impacts on emissions, water and waste, underpinning the monitoring of our progress against sustainable targets and environmental impacts.

We have increased resource to deliver the internal Defra group sustainability strategy. Learning resources have been made available to colleagues including conversation packs, information around business and personal impact to enable green choices. We launched our Defra group sustainability hub site in February 2022 for internal staff. It provides information, resources, and links to information from ALB partners. Work has also begun with the new government curriculum, which will include modules on the implications of net zero, climate change and wider environmental issues for government.

For a more detailed breakdown of our sustainability performance see Annex 3.

Our total emissions reductions improved to 50 per cent in 2019-20 from 46 per cent in 2018 to 2019.

Defra plays a crucial role in ensuring a sustainable future. We continue to work with a wide range of government departments to drive forward sustainable development thinking especially on developing the Sustainability Pillar of the Government Strategic Framework.

We promote sustainability leadership across government by co-ordinating the Greening Government Commitments (GGCs), which set targets for all departments to improve the sustainability of their own estates and operations, and report publicly on the progress made. The current GGC framework sets targets for reducing the government's greenhouse gas emissions, domestic flights, waste, paper and water, as well as promoting sustainable procurement. It also commits departments to reporting publicly on their actions on climate change adaptation, biodiversity, sustainable food and catering, and sustainable construction, as well as any other significant aspects of their work.

We have overseen the development of the new GGC target framework for 2021 to 2025 which was published in October 2021. The new framework ensures the public estate continues to reduce its environmental footprint, align with commitments in our 25 YEP and be consistent with a trajectory to achieving net zero greenhouse gas emissions by 2050.

COVID-19 has had a huge impact on our sustainability performance in 2020 to 2021. We have shut and reopened our office estate in line with BEIS guidance leading to reduced paper, energy and carbon use. However, these savings have been balanced by the increased operational demands of our laboratories due to increased testing requirements. Our travel requirements have dropped dramatically with government lock downs. Our waste and water use are primarily driven by operational requirements to support living plant collections, national forests and science operations so have been unaffected by the pandemic.

Compared to 2009 to 2010 baseline figures, in 2020 to 2021 Defra group reduced its greenhouse gas emissions by 59 per cent; domestic flights by 98 per cent; paper use by 97 per cent; reduced waste sent to landfill to 16 per cent of total waste; and decreased water consumption by 10 per cent. We are expecting these dramatic improvements to lessen as staff return to the office.

We are continuing to promote sustainable procurement through standing instructions within its policies and processes to consider all elements of good procurement practice including consideration of the Public Services (Social Value) Act; the Public Sector Equality Duty; the Small to Medium Enterprises agenda and modern slavery amongst others.

Where Defra leads on procurements, a sustainability appraisal is undertaken at the strategy stage and, where possible, Government Buying Standards and the balanced scorecard are applied.

For further commentary on our sustainable performance see Annex 3.

We engage with other government departments (OGDs), Non-Governmental Organisations (NGOs) and the private sector to embed natural capital thinking and approaches to support strategic and long-term decision-making, as set out in the 25 YEP. Building on the advice of the former Natural Capital Committee, we are playing a leading role in developing and making accessible the evidence and tools to support the consideration of environmental impacts in decision-making and in reporting. In August 2021, we published a substantial refresh of the Enabling a Natural Capital Approach (ENCA) online resource, originally launched in 2020, and which is being increasingly used by departmental analysts.

In March 2022, key material from ENCA was incorporated into the latest version of HM Treasury's Green Book appraisal guidance. ENCA also represents supplementary guidance to the Green Book.

The development of official natural capital accounts is key to mainstreaming understanding of the value of nature across all policy areas. Our Defra group experts played a leading role in the UN publication of a new ecosystem accounting framework officially published in September 2021 and continue to work closely with the Office for National Statistics (ONS) to develop physical and monetary accounts for the UK covering a wide range of services and natural assets.

Progress during the year includes an updated UK-wide account of ecosystem services (with an asset value of £1.2 trillion), a cross-cutting tourism account and a consultation to inform a new long-term roadmap. Our experts also contributed to the development of BSI's (note) Natural Capital Accounting Standard for organisations, launched in June 2021.

Note: BSI is an organisation which has a role as the UK National Standards Body, to publish guidance for preparing natural capital accounts.

Natural England (NE) continue to promote the use of a natural capital approach through practical application and the publication of guidance. This year they published a natural capital account for the Tees Valley, estimating benefits that could be valued of over £100 million per year as well as identifying significant unquantified benefits. NE also led the development of a natural capital account to assess the impacts of sandeel fisheries in the North Sea and tested a series of scenarios with changes in fishing effort to consider the potential changes in ecosystem benefits. The results from this account have since influenced policy and led to the total allowable catch for sandeels in the English part of the North Sea in 2022 being set at zero. NE's Natural Capital Evidence Handbook sets out how stakeholders can include natural capital evidence in strategic decision-making.

The EA continues to use the natural capital approach to deliver more benefits for people and the environment – creating climate resilient places, thriving wildlife, improving people's health and wellbeing, and supporting a sustainable economy. For example, the EA has developed a ‘natural capital account’ for its own estate as well as using a natural capital approach to calculate the benefits gained by the priority habitat creation and restoration work delivered by the EA in combination with its partners. The EA is also working with water utilities to support their adoption of the natural capital approach, using a suite of natural capital metrics to support options development that deliver priority outcomes for the natural environment, net zero, catchment resilience and access, amenity and engagement.

This section outlines how Defra group's principal risks link to our priority outcomes and strategic enablers (as shown in Chapter 1). It summarises the mitigating actions taken over the course of the financial year to control each risk and indicating future action planned.

Defra group has played a key role in managing some of the most severe threats facing the UK (which are recorded on the National Risk Register), including flooding, severe weather, air quality, CBRN emergencies and animal and plant disease outbreaks. Defra group has also managed a range of corporate risks of the type that affect many large organisations, such as: cyber security, risk of failure of key suppliers; strategic and financial risks; and specific risks associated with the delivery of both Defra group's core business and its change programmes.

We identified and assessed new and emerging risks relating to the potential impact on the businesses and sectors that our policies and activities affect, and on our priority outcomes. Plans were then put in place to control them. These included risks relating to supply chain disruption, international cooperation, environmental programmes and business failure in Defra sectors.

Tensions between Defra and local government policies as well as insufficient resources for local government means that we could exceed air targets which could result in legal challenge and failure to deliver significant health and environmental benefits (links to PO1).

Mitigating activities:

There is growing stretch on Defra group's capacity and capability because of funding and resourcing pressures. This puts our regulators – particularly the EA and NE – at risk of not being able to regulate effectively, resulting in risks to reputation and environmental outcomes including those in the 25 YEP (links to PO1).

Mitigating activities:

Incidents occurring simultaneously could exceed Defra group's incident management capability and capacity, leading to a failure to provide an effective emergency response. This could result in severe environmental, human, societal and economic impacts, negative impact, and/or severe reputational damage (links to PO3).

Mitigating activities:

The farming budget cannot be managed within RDEL ringfences due to pressures caused by an imbalance between CDEL and RDEL. The impact of this could be that either the farm budget will be forced into that position of delivering less for Defra's outcomes, or there will be financial pressure on the rest of the department (links to PO4).

Mitigating activities:

Labour shortages, global supply chain fragility, high energy prices, COVID-19 and other factors are disrupting multiple supply chains across all Defra sectors. This could undermine Defra objectives, cause lasting damage to its sector, generate disruptive challenges for the UK population and impose reputational damage on the government (links to PO4).

Mitigating activities:

A lack of movement in EU negotiations causes deteriorating relationship between the EU and UK which could prevent broader partnership activities (links to PO4).

Mitigating activities:

Increasingly sophisticated cyber-attacks and other security incidents are an ongoing and evolving challenge – especially due to the high volume of legacy technology across our estate (links to SE2).

Mitigating activities:

Many of our applications use out of date technology, increasing the risk of technology failing and/or successful cyber-attacks; making it harder to comply with latest accessibility and other digital standards; and making transformation activity more expensive and complex. (links to SE2).

Mitigating activities:

The physical condition of two of our most internationally important facilities remains a concern. We have focused on actions to minimise deterioration while working longer term plans for improving both sites (links to SE2 and 3).

Mitigating activities:

Controlling our finances is a key Defra group priority, and we have put measures in place to support budget holders in their responsibilities. The public finance context has meant that longer-term strategic financial planning is more challenging (links to SE3).

Mitigating activities:

Defra group's work depends on strong scientific evidence. We prioritise our most critical and vulnerable areas of research, but our science capability is further compounded by the ability to recruit and retain scientists, the impact of COVID-19 and growing difficulties with UK/EU science cooperation (links to SE1 and 3).

Mitigating activities:

The level of fraud and error in our grant schemes and programmes could breach the NAO's materiality threshold as we try to deliver complex policy objectives whilst minimising cost of delivery. This could result in significant financial loss (links to SE3).

Mitigating activities:

Inconsistent business planning, financial and workforce processes and incompatible data systems across Defra group, poor in-year business management that doesn't effectively track targets and efficiencies, and stringent headcount targets that impact staff capacity, could lead to failure to deliver our outcomes, poor staff wellbeing and breach of financial control totals (links to SE3).

Mitigating activities:

Limitations in staff capacity and capability, senior leadership capacity, and central function capacity, limitations in the wider delivery system (and related limitations in data, insights and governance) mean Defra may be unable to deliver outcomes (links to SE3).

Mitigating activities:

Controlling our finances is a key Defra group priority, and we have put measures in place to support budget holders in their responsibilities (links to SE3).

As a department we carry a high-risk profile across third party suppliers. In a difficulteconomic landscape for some businesses, we acted to safeguard Defra group's commercialexposure to the risk of market failure (Links to SE3).

We have a clear ambition to support all our staff mentally and physically ensuring a healthy, resilient and motivated team amid a range of pressures over the year (links to SE1).

Devolved administrations could challenge UK government and Defra plans to strengthen the UK Union where activities and/or policies intersect with devolved functions.

Our Ministerial Contact Unit dealt with:

Defra's executive agencies and non-departmental public bodies have enquiry centres that deal with public correspondence relating to their areas of work and expertise. Further information can be found within their individual annual report and accounts.

This chapter provides an overview of our financial performance across 2021 to 2022, including setting out our budget and confirming our spend against this, giving an overview of our Statement of Financial Position (SoFP) and Common Agricultural Policy (CAP) disallowance.

Defra group spent a total of £5.62 billion in 2021 to 2022 against a total DEL budget of £5.86 billion. Within this budget Defra spent £4.29 billion Resource DEL against £4.44 billion budget and £1.33 billion Capital DEL against £1.42 billion budget, overall this represented a 95.9 per cent spend against the total DEL budget (96.62 per cent RDEL, 93.66 per cent CDEL).

Within these allocations our budget is split into ringfenced and non-ringfenced allocations. Our RDEL ringfenced underspend was £63 million, and non-ringfenced underspend was £92 million, with CDEL ringfenced underspend being £20 million and non-ringfenced underspend of £66 million.

A detailed breakdown and analysis is provided further below, along with Defra group Spend against Budgets (in millions of pounds) table.

Defra has adhered to government guidelines to ensure spend is within designated control totals. Unlike previous years, EU exit funding for Defra was not ringfenced to recognise the move away from work that delivered exit from the EU onto delivering repatriated functions previously delivered through the EU. This allowed Defra to utilise funds across the business to fund new work and priorities driven by the exit. Below is a summary of the types of activities on which those funds have been spent:

SR baselined EU exit funding (£470 million RDEL and £102 million CDEL) was converted into business as usual to deal with the increased responsibilities transferred from the EU to Defra to cover new domestic policy. HM Treasury also recognised the ongoing need for increased domestic funding, adding a large proportion of this to Defra's SR21 baseline for ongoing delivery. HM Treasury provided additional funding through the Supplementary Budget Estimates for the continued delivery of Digital Assistance Scheme, Movement Assistance Scheme and Borders.

DAS (£5.71 million RDEL, £6.76 million CDEL) and MAS (£9.74 million RDEL) - The group deliver outcomes of the NI Programme to ensure that NI remains an integral part of the UK internal market, including the MAS which addresses the direct cost to traders as a result of the new export certification requirements, and the DAS which minimises the wider friction arising from these requirements and provides a full end-to-end e-certification solution.

The Borders programme is developing a regime for imports and exports which protects the biosecurity of the United Kingdom, including the policies, processes, and controls necessary for the import and export of agri-food goods. The programme is bringing together physical and digital systems, transitioning services and policy outputs into capability outcomes, with the emphasis on people, engagement, and communications.

This includes building the capacity and capability needed to receive, check, and certify goods at the border, including the port health authorities, APHA, Forestry Commission (FC), FSA and associated laboratory capacity. It also includes working with our partners in EU member states to share knowledge and approaches to ensure a reciprocal capacity and capability in managing the flow of goods.

The programme is engaged with Defra's Northern Ireland Programme where there are key areas for co-development. Finally, the programme encompasses a series of campaigns aimed at businesses and their supply chains, with associated validation, modelling, testing, and stress testing, to be assured that the border will work effectively.

UK Wide Chemicals (REACH) and Pesticides regimes that directly repatriate ownership of chemicals and pesticides regulation from the EU and enable us to make our own regulatory decisions as a sovereign nation (including working with DAs).

Marine and Fisheries Future Fisheries and Marine Control and Enforcement to progress the repatriation of funds and functions to the UK relating to the fishing sector. This includes: the development of new policies and the creation of new legislation; development of the UK's position on access, quota exchanges and associated negotiations; and assistance to the fishing sector in adapting to new trading arrangements.

Future Farming and Countryside Partnership designing new policy, schemes and regulation that are required because we have left the CAP and are replacing with three schemes that reward farmers for environmental benefits: the Sustainable Farming Incentive, Local Nature Recovery and Landscape Recovery. The department is working on scheme design, testing, and launch and CDEL is funding work on IT systems, both upgrade of existing and new build, to support the schemes and grants that Defra are launching to increase sustainability and productivity of the industry.

International and Borders ensures that the UK's borders, trade policy, trade agreements and relationship with the EU and the rest of the world, deliver Defra's environmental, food, farming, fisheries, and biosecurity objective. They are also driving a shift to a nature-positive world and reducing global poverty.

Much of the COVID-19 support provided by Defra was contained to 2020 to 2021. In 2021 to 2022, spend on COVID-19 totalled £10.4 million and significant interventions included:

For 2021 to 2022, departments must make an evidenced based estimate of the extent of the level of fraud and error in the COVID-19 support schemes that they administer; identify risks of fraud and error; and explain how these risks are being managed. These new requirements, listed below, have been set in responding to the Public Accounts Committee (PAC) recommendations from the Fraud and Error Report and the Treasury minute in response:

All our COVID-19 grant schemes had fraud risk assessments completed prior to their launch with support provided to policy teams by the counter fraud team. Upfront controls were implemented to check eligibility and assess the reasonableness of costs claimed and due diligence checks were made during delivery using the cross Government Spotlight system. Defra also took part in Post Event Assurance activity on its COVID-19 response expenditure in 2020 to 2021 to understand the rates of fraud and error, which was reviewed by the Cabinet Office Counter Fraud Function.

We also participated in two rounds of the Cabinet Office led Post Award Assurance cross government data matching exercise aiming to identify any examples where organisations had received duplicate funding from multiple government sources. Defra submitted all of its COVID-19 grants data and reviewed every match, concluding that there were no examples of genuine double funding. This exercise constituted the main Post Event Assurance for the three food charity schemes that we operated as duplicate funding was one of the highest rated residual risks on our fraud risk assessment.

Beyond EU Transition there have also been a number of other achievements funded and delivered throughout the financial year:

2021-22 Voted Net Funding £7.52 billion. Consisting of:

Net of external income: £1.17 billion

2021 to 2022 Voted Gross Funding £8.69 billion

The Statement of Parliamentary Supply shows that our total net parliamentary approved (voted) funding for the 2021 to 2022 financial year was £7.52 billion. This consisted of £5.86 billion in DEL, £1.65 billion in AME and £0.01 billion outside of the department's budgetary boundary (Non-Budget).

DEL is the budget total, issued by HM Treasury on behalf of Parliament, that we use to fund the delivery of our strategic objectives.

Our total gross funding in 2021 to 2022 was £8.69 billion, consisting of £7.03 billion DEL including £1.17 billion of external income, £1.65 billion AME and £0.01 billion non-budget.

The resource DEL budget (£4.44 billion in 2021 to 2022, of which £2.26 billion ring-fenced) includes the administrative costs of running the Defra group, and programme spend on delivering the COVID-19 response and our outcomes in environmental quality; food, farming and biosecurity; floods and water; marine and fisheries, and natural environment and rural. It also includes an allowance for the consumption of our assets over time (depreciation £0.25 billion in 2020 to 2021).

Since 2020 to 2021, the resource DEL budget excluding depreciation has decreased by £329 million, mainly due to an additional one-off funding for COVID-19 in 2020 to 2021 which included funding for shielding payments.

The capital DEL budget (£1.42 billion in 2021 to 2022, of which £0.27 billion ring-fenced) covers investment in the assets we need to deliver our objectives. This includes building IT systems following EU exit, expenditure on flood defence assets and the Defra group Estate, as well as the payment of capital grants. Since 2020 to 2021, the capital DEL budget has increased by £395 million, this is due a range of new funding including: Floods and coastal risk management, EU replacement funds for Farming, EU exit, Nature for Climate Fund and IT investment.

Our gross spending in the economy exceeds our DEL budget in practice, because it includes payments made, mainly to farmers, in respect of CAP and rural development schemes, for which income is received from the Commission. This income was budgeted at £0.39 billion in 2021 to 2022 as more payments became Exchequer Funded. Other sources of income include grant income, fees, levies and licences payable to some of Defra's group bodies. This was budgeted at £0.18 billion for the core department and the Agencies; and £0.6 billion for other group bodies, netted off against the DEL expenditure. Our total external DEL income budget was therefore £1.17 billion in 2021 to 2022.

The AME budget (£1.65 billion in 2021 to 2022) is mainly for movements in provisions. Compared to 2020 to 2021, the AME budget has increased by £287 million, mainly due to an increase to the Metal Mines and Foot and Mouth Disease Burial Site provisions due to changes in discount rates.

Other provisions include Copernicus (a possible commitment to participate in and contribute towards the EU's 2021 to 2027 Copernicus Programme of Earth Observation Satellites), CAP Disallowance and the Environment Agency closed pension fund. The expenditure by Defra group levy funded bodies – the Agriculture and Horticulture Development Board and Sea Fish Industry Authority, as well as the Defra group body Flood Re, are also included within AME.

The final area of Defra group funding, called non-budget (£0.01 billion in 2021 to 2022), is mainly held for any exchange rate differences that may arise on payments made by the RPA, in their role as the UK Funding Body, to the DAs, due to the timing differences between the payment date and the date of actual reimbursement by the Commission. A further £0.2 billion of income received from the Commission for the devolved administrations was treated as non-budget rather than DEL as this does not represent spending by Defra. Non-budget funding has reduced due to UK exiting the EU and a reduction of income received from the Commission.

The following table shows how our gross DEL funding of £7.03 billion (£4.44 billion resource DEL, £1.42 billion capital DEL and £1.17 billion external income) was allocated to each DG Group. These are the groupings of Defra Core directorates and ALBs which contribute to the delivery of outcomes and are used in planning and delivering our activities.

This information has been subject to audit.

Note 1: Other ring-fenced includes Farm Support Direct Payments, Official Development Assistance (ODA), Science R&D, Weybridge, COVID-19 and Disallowance.

The final DEL outturn against the £5,864 million voted funding (£4,444 million resource DEL, £1,420 million capital DEL) which excludes £1,169 million external income was £5,623 million – an underspend of £241 million. Excluding ring-fenced items, this represents a £158 million underspend, which is 4.7 per cent of our DEL budget excluding ring-fenced items of £2,527 million.

The administration outturn against the £963 million budget was £832 million, an underspend of £131 million. Excluding ring-fenced items, this moves to an underspend of £76 million.

The total AME outturn was £435 million against the £1,645 million budget. The final Resource AME outturn against the £1,486 million budget was £433 million – an underspend of £1,053 million. This reflects the less predictable and controllable nature of AME spending compared with DEL. The underspend included £821 million relating to an expected provision for the UK's contribution to the EU Copernicus earth observation programme. Budget cover of £821 million was sought in the Supplementary Estimate in the expectation that an obligation may exist at the year-end for the cost of participation over the lifetime of the Copernicus membership agreement.

Delays impacting our expected start date for participation meant this obligation did not exist at 31 March 2022. Participation in Copernicus remains the UK's preferred option and the UK stands ready to formalise our association to EU programmes, including Copernicus, at the earliest opportunity.

In addition to this, the AME outturn includes a credit of £107 million relating to Flood Re, which represents an underspend of £207 million against their budget of £100 million and is due to the need to hold budget cover for Flood Re in the event that a significant flood event occurs, and a credit of £63 million, mainly for a write back of the CAP Disallowance provision, which represents an underspend of £104 million.

The final non-budget outturn against the £10 million budget was £2 million – an underspend of £8 million, reflecting the unpredictability of exchange rate movements.

In order to fund the spending set out above, we needed to work with HM Treasury to ensure that we had sufficient cash – this is called the Net Cash Requirement (NCR). Our actual cash requirement in 2021 to 2022 was £679 million lower than our NCR of £5,957 million. This is mainly because when we agree the NCR, we make a prudent estimate in order to mitigate the risk of any Defra entities going overdrawn.

Of this, £330 million is held by the RPA. £31 million reflects euro balances held as an advance for EU funded Rural Development Programme for England (RDPE) and Devolved Administration. England and Scotland have consumed 95 per cent of their EU funded Rural Development Programme budget and therefore are expected to continue using their share of the remaining £31 million advance to reimburse their EU funded rural development claims until the end of the programme in 2024. Of the remaining £299 million, £134 million was due to a receipt from the Commission. A prudent approach was taken to ensure that RPA had enough funds should the Commission receipt have been received after 31 March 2022.

£292 million was not drawn down by the department and the remaining £57 million was held by Defra and its agencies.

Of the £387 million held in the bank accounts of Defra and agencies, the majority (99.9 per cent) is still held within the Government Banking Service, therefore ensuring good value for the Exchequer as a whole ensuring the Debt Management Office has access to the funds.

Over the 2021 to 2022 financial year, Defra group's total assets less liabilities increased from £2,115 million to £2,845 million. This £730 million increase was mostly driven by:

The Core Tables section of the accounts provides an analysis of departmental expenditure and plans covering the period 2017 to 2018 to 2024 to 2025. The expenditure is shown against the categories used for HM Treasury's reporting system. These categories are different to the Outcome Systems which we report on internally. Analysis of the Core Tables can be found at Annex 1.

The CAP is the agricultural policy of the EU and is a system of agricultural subsidies and rural development programmes. Pillar 1 of the CAP is funded through the European Agricultural Guarantee Fund (EAGF) and primarily involves direct payments to farmers. The rural development programmes – Pillar 2 of the CAP – is funded through the European Agricultural Fund for Rural Development (EAFRD).

As part of their oversight of EU Budget spending, the Commission can impose financial corrections on member states for failing to apply EU Regulations correctly in managing and administering EU schemes. These financial penalties are known as disallowance. In practical terms this means the EU reduces the amount of money that is reimbursed to member states for monies they have paid out on the CAP schemes. Historically, no member state has achieved zero disallowance under the CAP regime.

Examples of issues that can lead to disallowance include digital maps not being sufficiently up to date, the inclusion of ineligible features in claims and the timing of inspections as well as eligibility checks and administrative controls that are not deemed to be sufficiently robust. Defra only accounts for disallowance relating to England, the devolved administrations account for disallowance relating to their regions. Following the result of the referendum on 23 June 2016, the UK formally left the EU on the 31 January 2020 but the current assumption for these accounts is that Defra is still likely to incur disallowance on outstanding audits.

Rules around calculating disallowance were changed as part of the CAP reform which came into effect in 2015. As a result we have split the levels of disallowance below between the previous scheme and the new scheme.

Disallowance is accounted for in Defra group's accounts in three stages:

Both stage 1 and stage 2 transactions result in charges to resource (either AME or DEL), and are therefore charged to the SoCNE, as shown in the following table, Charges to the SoCNE for CAP Disallowance. The creation of an accrual at stage 2 may be skipped, as occasionally transactions can move from provision to payment within the same financial year. These transactions would still impact on the DEL budget and pass through the SoCNE. The balances from the SoFP for CAP Disallowance table shows the accumulation over time of stage 1, 2 and 3 transactions in Defra's accounts.

Note 1: In the Notes to the Departmental Accounts, Note 3.1 Staff and other Costs, EU disallowance row shows the net of the new accruals and write back in previous accrual.

During 2021 to 2022, Defra group made total transactions to the SoCNE of £55 million credit (2020 to 2021, £500 million credit). The net credit relates to audits as described below:

Provisions utilised in year and crystallised into an accrual are detailed below:

Note 1: In the Notes to the Departmental Accounts, Note 14 Provisions for Liabilities and Charges, see CAP Disallowance closing balance at 31 March 2022.

Note 2: In the Notes to the Departmental Accounts, Note 12 Trade Payables, Financial and Other Liabilities, as part of the Core department and agencies accruals and deferred income £414 million (2020 to 2021, £453 million).

Defra group's accounts include cumulative transactions for disallowance penalties totalling £634 million relating to CAP Scheme years 2005 to 2014.

Of this total, £634 million has been paid to the Commission over time (stage 3). This relates to:

Note 1: In the Notes to the Departmental Accounts, Note 14 Provisions for Liabilities and Charges, see CAP Disallowance closing balance at 31 March 2022.

Note 2: In the Notes to the Departmental Accounts, Note 12 Trade Payables, Financial and Other Liabilities, as part of the core department and agencies accruals and deferred income £414 million (2020 to 2021, £453 million).

Defra group's accounts include cumulative transactions for disallowance penalties totalling £174 million relating to CAP Scheme years 2015 to 2020.

We have paid over £107 million to the Commission relating to late payment penalties arising from BPS 2015 payments for £48 million, along with £44 million relating to BPS Area Aids Scheme Years 2015 and 2016 and £9 million relating to Cross Compliance for 2015 and 2016, £5 million relating to fruit and vegetable producer schemes with the balance made up from other smaller Rural Development schemes.

We also hold accruals of £8 million relating to:

Finally we hold provisions for potential future liabilities totalling £59 million relating to:

While these provisions are large it should be noted that these unusually cover multiple years worth of expenditure and are expected to reduce significantly when the final correction is agreed.

Limited notice is given of future Commission conformity audits and it is not therefore known which scheme areas will be audited during the coming year. Disallowance will be accounted for once audits have taken place and reliable estimates are available. Until an estimate can be made, a contingent liability is disclosed within Note 16 where an audit has taken place. Where there has not been an audit then we declare a remote contingent liability within the accountability section.

The only remaining large scheme with outstanding years still to be potentially audited is the Rural Development Programme 2015 onwards (based on the assumption there will be no inclusion in CAP for scheme year 2020 onwards).

It should be noted that, under the terms of the withdrawal agreement, while BPS 2019 was the last EU funded year of the scheme, we have agreed to continue to accept the controls and audits which cover the entire period of the programme and actions in accordance with the applicable rules.

Tamara FinkelsteinAccounting Officer for the Department for Environment, Food and Rural Affairs21 October 2022

The requirements of the accountability report are based on the matters required to be dealt with in a Directors’ Report, as set out in Chapter 5 of Part 15 of the Companies Act 2006 and Schedule 7 of SI 2008 No 410, and in a Remuneration Report, as set out in Chapter 6 of the Companies Act 2006 and SI 2013 No. 1981.

The governance statement outlines how Defra group is governed. It sets out our decision-making structures, the effectiveness of our risk management and internal controls as well as our most significant challenges. This is informed by the work of Defra group officials, the GIAA, input from the NAO, information from Defra group ALBs and Audit and Risk Assurance Committee views.

We work as Defra group to deliver outcomes for customers and for society. Further information on how Defra group works together to deliver for customers can be found in the latest Accounting Officer System Statement on GOV.UK.

Meetings attended out of those eligible to attend 1 April 2021 to 31 March 2022.

The board is chaired by the Secretary of State and brings together ministers, senior officials, and non-executive board members to provide collective strategic leadership. Membership and attendance are set out in Table 1. In 2021 to 2022, the board met six times. Throughout the year, the Board monitored progress towards achieving departmental objectives by regularly reviewing performance, finance, and risk information. The Board also focused on advising on and providing oversight on the delivery and operational implications of major Defra projects and on the effectiveness of activity in priority areas. Summaries of board meetings are published regularly on GOV.UK.

Some activities are undertaken on the board's behalf by its four committees which regularly report to the board. These are the ExCo, Delivery Committee (DelCo), Audit and Risk Assurance Committee (ARAC) and Nominations Committee (NomCom). ExCo is supported by seven sub-committees.

ExCo is the senior decision-making body for the Core department and sets the strategic direction of the Defra group:

DelCo is a new committee which was set up in 2021 to 2022. It operates as a sister committee to ExCo with similar membership and meets monthly. It's purpose is to foster a focus on outcomes and drive delivery of the projects and other activity needed to deliver those outcomes:

ARAC supports the Board, Principal Accounting Officer and ExCo by reviewing the comprehensiveness and reliability of governance; risk management; the control environment; the integrity of financial statements; and the Annual Report and Accounts (ARA):

NomCom is an advisory committee of the Defra Board. It is responsible for ensuring there are satisfactory systems for identifying and developing leadership and high potential, scrutinising the incentive structure and succession planning for Senior Civil Service (SCS - Directors General, Directors and CEOs of Delivery Bodies) and non-executive directors:

In 2021 to 2022, the Investment Committee (IC) set the internal assurance and approvals framework for business cases and investment decisions. It implemented new ways of working approved by ExCo to maximise its impact, enhance its value added and ensure greater capacity and competence in programme boards. Investment appraisal was reviewed by internal audit in this period, citing substantial assurance was in place across the group.

Key activities:

Our internal review of the Board's effectiveness found its overall performance to be as effective or more effective than the previous year, with improvements made in the quality of information provided on key performance indicators and risk in 2022 to 2023, our focus is on ensuring non-executive directors are more closely engaged in the development of board agendas while over the longer term we will ensure that skills of board members best support the department's priorities.

The Core department continues to operate in compliance with the principles set out in the Corporate Governance in Central Government Departments: code of good practice (2017). While compliance with the code is mandatory for ministerial departments only, Defra's delivery bodies are encouraged to adopt the principles wherever relevant and practical.

Every six months, individual executive and non-executive board members are required to complete a declaration of interests statement in which they must disclose any financial and non-financial interests of their own or of family members and are expected to declare new interests that may create a conflict as they arise. The full list of interests is published on GOV.UK.

Where a member's interest is considered by the board secretariat and the Permanent Secretary to create a conflict with Defra's responsibilities or the discharge of their duties, specific arrangements are agreed and put in place to manage the risk. As a further safeguard, at the start of each board meeting, members are asked to declare if they have any interests which they believe conflict with any item on the meeting agenda and this is recorded in the minutes. Relevant senior staff are made aware where a potential conflict with a non-executive director's other interests exists and the mitigations in place.

All special advisers are required to make a declaration of interests or confirm there are none to disclose. Any declared interests are set out here, in the governance statement. The Permanent Secretary has considered these returns and the following relevant interest is set out here:

Special adviser Emma Pryor: parents own a small farm which receives a grant through the BPS. Emma Pryor resigned from her post on 14 July 2022 to take on a new role elsewhere.

As a result of the recent leadership election and Cabinet reshuffle, Defra has experienced a number of ministerial and special adviser changes and the department is now working with its new leadership to deliver on and achieve its commitments.

The department is committed to the highest standards of ethical conduct and integrity. Defra's policy on declaring and handling outside interests is clearly outlined in the Defra Code of Conduct, and in its conflict of interest policy.

All staff are responsible for ensuring that there is no conflict of interest between their interests outside work and their role at the department.

All SCS must complete forms to declare outside interests annually. Following the initial request, all non-responders were contacted, risk assessment has been undertaken and escalations were made (where appropriate) to ensure full process compliance.

The business appointment rules apply to serving civil servants and special advisers who intend to take up an outside role after leaving the Civil Service, and to former civil servants for two years after the last day of paid service. Policy and process is in place for managing applications that may require approval before a job or appointment is confirmed outside the Civil Service. The approval process for applications under the rules differs depending on the applicant's seniority.

Advice regarding specific business appointments has been published on GOV.UK. Information on Business Appointment Rules is also available to all staff on the departmental intranet.

In April 2021, Defra published its revised and updated risk strategy. The revised version is better aligned with the HM Treasury Orange Book and includes additional guidance on risk escalation, reporting and responsibilities and a new section on risk appetite. Over the year, these principles have been embedded in the Core department and our ALBs to develop a clear and consistent approach to Defra group's risk management, escalation and reporting. While escalation routes are clearly set out in the strategy, there is some evidence that risk escalation is not being applied consistently across our ALBs. Defra group's oversight and escalation of risk is outlined in Figure 15.

The department's principal risk register was reviewed and updated quarterly in 2021 to 2022. ExCo and ARAC engagement in risk has improved significantly over the year, supported by workshops. In addition to quarterly reporting, each of our principal risks is now the subject of a rolling programme of ExCo deep dives. We have worked to embed all the strands of our risk management activity into a single framework, including how we identify future vulnerabilities and how we align our principal risks with the National Security Risk Assessment; this work will continue into 2022 to 2023. ARAC regularly reviews both our strategic risks and Defra's wider approach to risk management.

We draw assurance from multiple sources, following the Three Lines of Defence Model. Risk owners carry out direct management of risks, supported by risk practitioners who assist with identifying, managing and reporting their risks and issues. A central risk team sets policies and standards and assists ExCo to provide corporate oversight of the first line of defence. The GIAA provide an objective evaluation of the adequacy and effectiveness of our risk management and control framework.

Defra group manages some of the most severe threats facing the UK including flooding, severe weather, air quality, CBRN emergencies and animal and plant disease outbreaks. We also manage a range of corporate risks such as cyber security, risk of failure of key suppliers, strategic and financial risks, and delivery risks both to Defra group's core business and its change programmes.

New and emerging risks are continually identified and assessed, with plans put in place to control them, in line with the principles outlined in the government's Orange Book. These include risks relating to supply chain disruption, international cooperation, environmental programmes and business failure in Defra sectors.

The Ukraine conflict has impacted Defra's risk landscape. It has affected several principal risks and issues caused by concurrent incidents including supply chain disruption and rising costs for business and consumers, impacting the food sector and other core department objectives. The conflict also heightens Defra group's cyber risk either from collateral impact of a cyber-attack launched against Ukraine, or targeted attacks against UK infrastructure. It has also heightened biosecurity risks associated with Ukrainian pet imports.

The top risks that Defra has managed over the past year are security, (including cyber), technological resilience, infrastructure failure and failure to reach NO2 compliance limits and emissions ceilings. A full list of the principal risks, and their associated mitigations, can be found in Chapter 2 – Performance Analysis.

Risk escalated where mitigation requires ExCo authority to act or potential cross-cutting impact means ExCo needs to monitor and inform. Escalated to and from:

Risk escalated where mitigation requires higher level authority or action across an outcome system, or potential cross-cutting impact means next level needs to monitor.

Directors in the Core department provided statements confirming that responsibilities delegated to them by the Principal Accounting Officer had been properly exercised in 2021 to 2022 explaining any non-compliance. A second line of assurance was conducted by subject matter experts, not involved in the delivery of business, who provided enhanced assurance on the overall picture across the department. This included the following areas: counter fraud, data protection, business continuity, finance, health and safety, performance, commercial, programmes and projects, risk, security and staff conduct. No additional issues were raised because of this exercise.

In May 2022, Defra received a letter from the Chancellor of the Duchy of Lancaster and Chief of Staff to the Prime Minister, and the Chancellor of the Exchequer, setting out the need to develop a plan to return Civil Service numbers to 2016 levels, which will mean reducing the service by around 91,000 roles, or approximately 20 per cent of its current size. We have been working with colleagues across Defra and with HM Treasury and Cabinet Office on how we can contribute to this challenge, including any impact on delivery of our objectives against different headcount reduction scenarios.

In order to prevent headcount growth that would make additional reductions harder to achieve we have introduced recruitment controls. Once more is known on the specific reductions Defra is asked to deliver, we will revise our workforce plans and resourcing controls accordingly.

Defra group has a partnership model for delivering corporate services to the core department and its larger ALBs. Maturing this partnership approach has been a key focus in 2021 to 2022 along with continuing transformation and harmonisation of policy, processes, and systems.

Individual Partnership Agreements and the Group Corporate Services Board (GCSB) continue to provide assurance on the effectiveness of corporate services. Performance was regularly reported to and discussed with the GCSB, ExCo, delivery bodies’ executive teams, and Audit and Risk Assurance Committees as required. Defra Group Corporate Services’ efficiency benchmarked strongly against other government departments and industry standards, and effectiveness is being baselined against relevant Government Functional Standards.

Our partnership model is seen as best practice across government, and we are actively taking part in the Cabinet Office Operating Model Optimisation Pilot to identify and drive improvements in the way corporate services are delivered and monitored. Recognising the need to address outstanding challenges from previous reform activities, a transformation programme reset progressed significant improvements. These included implementing a refreshed governance framework and functional service catalogues which were co-created with our partners. The reset work has set the blueprint for continuing transformation activities over the next three years.

Legacy technology, security and improving digital services are particular areas of concern that require significant investment. This was partially secured in SR21 funding bids and progress continues to be made in stabilising Defra's legacy technology and improving our digital services. Over the past year, we have mitigated associated risks by upgrading legacy infrastructure; updating some of our most critical applications; and launching new digital services. We still have significant volumes of legacy technology and digital services needing improvement so, in 2022 to 2023 and future years, this area requires ongoing work.

Recognising the challenging landscape of COVID-19 and responding to the changing government guidance, the past year has seen considerable effort given to supporting staff to shift ways of working, to ensuring our buildings are assessed and safe, and ensuring the estate and technology is prepared to enable staff from across the group to move to our future blended/hybrid working approach.

Corporate services have a key role in managing the majority of Defra's principal risks, of which more detail can be found in Chapter 2 – Performance Analysis. Security (including cyber security), business and technology resilience and science estate infrastructure failure are notable among these. At SR21, Defra secured partial funding to mitigate and stabilise these risks.

Each Accounting Officer is provided with an annual Letter of Assurance on Shared Services Connected Ltd (SSCL) overall performance. The assurance letter for 2021 to 2022 concludes that "the SSCL management response to the COVID-19 pandemic and their ability to maintain operations during this challenging time has been commendable".

The Government Business Services (GBS) Annual Audit Plan is delivered by SSCL's internal service auditors PricewaterhouseCoopers (PwC) for core SSCL system audits and by the GIAA for end-to-end audits that involve customers. PwC issued an opinion for 2021 to 2022 that concluded "generally satisfactory with some improvements required", whilst GIAA stated a "moderate" opinion.

Overall, SSCL have performed well this year and it is pleasing to see PWC and GIAA auditors noted improvements from last year. Defra Group Shared Services continue to closely monitor the performance of SSCL to ensure that all contract key performance indicators and service level agreements are met, and the services provided to Defra group are in line with both our contract and expectations when working in partnership with SSCL.

Defra continues to apply the quality assurance guidance set out in HM Treasury's Aqua Book. Each analytical model has a senior responsible owner in Defra group, who ensures that assurance activities are appropriate, including regular internal and external peer review of assumptions and developments, verification, change management and governance procedures. This year the GIAA was commissioned to assess progress in implementation of the Macpherson report's recommendations, conformity with the Aqua Book and wider steps to implement Government Functional Standard 10 on Analysis.

The resultant report in March 2022 concluded that the essential elements of the control environment and guidance are in place. It is anticipated that an oversight function for the Quality Assurance (QA) process will be strengthened for a wider range of analytical models as recommended by GIAA, to promote consistent QA, assessment of model uncertainty and support evidence collation and accessibility. The issue of resource constraints impacting the required technical oversight and governance is to be addressed by the Chief Scientific Adviser (CSA) and Director of Analysis.

During 2021 to 2022, work has continued to improve our security and cyber security controls. The growth of the security team and the prioritisation of a number of security workstreams has enabled us to improve our compliance with the Government Security Functional Standard and the government minimum baseline standards against which we self-assess as part of the departmental security health check. Key improvements were - a 4 per cent improvement in cyber security; a 17 per cent improvement in incident management compliance; a 5 per cent increase in personnel security compliance.

However, the department still needs to make further progress to comply with minimum baseline standards and develop security controls. As part of this and in response to the ExCo requirement to reduce the residual security risk across Defra group, part of Digital Data and Technology Services’ Spending Review 2021 bid includes provision for a transformational Security Improvement Plan (SIP).

The SIP will target seven key security "pillars" - governance risk management and policy; security culture training and business change; identity management and privileges; legacy and grey IT; protective monitoring and operational security; resilience and disaster recovery; and physical security.

Work has already begun on some of the deliverables under the SIP. Progress has been made in reducing our dependency on legacy technology.

We have developed and rolled out new basic security training for all staff which has been picked up by the Cabinet Office as best practice. We have also put together targeted security briefings and campaigns for high-risk groups and in response to the Ukraine crisis.

Over this period there were five reported incidents across the Core department, APHA, Cefas, EA, JNCC, MMO, NE, RPA and VMD. Four of the incidents involved unauthorised disclosure of information and one involved the publishing of EA email addresses and passwords on the web, most likely as a result of a historic breach of a third party supplier. There have been no incidents reported to the Information Commissioner's Office (ICO) during this period.

Defra has a risk-based approach to managing fraud, bribery, corruption and error across the group and ensures that activity set out in the group counter fraud, bribery and corruption strategy is delivered in adherence to the group policy and the cross-government Counter Fraud Functional Standard. Performance is monitored and scrutinised internally by ARAC and ExCo and externally by the Cabinet Office.

A process to undertake fraud risk assessments of grant expenditure has been embedded across the Core department and will continue to be rolled out across all grant giving organisations in the group. Since April 2021, 40 fraud risk assessments have been undertaken on individual grant schemes in the Core department, including seven on high- value Future Farming and Countryside Programme schemes. All reported instances of suspected and actual fraud were dealt with in line with the Defra's fraud response plan. In the Core department, financial losses from fraud that were reported to the central fraud hub amounted to £217,000 and work continues across directorates to make reporting routes clear and robust.

The Defra Whistleblowing policy provides good assurance, as highlighted in a recent health check and audit. However, to further strengthen this, a whistleblowing and raising a concern policy review is underway and scheduled for implementation in 2022 to 2023. We continue to build a culture where employees feel comfortable raising concerns and have confidence in these being promptly investigated and addressed.

We continue to use our whistleblowing register that was established in 2021 to 2022 for recording and tracking reported cases. In 2021 to 2022:

During 2021 to 2022, we continued activity to ensure compliance with data protection legislation and ICO guidance. This included replacing data protection reviews with the ICO recommended Accountability Framework. The Defra Data Protection Officer, data protection teams and legal advisers continued to provide advice and guidance as required. In 2021 to 2022, we are working with senior leaders to build data protection issues into policy and delivery planning at an earlier stage. We will also review the data protection governance structure.

Two personal data breaches were reported to the ICO this year. In all cases where personal data breaches occurred or risks arose, Defra worked with staff and suppliers to act quickly and effectively, addressing faults and revising processes.

In May 2022, GIAA published a report regarding Defra adherence to Cabinet Office spending controls process designed to reduce wastefulness and encourage a cross-government approach to spending. The report provided a moderate opinion and detailed a number of required improvements to enhance the adequacy and effectiveness of the department's framework of governance, risk management and control.

Issues arising within individual bodies are covered in their respective governance statements, with the most significant also highlighted below.

Defra's ALBs deliver critical policies on the ground, providing services to communities and businesses across the country while protecting and enhancing our natural environment. Our ALB landscape has evolved over many years, with some organisations designed to operate within EU frameworks. As we assess options to improve nature recovery, it is right to look at how we are organised to meet our ambitious environmental agenda and build a coherent, outward facing group. Defra and our ALBs will continue to work collaboratively on this work as it progresses.

On 5 April 2022, a fatal incident occurred at a national nature reserve work base where a subcontractor, working under a Defra wide property maintenance contract, fell whilst undertaking work on a roof. NE continues to work with Health and Safety Executive on the investigation. Full details and analysis of the incident will appear in the NE Annual Report and Accounts 2022 to 2023.

In 2019 to 2020, NAO raised a qualification on operational asset balances in the EA on the basis that these were not valued using a Depreciated Replacement Cost (DRC) approach. In 2020 to 2021, the NAO expanded its qualification on the reported values of operational property, plant and equipment in EA to include those within the scope of the quinquennial revaluation of land and buildings. More information on this is available in the 2019 to 2020 and 2020 to 2021 annual report and accounts. EA are working to deliver a DRC valuation and improve the property assets data and expect these to be in place by the end of the 2022 to 2023 financial year. This means the NAO qualification on this matter remains for the 2021 to 2022 accounts.

In the 2021 to 22 audit NAO identified in their sample testing of EA projects that:

These matters are considered a weakness in EA project accounting records and controls.

It was clear from the early stages of the NAO testing of project accounting that it would be a considerable activity to undertake the substantial analysis needed and that this would be logistically impossible in the time available. The initial results of NAO's testing indicated that there may also be a high value of error. For these reasons and with consideration to the impact of this on project managers and their teams seeking to deliver better protection from flooding for the communities, EA reluctantly chose to limit the scope of NAO's audit in this area for practical and value for money reasons.

EA are working to make the necessary accounting changes which are expected to lead to the removal of any audit qualification over project accounting, this however must be a balance of the time requirement from project managers to minimise the adverse impact on delivery.

Flood Re is a hybrid organisation, run and managed by the insurance industry, with direct Parliamentary accountability and its own governance structure as a not-for-profit reinsurance body. In December 2021, Flood Re was classified by the ONS as a central government public body. Flood Re should comply with Managing Public Money and public sector pay and benefits policy. Ongoing discussions around Flood Re pay and remuneration have resulted in the Framework Document between Defra and Flood Re remaining unsigned.

On 27 September 2022, Defra received a retrospective pay exemption (2021 to 2022) from HM Treasury for Flood Re. Defra and HM Treasury continue to work closely with Flood Re to find an enduring solution. Flood Re have agreed to voluntarily negotiate a pay framework, which is due to conclude in January 2023. Flood Re continue to operate within the spirit of the draft Framework Document.

The department is subject to independent oversight in several areas and implements many of the recommendations made. This includes:

In 2021 to 2022, all of our major projects were formally constituted with a business case, Senior Responsible Officer and project board, in accordance with the department's integrated assurance and approvals strategy. Business cases were approved by the Investment Committee which oversaw investment decisions on behalf of ExCo. The level of project assurance was based on a risk potential assessment and captured in an Integrated Assurance and Approvals Plan (IAAP) for each project.

The IPA provide third line assurance for our Government Major Projects Portfolio (GMPP) projects and GIAA review our delivery activity at a project and portfolio level. All current Defra GMPP projects are subject to IPA assurance reviews at key stage gates or as part of an annual review cycle. IPA reviews are coordinated with the IPA in accordance with the IAAPs for each project.

Overall, the Group Chief Internal Auditor (GCIA) has provided a moderate opinion on the framework of governance, risk management and internal control for the Core department and across the Defra group for the 2021 to 2022 financial year, although some improvements are required to enhance adequacy and effectiveness. This opinion was reached through the GCIA's engagements on the 2021 to 2022 Defra group internal audit plans, as well as through knowledge gained from their attendance at different management forums, through review of associated papers received, and from other sources of assurance, including the IPA and the NAO.

Although the opinion rating is the same as the previous year, this financial year, the GCIA observed an improvement and was satisfied that Defra's governance, risk and control arrangements now fall comfortably into this moderate rating.

The GCIA observed that whilst many risks remain for Defra, they are well identified and understood and there are effective strategies in place to address them, albeit some of these strategies are still in their infancy. There were also a higher number of assurance engagements this year, resulting in a higher number of moderate opinions, which raised the level of confidence over the operation of the control environment.

The department was subject to two specific Defra focussed NAO reports from 2021 to 2022, where it was the lead department. An overview of the recommendations made by the NAO and PAC in 2021 to 2022 is summarised in Table 2. All NAO recommendations published since 1 April 2019 can be found at the NAO website. In future, the department will be considering and implementing the recommendations where applicable.

The NAO Annual Report and Accounts 2021 to 2022 confirmed Defra and EA had acted upon its recommendation to improve the targeting of packaging regulation enforcement inspections. This resulted in a reduction in the number of packaging recovery notes issued fraudulently or in error.

During the 2021 to 2022 financial year, and up to the date of this report, no ministerial directions were issued.

I have reviewed the opinion of the GCIA and taken advice from the Defra group ARAC, based on the assurances it has considered during the year. I conclude that the department had satisfactory governance, risk management and internal control arrangements in place in 2021 to 2022, and that we have continued to improve.

As Defra group continues to progress its policy objectives, establish and deliver major programmes and provide crucial services in 2022 to 2023, we will also continue to improve our framework of governance, risk management and internal control environment.

Tamara FinkelsteinAccounting Officer for the Department for Environment, Food and Rural Affairs21 October 2022

Under the Government Resources and Accounts Act 2000 (the GRAA), HM Treasury has directed Defra to prepare, for each financial year, consolidated resource accounts detailing the resources acquired, held or disposed of, and the use of resources, during the year by the department (inclusive of its executive agencies) and its sponsored non-departmental (and other arm's length) public bodies designated by order made under the GRAA by Statutory Instrument 2021 no 265 together known as the Defra group, consisting of the department and sponsored bodies listed at Note 18 to the accounts. The accounts are prepared on an accruals basis and must give a true and fair view of the state of affairs of the department and the Defra group and of the income and expenditure, Statement of Financial Position and cash flows of the Defra group for the financial year.

In preparing the accounts, the Accounting Officer of the department is required to comply with the requirements of the Government Financial Reporting Manual (FReM) and in particular to:

HM Treasury has appointed the permanent head of the department as Accounting Officer of Defra. In addition, HM Treasury has appointed Ian Gambles as an additional Accounting Officer to be accountable for those parts of the department's accounts relating to the Forestry Commission. Flood Re has an independently appointed chief executive who acts as Senior Responsible Officer (SRO) with accounting officer responsibilities for the body. Flood Re's SRO is directly accountable to Parliament for its income and expenditure. However, because its accounts consolidate into the department's, Flood Re must provide assurance to Defra's accounting officer through its independent auditors that they represent a true and fair view and comply with propriety and regularity expectations as contained in Managing Public Money. These appointments do not detract from the Head of Department's overall responsibility as Accounting Officer for the department's accounts.

The Accounting Officer of the department has appointed the chief executives of the executive agencies and NDPBs as accounting officers of those bodies. The accounting officer of the department is responsible for ensuring that appropriate systems and controls are in place to ensure that any grants that the department makes to its delivery bodies are applied for the purposes intended, and that such expenditure and the other income and expenditure of the delivery bodies are properly accounted for, for the purposes of consolidation within the resource accounts. Under their terms of appointment, the accounting officers of the delivery bodies are accountable for the use, including the regularity and propriety, of the grants received and the other income and expenditure of the delivery bodies.

The responsibilities of an Accounting Officer, including responsibility for the propriety and regularity of the public finances for which they are answerable, for keeping proper records and for safeguarding the assets of the department or NDPB for which they are responsible, are set out in Managing Public Money published by HM Treasury.

The Accounting Officer is required to confirm that, as far as they are aware, there is no relevant audit information of which the entity's auditors are unaware, and the accounting officer has taken all the steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the entity's auditors are aware of that information.

Details of Defra's ministers and senior officials can be found in the departmental membership and attendance table in the Governance Statement.

Details of pension liabilities can be found in Note 15 to the accounts.

Details of procedures in relation to conflicts of interest can be found in the Governance Statement.

Section 70 of the Charities Act 2006 sets out a power for ministers to give financial assistance to charitable, benevolent or philanthropic institutions. Defra and its delivery bodies are required to report to Parliament annually any financial assistance given to any charitable institution under the Charities Act. For 2021 to 2022, no such payments were made by Defra or its delivery bodies (2020 to 2021, £Nil).

Work to support compliance with data protection legislation has continued throughout the year. In all cases, where personal data breaches have occurred or risks have arisen, Defra has worked with staff and suppliers to act quickly and effectively, address faults and revise processes.

Each organisation in the Defra group is legally accountable for the health and safety of their employees. Each has their own arrangements for health and safety to assist senior leaders to fulfil their legal duties. Organisational level reporting requirements are developed to suit each organisations risk profile and requirements of their senior leadership teams. However, health and safety teams across the Defra group recognise the value in benchmarking and voluntarily participate in six monthly benchmarking of lagging indicators including reported cases of work-related injuries, ill health (including work-related stress), and non-injury events such as near misses and unsafe conditions.

COVID-19 continued to influence ways of working across the Defra group during 2021 to 2022 with a large volume of staff remaining working at home. However, some organisations have had many of their workforce remaining working in laboratories, out on operations or fieldwork, and facilities management on site maintaining Defra group workplaces.

From 1st April 2021 to 31st March 2022, a total of 1,378 reports of work-related injuries or ill health (including work-related stress) were received across the Defra group (an increase on 2020 to 2021 where 983 reports were received). Of these injuries and ill health, 17 had to be reported to the HSE in accordance with the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR):

This is a significant decrease compared to the same period in 2020 to 2021 (where 36 RIDDORs for injury or ill health were reported across the Defra group).

Following awareness campaigns there is sustained levels of reporting of work-related stress in some organisations with 358 cases reported (353 were reported in 2020 to 2021). The most common work-related root cause of stress is cited on workload or demands placed upon employees. 76 reports of Musculoskeletal Disorders were received, a minor increase on the 71 reports received during 2020 to 2021. This is likely linked to sustained temporary workspace set up and an increased awareness to report issues. The third top cause was physical injuries caused by slips, trips or falls on the same level with 71 reports (a large decrease on 2020 to 2021 where 132 were reported).

Note 1: Column 2 - Includes all reports of work-related injury and ill health (physical and psychological - includes work- related stress where it is recorded by the organisation). Does not include non-injury events such as near misses.

Note 2: Column 3 - Excludes RIDDOR for Dangerous Occurrences.

Note 3: Column 4 – This is the number of people that had to be absent from work as a result of their injury or ill-health (includes work-related stress where recorded by the organisation), not the total number of days that people were absent. For example, if an employee was off sick for 9 days, another employee was off for 27 days, and another employee off for 2 days, it is captured as ‘3’ people for the purposes of this report (not 38 days).

Note 4: Column 5 – all other injuries or ill health that did not result in any absence of over one day.

Note 5: Calculated using reports of injury or episode of ill health resulting in the employee losing one day or more. Lost Time Injury Frequency Rate is the number of people injured over a period for every 100,000 hours worked by a group of employees which enables performance to be compared across organisations of different sizes. Arrows indicate increase, decrease or maintain since 2020 to 2021 but it is important not to make strict comparisons as not all organisations record work-related stress in H&S data.

‘Like for like’ comparisons between organisations are not necessarily achievable or helpful as reporting cultures and categories vary e.g., some organisations do not record cases of work-related stress (or sick absence associated with it) some have large operational workforces so reporting of near misses during high-risk operational activity is more embedded as part of the safe systems of work, and those with office-based workforces may see more incidence of musculoskeletal disorders.

For example, core-Defra is largely non- operational so will naturally see fewer physical incidents and injuries, the EA has a large operational workforce working outdoors facing physical risks, and APHA have many of their workforce in their laboratories so will be exposed to more biological hazards.

It is not unusual for smaller, very low risk, organisations (such as the newly formed Office for Environmental Protection) to have no reported incidents at all during a 12-month period.

At individual organisational level, steps are taken to investigate and action as needed to prevent further reoccurrence. This includes local and (where applicable) group level campaigns and review of control measures to eliminate or minimise risk and provision of protective clothing and equipment as a last resort when required.

Defra group organisations encourage employees to report near miss (non-injury) events. This is an incident which could have caused an injury e.g. when someone slips on a wet floor but is not injured; when opening a gate a person traps fingers but does not hurt themselves, when a car skids but does not crash; when a fixture falls from a ceiling but does not hit anyone etc. Investigating near misses enables lessons to be learned, shared, and applied to prevent more serious incidents (possibly resulting in injury or ill health) occurring in the future.

3867 non-injury events were reported across the Defra group in the reporting period. Of these;

No new prosecutions or interventions by the HSE were served on Defra group organisations during the reporting period.

Following the tragic work-related fatality within the EA in 2020 to 2021, the coroner's inquest process and HSE investigation have concluded. The following statement has been published on the EA internal intranet site.

"Many of you will know that just over a year ago, a highly valued member of our workforce, tragically died in an accident at work when carrying out tree maintenance near Shepperton Lock on the river Thames. Our thoughts have been and remain with his family, friends and colleagues.

As our Chief Executive, James Bevan, indicated previously, we have engaged and fully co-operated over the past year with both the coroner's process and the HSE investigation.

We can now tell you that both of those processes have concluded. The inquest was held at Woking Coroner's Court in February and the jury's conclusion was one of accidental death. Following this, the HSE has notified us that they have completed their investigation and have confirmed that they will not be taking any further action in relation to this matter.

All organisations are subject to this scrutiny after such an incident. The fact that the HSE are not proposing to take any further action does not undermine our resolve to constantly improve our health and safety and implement and embed the lessons learned from our review.

We will continue to do all we can to prevent anything like this ever happening again"

A ‘lessons learned’ briefing has been shared by the EA across Defra group when it is available.

Complaints are received and dealt with at three levels within the Core department.

Level one - by the Defra Service Standards Complaints Adjudicator. Level two - at a senior level within the relevant business unit.

Most complaints are resolved at levels one and two. Complainants who remain dissatisfied after level two can take their complaint to the PHSO.

Defra's complaints procedure can be found online. Each part of Defra's group has its own complaints procedures which can be viewed on its website.

Learning from complaints is a key priority for the entire Defra group. The Defra group is sharing information on ways of working and lessons learnt and working with PHSO to improve complaints handling.

From 1 April 2021 to 31 March 2022 no complaints were accepted for investigation by the PHSO relating to the Defra group.

These figures are a snapshot of complaints with PHSO between April 2021 and March 2022. Not all complaints accepted for investigation in that period will be resolved in the same period and some cases resolved will have been accepted for investigation in the previous year.

There has not been any successful litigation against Defra alleging a breach of the Human Rights Act 1998. All Defra primary legislation introduced into Parliament and all Defra statutory instruments during the relevant period which were subject to the affirmative procedure, or which amended primary legislation, have been accompanied by a statement of compatibility with the European Convention on Human Rights. No Parliamentary committee has adversely reported any Defra legislation for breach of the Human Rights Act 1998.

The staff and remuneration report provides information on people in Defra and sets out the entity's remuneration policy for directors, how that policy has been implemented, sets out the amounts awarded to directors, and where relevant, the link between performance and remuneration. It also provides details on remuneration and staff that Parliament and others see as important to accountability.

2021 was the thirteenth consecutive year in which the Cabinet Office has conducted the annual Civil Service People Survey. The combined response for Defra and the participating agencies (RPA, APHA, VMD and Cefas was 69 per cent, an increase of 2 percentage points on 2020. The overall response rate for the Civil Service was 62 per cent (down from 66 per cent in 2020).

The Civil Service People Survey ran for 5 weeks from 28 September to 3 November 2021. Our corporate Defra response rate was 69 per cent and our Core department response rate was 76 per cent, an increase of 10 percentage points. The overall Civil Service response rate was 62 per cent.

In the Core department, our Employee Engagement Index increased to our highest level ever, 67 per cent in 2021, up from 65 per cent in 2020. Our corporate Defra Engagement Index increased by 1 percentage point to 64 per cent. The 2021 Civil Service Engagement Index for 2021 remained at 66 per cent.

Whilst results vary by organisation, corporately Defra has made progress across eight of the nine engagement driver themes compared with 2020, the exception being pay and reward.

It is with immense pride that corporately Defra employees feel more engaged than ever in their work (78 per cent) and the role they play in delivering on our priority outcomes, an increase of 1 percentage point since 2020.

This year, Defra is one of only five government departments to see an increase in leadership and managing changes scores, and in Defra, this has been a year-on-year increase to 55 per cent.

Whilst our inclusion and fair treatment driver theme increased this year and is 1 percentage point higher than the Civil Service benchmark of 82 per cent, our bullying and harassment scores remained static at 87 per cent. We will continue to maintain a zero-tolerance approach to discrimination in any form, while continuing to support our people in reporting incidents.

Despite the uncertainty and challenges the COVID-19 pandemic has brought we have experienced increases in all positive health and wellbeing measures, and levels are very close to returning to those reported pre-pandemic.

For example, our PERMA Index, which tells us the extent to which our people are flourishing in the workplace this year increased from 73 per cent to 74 per cent (up being positive) and our Proxy Stress Index decreased by one percentage point to 27 per cent (down being positive). This tells us that the way stress is managed in Defra is improving.

Importantly we have seen increases in self-rated health – both mental health (+4 percentage points) to 73 per cent and physical (+4 percentage points) to 70 per cent.

However, whilst levels of subjective anxiety have decreased from 46 per cent in 2019 to 43 per cent in 2021, levels do remain high, and this is an issue for us to collectively address.

Whilst 2021 has continued to put pressures on the business and our people, more colleagues this year felt their work-life balance had improved (73 per cent), an increase of 3 percentage points on 2020 scores, and more people felt their workloads were acceptable 60 per cent (up 1 percentage point).

Whilst 2021 has been an unprecedented and challenging year for the business and our people, the results from the People Survey demonstrate the professionalism, leadership, support for one another and on-going commitment to making Defra a great place to work.

At a pan-organisational level we remain committed to on-going work to address factors affecting colleague wellbeing and inclusion as we recognise getting this right is crucial for our long-term sustainability and business performance.

There are many positive scores within the People Survey this year, however, we are not complacent and recognise the importance of acting on what our people are telling us. The survey provides valuable insight into the views of colleagues across the Defra group, identifying areas of commonality and differences between organisations. Survey themes and indicators will be used to inform our work programmes over the coming year at both a corporate and a local level to help make Defra an even better place to work.

The Civil Service Order in Council 1995 sets out the legal basis for Defra and its agencies’ recruitment policies and practice. The Civil Service Commissioners’ Principles for Recruitment are mandatory and must be followed when any post is opened to competition from outside the Civil Service.

Defra continues to monitor the make-up of the group's workforce by gender which is described in the gender split table. During recruitment and selection processes applications are anonymised up until the interview stage; interview panel members are required to undertake unconscious bias training; and single gender selection panels are allowed by exception only.

Note 1: Defra group includes the Core department, executive agencies, NDPBs, levy bodies, Flood Re, and the National Forest Company. Figures are by headcount.

Defra group's EDI strategy 2020 to 2024 sets five strategic objectives:

In addition, the EDI Strategy identified three priorities to improve outcomes where evidence from both statistical indicators and staff views suggests we most need to deliver improvement:

Our EDI Strategy extends to all Defra organisations, with the core department, its executive agencies, NE and the EA actively supporting actions against its objectives.

Good progress has been made across priorities supporting Defra to understand their workforce diversity, tackle barriers to inclusion, improve career support for diverse employees, minimise discrimination, bullying and harassment, and ensure policies and programmes show due regard to EDI. Against the backdrop of corporate services and HR transformation, we are focusing on improvements in our People work strands: Induction, Line Management, Performance and Development and Recruitment.

A range of initiatives have been delivered to improve our EDI practice against our five strategic objectives as described below.

Our vision, as set out in Defra Group EDI Strategy, is of diverse and inclusive organisations where every individual has equality of opportunity to progress and to apply their unique insights to making the UK a great place to live. This vision aligns with the vision set out in the Declaration on Government Reform (published June 2021) – to "set the standard for inclusive workplaces where people achieve their full potential".

Our strategic objectives listed above align well with the Civil Service Diversity & Inclusion Strategy, launched on 24 February 2022, with its objective to enable a Civil Service that: understands and draws from the communities it serves; is visible to everyone; is flexible; and welcomes talent from wherever it comes.

Initiatives developed during 2021 to improve our evidence base and EDI governance arrangements include:

In November and December 2021, the GIAA carried out an audit of our EDI structure and processes. The audit found that "Overall, the governance structures within the core department are well-designed and allow volunteer networks to operate as part of the overarching EDI approach. The structure is embedding and is well supported by the EDI team who use their internal resource effectively". The audit identified some areas for improvement which we have incorporated into our EDI Delivery Plan for 2022 to 2023.

In 2019, the Civil Service set out a definition of what inclusion means, identifying three key elements:

Defra organisations took part in the culture diagnostic in the summer of 2019, and again in 2021, when all employees were invited to complete a survey to contribute to an assessment of inclusion across the six domains below:

These domains are the bedrock of how inclusion is measured across Civil Service departments, including Defra.

Responses to all but one question were as positive or more positive than the average across the Civil Service. However, it was recognised there is work to be done, particularly in relation to sense of belonging.

Defra organisations have a tradition of actively promoting inclusive cultures. Employee EDI networks are encouraged to support the inclusion of diverse employees. They work in collaboration with ExCo EDI champions to deliver actions and communications including, for example, during Black History Month, National Inclusion Week, International Day of Disabled People, International Women's Day, International Men's Day, Interfaith Week, LGBT History month and Mental Health awareness.

Our EDI networks are also consulted during policy development and delivery of projects.

In September 2021, we launched our Social Mobility Strategy with our vision to weave social mobility into the fabric of Defra group, helping to further transform our collective culture and demonstrate our commitment to attracting, recruiting and developing a diverse population of talented people including those from marginalised groups.

In November 2021, our Respect at Work Board launched a draft Respect at Work Charter for discussion and debate. Its aim is to prompt a conversation across the organisation about what respect means to us and how we embed it in the ways we work with each other.

We actively support underrepresented groups in a number of different ways, adopting an evidence-based approach.

We have combined our Workplace Adjustments passport and our Carers Passport into one Employee Passport which we have expanded to include all individual workplace needs in one record. Our aim is to make the Employee Passport commonplace, to encourage good quality conversations between line managers and their employees to ensure that individual needs are met and recorded.

We have reduced our gender pay gaps across Defra organisations. In addition, we have formed a Cross-organisational Gender Pay Gap Action Planning Group to review good practice and take steps to reduce gender pay gaps and increase gender parity at all levels across Defra organisations.

Ensuring that we have robust data on our workforce enables us to pinpoint problem areas, deploy action effectively and monitor progress.

From our data and insights, we know there is more we can do to improve both representation and declaration across Defra group organisations. Defra organisations from this point on refers to the Core department, its Executive agencies (Animal and Plant Health Agency, Cefas, Rural Payments Agency and Veterinary Medicines Directorate), Natural England and the EA.

In comparison to March 2021 declaration rates have not changed significantly and average around 83 per cent for both disability and ethnicity. Sexual orientation declaration has seen a minimal increase of less than 1per cent.

Our 2021 Gender Pay Gap Report shows that our gender pay gap continues to close – see below for more information on our gender pay gap and action we are taking to close it further.

The table below shows female representation by grade as at 31 March 2022. ‘Other’ grades refers to those EA grades which do not map to Civil Service grades.

The overall diversity profile across Defra, its executive agencies, the EA and NE in terms of the representation of women, ethnic minority, disabled and lesbian, gay, bisexual and other (LGBO) employees is presented in the table below. This table shows comparisons between March 2021 and March 2022. (Note March 2021 figures have been adjusted to exclude the Marine Management Organisation who no longer contribute to data collation).

Diversity representation by grade across Defra and its executive agencies (as at 31 March 2022) is shown in the following table – with AA and AO the most junior and SCS the most senior. ‘Other’ relates to grades in the EA which do not map to Civil Service grades.

We actively support the development of underrepresented groups in a number of different ways. The Project Race initiative launched the Level-UP programme for ethnic minority grade 6 and 7s across Defra group in January 2021. The aims of the Level-UP programme are to:

The programme was completed by 19 participants in July 2021. We are now developing a Level-UP Stepping Into Leadership Toolkit to support roll out of this programme in different parts of the business.

Additionally, diverse cohorts of employees have successfully secured places on mainstream Civil Service wide and locally-driven development programmes, for example: 29 employees from the core department, the EA, NE, APHA and RPA were accepted on to the Beyond Boundaries programme, a Civil Service wide programme to support the development of employees at grades AA to SEO. These places were ring-fenced for ethnic minority employees, disabled employees and employees from lower socio-economic backgrounds.

We ensure our policies, projects, programmes and processes show due regard for diversity and inclusion and consider the impact of decisions on under-represented groups.

Equality Impact Assessments (EIAs) are built into policy decisions to identify potential adverse impacts on employees with protected characteristics. Where a negative impact is identified, part of the process involves developing and implementing action to mitigate them.

We are working to enhance consistency across the Defra group organisations by extending and improving awareness, guidance and practice. We ensure our EDI networks are consulted within this process and that there is synergy in our approach to implementing EIAs across HR, in our external facing policies – and across the Defra group.

We have developed an EDI Advisory Panel to support policy makers to identify a range of diverse stakeholders with whom to consult in the development of Defra policies.

Defra has ambitious plans for improving the diversity of its public appointees to better reflect the communities our ALBs serve.

In 2021, we focussed on improving the way we collect, monitor and analyse data; attracting more diverse talent; ensuring that the application process reflects our commitment to diversity; and developing a board mentorship scheme.

We continue to make good progress, identifying panel members with expertise in equality, diversity and inclusion and ensuring inclusive language is used in our documentation. Last year Defra hosted its first webinar to promote public appointments to potential candidates. We have built on this by creating and sharing videos to encourage applicants from under-represented groups. The Permanent Secretary hosted a roundtable discussion with diversity experts and actions to follow up on this include building closer ties with diversity networks, using more inclusive language in our communications and building a diverse talent pool.

Effectively supporting departments, teams and line managers to address, discuss and support EDI initiatives and issues is key to delivering on our overall EDI strategy.

Defra group employees have access to Civil Service learning platforms or alternative learning interventions across the ALBs. Defra Civil Servants are required to complete the ‘Inclusion in the Civil Service’ e-learning module and similar modules are available in ALBs.

Our EDI team works with our Learning and Development team to ensure EDI content is incorporated into training for all staff, such as corporate induction modules. We have developed a training programme for new line managers which includes a module on ‘Managing Inclusively’. As a result of increased remote working during 2021, training has been developed to support running inclusive meetings.

We have developed a Conscious Inclusion Library, available to all staff across Defra organisations, comprising information on a variety of subjects in ‘bite-size chunks’. We continue to develop and add to this resource.

In conjunction with our disability networks, we have developed a Disability Confidence workshop for line managers, which is now being rolled out across Defra organisations.

Project Race ambassadors continue to work with senior leaders and colleagues to drive inclusive behaviours and support race equality.

The EDI team are developing regular workshops for line managers on how to lead diverse teams, utilising tools and resource in Defra which will also highlight how to be an effective ally to diverse groups and better understand and reduce potential micro incivilities in the workplace (both real and perceived).

Throughout 2021, we have continued to develop and refine our reporting structures, through our EDI Boards, the EDI Delivery Group, and the Inclusion Leadership Group. We have developed an EDI data dashboard, to provide evidence of progress made and future priorities for all areas of the business.

In consultation with the EDI Delivery Group, the Inclusion Leadership Group and ExCo, we have identified key priorities and themes and developed our EDI Delivery Plan accordingly. We report regularly through our governance structure on progress against the Delivery Plan. We work with staff networks, Champions and EDI Boards to identify issues of concern to groups with different characteristics and report progress against those issues.

We work with networks to coordinate communications across Defra group raising awareness of significant dates in the EDI calendar – for example during Black History Month, Interfaith Week and the International Day for People with Disabilities. We delivered internal EDI leadership events during the Defra Live event and during National Inclusion Week.

In January 2022, we published our Defra Civil Service Gender Pay Gap Report. This shows that the percentage difference in the average pay between all men and women in the organisation has narrowed slightly since 2020. As at 31 March 2021, Defra had a mean gender pay gap of 6.7 per cent, a reduction of 0.5 percentage points on the 2020 figure, and a median pay gap of 6.8 per cent, a reduction of 0.6 percentage points on the 2020 figure.

The table below shows the gender and grade split for Defra Civil Service as at 31 March 2021.

Note 1: Figures include unknown grades and rounding applied.

Our gender pay gap has narrowed year-on-year since the inception of reporting in 2017 as indicated in the table below.

We are working to further close our gender pay gap by delivering initiatives which include the following:

We continue to review and refresh our approach to resourcing to ensure the recruitment of women and men at all levels is inclusive. We anonymise our application processes, use diverse interview panels for selection and recommend that all interviewers have undergone relevant training. Recruitment data is monitored throughout the attraction, recruitment and selection processes to identify areas for further improvement in achieving greater diversity in our workforce.

Recognising that the COVID-19 pandemic presented unprecedented challenge and uncertainty for our business and people, we put in place a range of measures to support our peoples’ health and wellbeing. This investment resulted in all Defra group's positive wellbeing metrics measured via the 2021 to 2022 annual Civil Service People Survey increasing to levels very close to those reported pre-pandemic.

For example, our PERMA Index, which tells us the extent to which our people are flourishing in the workplace reflects positive changes this year. Our Proxy Stress Index decreased (by one percentage point) and this tells us that the way stress is managed in Defra is improving and perhaps is in response to measures we have put in place such as stress and resilience webinars, improving our stress reporting systems and similar.

Against the four national statistics for personal wellbeing, the positive measures, Life Satisfaction, Worthwhile and Happiness, have improved on average by 6 percentage points in 2021.

Importantly, we have seen increases in self-rated health – both mental health (+4 percentage points) to 73 per cent and physical (+4 percentage points) to 70 per cent.

Whilst 2021 has continued to put pressures on the business and our people, more colleagues this year felt their work-life balance had improved (73 per cent), an increase of 3 percentage points on 2020 scores, and more people felt their workloads were acceptable 60 per cent (up 1 percentage point).

However, whilst levels of subjective anxiety have decreased from 46 per cent in 2019 to 43 per cent in 2021, levels do remain high, and this is an issue for us to collectively address as part of our long-term wellbeing strategy.

In Defra, our sickness absence levels remain below the Civil Service Average Working Days Lost benchmark. Long-COVID is a potential emerging wellbeing issue as we see increasing numbers of COVID-19 absences becoming long-term. This is an area we will continue to watch and develop new interventions with our wellbeing partner where necessary to support our people to remain in work or get back to work.

This year we have set an aspirational vision for health and wellbeing in the Defra group and have invested time in raising awareness of the wellbeing offer across our workforce. In response we are seeing many more Defra colleagues accessing the wellbeing support for a range of interventions and services. This indicates that our people are getting the support and help they need to pro-actively manage, maintain and improve their wellbeing, enabling them to be at their best and perform at their best.

Through collaboration and partnership with our internal and external stakeholders, we have, and will continue to support our people with their wellbeing as they adjust to hybrid working following prolonged periods of working from home for many of our colleagues during the pandemic.

The recent GIAA Wellbeing Audit concluded with a substantial opinion (highest rating), meaning the framework of governance, risk management and control is adequate and effective.

In response to the GIAA audit, we have revised our organisational wellbeing risk (which is reported to our Corporate Services Board) and developed metrics to measure and track our progress and risk mitigation over time. This year we will build on this by setting out proposals to develop a sophisticated health and wellbeing dashboard.

Finally, this year we will build on our five high level principles for organisational wellbeing and re-set our long-term wellbeing strategy, ensuring our approach and interventions are innovative and prevention focussed. We will also develop proposals for a Defra group operating model for health and wellbeing to ensure we have a consistent, efficient and effective approach to wellbeing across the whole Defra group. Both of these strategic actions will help us make progress towards our vision for wellbeing in Defra group.

A corporate strategy for managing attendance is in place across Defra, as part of supporting the wellbeing of our people and proactively maintaining good levels of attendance at work. Levels of absence are closely monitored to ensure our people are getting the right support at the right time to help them return to the workplace. We take a pro-active preventative approach to health and wellbeing, encouraging our people to look after themselves and others to help prevent the on-set of ill health. We equip both the individual and their line manager to manage any issue related to their health and wellbeing so people who are able to work can do so.

Our aim is to provide the support needed to not only help people return to work from a period of long-term absence, including keeping in touch, but to also ensure that short term absences are recorded, recognised, and managed well. Our options for support comprise extensive guidance and tools to equip line managers and staff to maintain their own and others’ wellbeing as part of delivering well. We also provide Occupational Health advice and intervention, counselling, access to Headspace and other advisory services through our employee assistance programme. We aim to prevent work related ill-health and injury by implementing safe working practices, monitoring, and addressing underlying causes.

The Coronavirus pandemic has had an impact on many of our employees, both as a direct result of COVID-19 and as a consequence of the pandemic on other illnesses. We continue to update our policies to reflect the latest Civil Service Human Resources and government guidance.

In response to the various lockdown situations and move to blended working (part working from home and part in a Defra workplace) Defra has continued to provide a range of tools and support via our dedicated Ways of Working and Well-being Hubs. These included virtual learning and development for those managing dispersed teams, collaboration tools and guidance on staying in touch.

For Defra and its executive agencies, an average of 4.6 working days per employee was lost to sickness absence during the year to 31 March 2022, compared with 3.4 days in the year to 31 March 2021.

Defra continues to demonstrate its commitment to the corporate social responsibility agenda encouraging employees to take advantage of the special leave that is available for volunteering. Defra employees are offered up to three days special leave with pay each year to use their skills to help others by volunteering individually, or as part of a team, for charitable or non-profit-making organisations.

Many of our staff have used their volunteer days to assist with the COVID-19 pandemic situation. In December 2021, Defra responded to the government's request for assistance to roll out the COVID-19 booster programme by identifying more than 90 volunteers.

The three unions recognised by the Core department and it's agencies for the purposes of consultation and negotiation are the Public and Commercial Services union (PCS), Prospect and FDA. An employee relations framework helps define this relationship.

In accordance with the requirements of the TU (Facility Time Publication requirements) Regulations 2017, the following is a summary of trade union officials of employees and facility time usage of this group during the 2021 to 2022 year.

In the Core department and it's agencies, 55 (53.11 full time equivalent) were TU representatives. Of these employees 41 spent up to 50 per cent of their working hours on facility time on TU business. The other 14 spent none of their working hours on facility time on TU business.

The total cost of the facility time was £145,873 which is 0.026 per cent of the total pay bill. There were no paid TU activities during 2021 to 2022. The total pay bill cost was £570,676,787.

TU information for our NDPBs which are in scope for this disclosure can be found in their individual ARA.

The table below includes information on NDPBs that are assessed through a different job evaluation system. To enable a consistent understanding of respective roles, and in line with previous years, salary has been used for comparison purposes. Work relating to talent and succession management provides additional assurance in terms of general comparability.

Flood Re employees are excluded as they cannot be allocated against SCS pay bands. The figures stated are as at 31 March 2022.

The table below shows the total consultancy and temporary staff expenditure incurred by the Defra group.

Overall, consultancy expenditure has increased by £5.6 million and temporary staff costs have increased by £14.8 million compared with the prior year. The Core department and the Royal Botanic Gardens Kew (RBG Kew) are the primary contributors to the year on year change for consultancy. The Core department, NE, EA, APHA and RBG Kew are the primary contributors to the year on year increase for temporary staff costs across the group, offset by a decrease at the RPA.

The Core department's consultancy costs have increased by £2.5 million, this is due to an increased demand for consultancy staff around Synergy and the New Wave programme. In addition, RBG Kew increased consultancy spend by £2.1 million on various estates projects and a new retail system.

The Core department's temporary staff costs have increased by £10 million due to costs associated with the implementation of the new Biosecurity, Borders and Trade Programme (BBTP) along with the establishment of Defra's new Northern Ireland Directorate. The need to fill roles on various projects has resulted in an increase in temporary staff costs of £3.8 million for NE and £3.5 million for the EA.

APHA have increased temporary staff costs by £2.6 million to cover additional Borders’ work and an unprecedented level of Avian Influenza outbreaks, increasing the need for non-permanent staff.

RBG Kew's costs increased by £1.6 million due to increased activities following the previous year's lockdown restrictions. This is offset by an £8.6 million reduction within the Rural Payments Agency who continue to reduce reliance on temporary staff.

Staff costs comprise:

Defra Board (the Board) remuneration is included in the Remuneration Report.

Special Advisers are temporary civil servants. In order to improve efficiency, the administration of staff costs for all Special Advisers across government was moved to the Cabinet Office in July 2019, with corresponding budget cover transfers. Therefore special adviser costs are now reported in the Cabinet Office ARA. Special Advisers remain employed by the respective departments of their appointing Minister.

The Principal Civil Service Pension Scheme (PCSPS) and the Civil Servant and Other Pension Scheme, known as alpha, are unfunded multi-employer defined benefit schemes. Defra is unable to identify its share of the underlying assets and liabilities. The scheme actuary valued the PCSPS as at 31 March 2016. Details can be found in the annual accounts of the Cabinet Office: Civil Superannuation and on the Civil Service Pension Scheme website.

For 2021 to 2022, employer's contributions of £143.7 million (2020 to 2021, £128.7 million) were payable to the PCSPS at one of four rates in the range 26.6 per cent to 30.3 per cent (2020 to 2021, 26.6 per cent to 30.3 per cent) of pensionable earnings, based on salary bands.

The scheme actuary reviews employer contributions usually every four years following a full scheme valuation. The contribution rates are set to meet the cost of the benefits accruing during 2021 to 2022 to be paid when the member retires and not the benefits paid during this period to existing pensioners.

Employees can opt to open a partnership pension account, a stakeholder pension with an employer contribution. For 2021 to 2022 employer's contributions of £2.7 million (2020 to 2021, £2.7 million) were paid to one or more of the panel of three appointed stakeholder pension providers. Employer contributions are age related and ranged from 8 per cent to 14.75 per cent (2020 to 2021 8 per cent to 14.75 per cent) Employers also match employee contributions up to 3 per cent of pensionable pay.

In addition, employer contributions of £37,000 for 2021 to 2022 (2020 to 2021, £28,000), 0.5 per cent of pensionable pay, were payable to the PCSPS to cover the cost of the future provision of lump sum benefits on death in service or ill health retirement of these employees. Contributions due to the partnership pension providers at the reporting period date were £Nil (2020 to 2021, £Nil). Contributions prepaid at that date were £Nil (2020 to 2021, £Nil).

In addition to the schemes listed above, EA operates a funded defined benefit scheme, and some other delivery bodies operate small defined contribution schemes. Details of these schemes can be found in the ARAs of the relevant delivery bodies.

There were no individuals in the Core department (2020 to 2021, two) who retired early on ill health grounds. Their total additional accrued pension liabilities in the year amounted to £nil (2020 to 2021, £64,156).

Loans are made to employees to cover season ticket advances and to relocate. As at 31 March 2022, there were no outstanding balances from Core department senior officials.

The average number of whole-time equivalent persons employed within the Defra group during the year was as follows:

As at 31 March 2022 the department had three Special Advisers working with Ministers and paid by the Cabinet Office.

The Core department staff turnover rate as at the 31 March 2022 was 11.8 per cent. This is a reduction when compared to the staff turnover rate at 31 March 2021 of 13.3 per cent.

Redundancy and other departure costs have been paid in accordance with the provisions of the Civil Service Compensation Scheme, a statutory scheme made under the Superannuation Act 1972. Exit costs are accounted for in full in the year of departure. Where the department has agreed early retirements, the additional costs are met by the department and not by the Civil Service Pension Scheme. Ill-health retirement costs are met by the Pension Scheme and are not included in the table.

In line with the Constitutional Reform and Governance Act 2010 and the Model Contract for Special Advisers, a Special Adviser's appointment automatically ends when their appointing Minister leaves office. Special Advisers are not entitled to a notice period but receive contractual termination benefits to compensate for this.

Termination benefits are based on length of service and capped at six months’ salary. If a Special Adviser returns to work for HM Government following the receipt of a severance payment, the payment is required to be repaid, less a deduction in lieu of wages for the period until their return. Termination costs for Special Advisers are reported in the Cabinet Office Annual Report and Accounts.

The core department had 34 staff on informal loans from other government departments to aid in the work relating to Defra's exit from the EU as at the end of March 2022, inclusive of Trade and Cooperation Agreement (TCA) FTE . The number staff on long (over six months) term loan categorised by grade is shown in the table below. The average duration of all loans was 22.7 months.

The FTE illustrated related to the proportion of full time hours aligned to EU exit/TCA rather than the full FTE of the individual concerned.

The costs of the staff loans was £1,501,519 and is classed as administration costs.

In response to the COVID-19 pandemic the core department has entered into arrangements for the loan of Defra Staff to other government departments and other public bodies. The table below details the number of staff redeployed as at the 31 March 2022. The staff were loaned to Department of Health and Social Care (DHSC) and Cabinet Office. The average length of the loan arrangements was 10.7 months.

The costs of the staff loans was £277,856 and is classed as administration costs.

During 2021 to 2022 the board of trustees of the RBG Kew received £0.12 million (2020 to 2021, £6.4 million) Coronavirus Job Retention Scheme (furlough) grant income from HM Treasury in addition to the grant in aid received from the department. This was in relation to 208 employees (2020 to 2021, 1146), and covered the period April and May 2021. The employees who were furloughed in 2021 to 2022 were mainly employees who were clinically extremely vulnerable in accordance with the government guidance and the roles could not be undertaken remotely or those whose roles were very limited or even non-existent due to the pandemic, for example, events. Staff could not be redeployed within RBG Kew under the Coronavirus Job Retention Scheme.

Information on off-payroll engagements is set out in the following tables. Off-payroll means anyone who is working for the department or a delivery body but is not paying PAYE (Pay As You Earn) or National Insurance via the departmental payroll.

All highly paid off-payroll workers engaged at any point during the year ended 31 March 2022, earning £245 per day or greater.

For any off-payroll engagements of board members, and/or, senior officials with significant financial responsibility, between 1 April 2021 and 31 March 2022.

Note 1: Following the resignation of the finance director, Forest Research appointed an off-payroll interim on 8 November 2021 who will remain in-post until a new finance director is recruited. As a temporary measure the interim was removed from the Forest Research Board and their financial responsibility was moved to the CEO at the beginning of May 2022.

The remuneration of the SCS is set by the Prime Minister following independent advice from the Senior Salaries Review Body (SSRB). The Cabinet Office advises the department in March or April each year of the government's response to the SSRB recommendations and produces guidance for departments to follow.

The core department develops its SCS reward strategy within the Cabinet Office framework, ensuring that the overall pay awards for the SCS are within the cost ceiling allowed.

Members of the SCS are eligible to be considered for individual levels of bonus as non-pensionable, non-consolidated variable pay (NCVP), based on their performance. NCVP is paid in the financial year after that in which it was earned. During 2021 to 2022, NCVP for 2020 to 2021 performance was paid to approximately 28 per cent of the SCS and was paid at £6,000 for deputy directors, directors and directors general. NCVP values, informed by each individual's appraisal grade, were paid within Cabinet Office guidelines. Departments also have discretion to make in-year non-consolidated award payments to recognise outstanding contribution for SCS staff. These are limited under Cabinet Office guidance to a maximum of £5,000.

The Permanent Secretary is eligible to be considered for a NCVP bonus award measured against achievement of objectives, which for performance in 2020 to 2021 was subject to a maximum of £17,500. Such awards are made by the Permanent Secretaries’ Remuneration Committee, which comprises the Chairman of the SSRB (who acts as chair), two other members of the SSRB, the Cabinet Secretary and the Permanent Secretary of HM Treasury.

Ministerial salaries are determined by the Cabinet Office, under the Ministerial and Other Salaries Act 1997.

The Constitutional Reform and Governance Act 2010 requires Civil Service appointments to be made on merit, on the basis of fair and open competition. The recruitment principles published by the Civil Service Commission specify the circumstances when appointments may be made otherwise.

Unless otherwise stated below senior officials covered by this report hold appointments which are open ended. Early termination, other than for misconduct, would result in the individual receiving compensation as set out in the Civil Service Compensation Scheme.

Further information about the work of the Civil Service Commission can be found on the Civil Service Commission website.

The following sections provide details of the remuneration and pension interests of the ministers and the board members who were employees of the department during 2021 to 2022. The following tables in the Remuneration Report have been subject to audit.

Note 2: The value of pension benefits accrued during the year is calculated as the real increase in pension multiplied by 20 less the contributions made by the individual. The real increase excludes increases due to inflation or any increase or decrease due to a transfer of pension rights. Ministers’ pensions are disclosed to the nearest £000's.

Note 3: Lord Goldsmith receives no reimbursement from the department.

The Board has two ex officio members, Emma Howard Boyd from EA and Tony Juniper from NE.

The ex-officio members do not receive any additional payment from the Core department for their duties on the Board. For details of the remuneration of these ex-officio members, please see the EA and NE ARAs as they are paid by these entities.

The monetary value of benefits in kind covers any benefits provided by the department and treated by HM Revenue and Customs as a taxable emolument. No Defra officials received benefits in kind during the 2021 to 2022 year.

Salary includes gross salary; overtime; reserved rights to London weighting or London allowances; recruitment and retention allowances; private office allowances and any other allowance to the extent that it is subject to UK taxation.

This report is based on accrued payments made by the department and thus recorded in these accounts. In respect of ministers in the House of Commons, departments bear only the cost of the additional ministerial remuneration; the salary for their services as an MP £81,932 (from 1 April 2020) and various allowances to which they are entitled are borne centrally.

However, the arrangement for ministers in the House of Lords is different in that they do not receive a salary but rather an additional remuneration, which cannot be quantified separately from their ministerial salaries. This total remuneration, as well as the allowances to which they are entitled, is paid by the department and is therefore shown in full in the figures above.

The information given above relates to members of the Board. Equivalent information relating to the entities consolidated into the departmental accounts as per Note 18: executive agencies, NDPBs, NFC, Flood Re, Forestry Commission and LFBs) is given in their separate ARAs.

Bonuses are based on performance levels attained and are made as part of the appraisal process. The bonuses reported in 2021 to 2022 relate to performance in 2020 to 2021 and the comparative bonuses reported for 2020 to 2021 relate to the performance in 2019 to 2020.

Note 1: Differences between the entitlements and amounts paid arise due to timing of claims. Where the amount paid exceeds the entitlement for the year, this relates to fees for previous periods.

Note 1: Start and end date of Cash Equivalent Transfer Value (CETV) is 31 March or date of joining or leaving the Board.

Note 2: Lord Goldsmith and Rebecca Pow MP chose not to be covered by the ministerial pension scheme arrangements during the reporting year.

Pension benefits for ministers are provided by the Parliamentary Contributory Pension Fund (PCPF). The scheme is made under statute and the rules are set out in the Ministers’ etc. Pension Scheme 2015.

Those ministers who are MPs may also accrue an MP's pension under the PCPF (details of which are not included in this report). A new MP's pension scheme was introduced from May 2015, although members who were MPs aged 55 or older on 1 April 2013 have transitional protection to remain in the previous MP's final salary pension scheme.

Benefits for ministers are payable from State Pension age under the 2015 scheme. Pensions are revalued annually in line with pensions increase legislation both before and after retirement. The contribution rate from May 2015 is 11.1 per cent and the accrual rate is 1.775 per cent of pensionable earnings.

The figure shown for pension value includes the total pension payable to the member under both the pre and post 2015 ministerial pension schemes.

Note 1: Start and end date of CETV is 31 March or date of joining or leaving the Board.

Note 1: Start and end date of CETV is 31 March or date of joining or leaving the Board.

Pension benefits are provided through the Civil Service pension arrangements. From 1 April 2015 a new pension scheme for civil servants was introduced – the Civil Servants and Others Pension Scheme or alpha, which provides benefits on a career average basis with a normal pension age equal to the member's State Pension Age (or 65 if higher). From that date all newly appointed civil servants and the majority of those already in service joined alpha. Prior to that date, civil servants participated in the Principal Civil Service Pension Scheme (PCSPS). The PCSPS has four sections: three providing benefits on a final salary basis (classic, premium or classic plus) with a normal pension age of 60; and one providing benefits on a whole career basis (nuvos) with a normal pension age of 65.

These statutory arrangements are unfunded with the cost of benefits met by monies voted by Parliament each year. Pensions payable under classic, premium, classic plus, nuvos and alpha are increased annually in line with Pensions Increase legislation. Existing members of the PCSPS who were within 10 years of their normal pension age on 1 April 2012 remained in the PCSPS after 1 April 2015. Those who were between 10 years and 13 years and 5 months from their normal pension age on 1 April 2012 switch into alpha sometime between 1 June 2015 and 1 February 2022.

Because the government plans to remove discrimination identified by the courts in the way that the 2015 pension reforms were introduced for some members, it is expected that, in due course, eligible members with relevant service between 1 April 2015 and 31 March 2022 may be entitled to different pension benefits in relation to that period (and this may affect the Cash Equivalent Transfer Values shown in this report – see below).

All members who switch to alpha have their PCSPS benefits ‘banked’, with those with earlier benefits in one of the final salary sections of the PCSPS having those benefits based on their final salary when they leave alpha. (The pension figures quoted for officials show pension earned in PCSPS or alpha – as appropriate. Where the official has benefits in both the PCSPS and alpha the figure quoted is the combined value of their benefits in the two schemes). Members joining from October 2002 may opt for either the appropriate defined benefit arrangement or a defined contribution (money purchase) pension with an employer contribution (partnership pension account).

Employee contributions are salary-related and range between 4.6 per cent and 8.05 per cent for members of classic, premium, classic plus, nuvos and alpha. Benefits in classic accrue at the rate of one-eightieth of final pensionable earnings for each year of service. In addition, a lump sum equivalent to three years initial pension is payable on retirement. For premium, benefits accrue at the rate of one-sixtieth of final pensionable earnings for each year of service. Unlike classic, there is no automatic lump sum. Classic plus is essentially a hybrid with benefits for service before 1 October 2002 calculated broadly as per classic and benefits for service from October 2002 worked out as in premium. In nuvos a member builds up a pension based on his pensionable earnings during their period of scheme membership.

At the end of the scheme year (31 March) the member's earned pension account is credited with 2.3 per cent of their pensionable earnings in that scheme year and the accrued pension is uprated in line with Pensions Increase legislation. Benefits in alpha build up in a similar way to nuvos, except that the accrual rate is 2.32 per cent. In all cases members may opt to give up (commute) pension for a lump sum up to the limits set by the Finance Act 2004.

The Partnership Pension Account is an occupational defined contribution pension arrangement which is part of the Legal & General Mastertrust. The employer makes a basic contribution of between 8 per cent and 14.75 per cent (depending on the age of the member). The employee does not have to contribute, but where they do make contributions, the employer will match these up to a limit of 3 per cent of pensionable salary (in addition to the employer's basic contribution). Employers also contribute a further 0.5 per cent of pensionable salary to cover the cost of centrally-provided risk benefit cover (death in service and ill health retirement).

The accrued pension quoted is the pension the member is entitled to receive when they reach pension age, or immediately on ceasing to be an active member of the scheme if they are already at or over pension age. Pension age is 60 for members of classic, premium and classic plus, 65 for members of nuvos, and the higher of 65 or State Pension Age for members of alpha. (The pension figures quoted for officials show pension earned in PCSPS or alpha – as appropriate. Where the official has benefits in both the PCSPS and alpha the figure quoted is the combined value of their benefits in the two schemes, but note that part of that pension may be payable from different ages).

Further details about the Civil Service pension arrangements can be found at the Civil Service Pension Scheme website.

A CETV is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member's accrued benefits and any contingent spouse's pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the pension benefits they have accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total membership of the pension scheme, not just their service in a senior capacity to which disclosure applies.

The figures shown include the value of any pension benefit in another scheme or arrangement which the member has transferred to the Civil Service pension arrangements. They also include any additional pension benefit accrued to the member as a result of their buying additional pension benefits at their own cost. CETVs are calculated in accordance with the Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and do not take account of any actual or potential reduction to benefits resulting from Lifetime Allowance Tax which may be due when pension benefits are taken.

This reflects the increase in CETV that is funded by the employer. It does not include the increase in accrued pension due to inflation, or contributions paid by the employee (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market valuation factors for the start and end of the period.

This information has been subject to audit.

Reporting bodies are required to disclose the relationship between the remuneration of the highest paid director in their organisation and the lower quartile, median and upper quartile remuneration of the organisation's workforce.

Total remuneration includes salary, non-consolidated performance-related pay and benefits-in-kind. It does not include severance payments, employer pension contributions and the cash equivalent transfer value of pensions.

The banded remuneration of the highest-paid director in the department in 2021 to 2022 was £180,000 to 185,000 (2020 to 2021, £180,000 to 185,000). This was 5.6 times (2020 to 2021, 5.6) the median remuneration of the workforce, which was £32,557 (2020 to 2021, £32,557).

The banded remuneration of the highest paid director remained unchanged in 2021 to 2022 from the previous year. They did not receive an increase in salary.

In 2021 to 2022, one (2020 to 2021, five) employees received remuneration in excess of the highest- paid director. All those receiving higher remuneration were contractors employed for their specialist skills. No permanent staff received remuneration in excess of the highest paid director. Remuneration ranged from £15,000 to £20,000 to £190,000 to £195,000 (2020 to 2021: £15,000 to £20,000 to £220,000 to £225,000).

The highest banding of the workforce has fallen due to a fall in the number of staff employed for their specialist skills and paid more than the highest paid director.

Percentage change in total salary and bonuses for the highest paid director and the staff average.

Ratio between the highest paid directors’ total remuneration and the lower quartile, median and upper quartile for staff pay.

Lower quartile, median and upper quartile for staff pay for salaries and total pay and benefits.

The parliamentary accountability and audit report describe how departments are financed through the Parliamentary Estimates process. Details are also provided regarding the regularity of expenditure, so that Parliament can be assured that funds have been expended in the manner intended. This meets the key accountability requirements to Parliament. The Certificate and Report of the Comptroller and Auditor General to the House of Commons is also included, as required by the Government Resources and Accounts Act 2000.

In addition to the primary statements prepared under International Financial Reporting Standards (IFRS); the Government Financial Reporting Manual (FReM) requires Defra to prepare a Statement of Outturn against Parliamentary Supply (SOPS) and supporting notes.

The SOPS and related notes are subject to audit, as detailed in the Certificate and Report of the Comptroller and Auditor General to the House of Commons.

The SOPS is a key accountability statement that shows, in detail, how an entity has spent against their Supply Estimate. Supply is the monetary provisions (for resource and capital purposes) and cash (drawn primarily from the Consolidated Fund), that Parliament gives statutory authority for entities to utilise. The Estimate details supply and is voted on by Parliament at the start of the financial year.

Should an entity exceed the limits set by its’ Supply Estimate, called control limits, their accounts will receive a qualified opinion.

The format of the SOPS mirrors the Supply Estimates, published on gov.uk, to enable comparability between what Parliament approves and the final outturn.

The SOPS contain a summary table, detailing performance against the control limits that Parliament have voted on, cash spent (budgets are compiled on an accruals basis and so outturn will not exactly match to cash spent) and administration.

The supporting notes detail the following: Outturn by Estimate line, providing a more detailed breakdown (SOPS Note 1); a reconciliation of outturn to net operating expenditure in the SOCNE, to link the SOPS to the financial statements (SOPS Note 2); a reconciliation of outturn to net cash requirement (SOPS Note 3); and, an analysis of income payable to the Consolidated Fund (SOPS Note 4).

Unless specifically stated in the table the 2020 to 2021 comparatives have been not restated.

The SOPS and Estimates are compiled against the budgeting framework, which is similar to, but different to, IFRS. An understanding of the budgeting framework and an explanation of the key terms is provided in the financial review section of the performance report. Further information on the Public Spending Framework and the reasons why budgeting rules are different to IFRS can also be found in Chapter 1 of the Consolidated Budgeting Guidance, available on GOV.UK.

The SOPS provides a detailed view of financial performance, in a form that is voted on and recognised by Parliament. The financial analysis, in the Performance Report, provides a summarised discussion of outturn against estimate and functions as an introduction to the SOPS disclosures.

The table below includes the results for the Core department, executive agencies, Forestry Commission, Flood Re and non-departmental public bodies.

The table above details the 2021 to 2022 figures for voted totals subject to parliamentary control, and the non-voted estimate and outturn which was an exceptional item relating to a Contingency Fund Advance for OEP, due to the enabling legislation and passing of the Environment Bill being delayed. Refer to the Supply Estimates Guidance manual, available on GOV.UK, for detail on the control limits voted by Parliament. In addition, although not a separate voted limit, any breach of the administration budget will also result in an excess vote.

Although not a separate voted limit, any breach of the administration budget will also result in an excess vote.

Explanations of variances between the Estimate and outturn are given in Chapter 3 – Financial Analysis.

The Notes to the Departmental Accounts form part of these accounts.

Note 1: Virement reallocates underspends on one part of the Estimate to cover overspends on another part of the Estimate. Detailed explanations of significant variances between Estimate and net resource outturn are shown in Chapter 3 – Financial Analysis.

Note 2: The Countryside and Rural Services Estimate line has been merged within existing Estimate lines and has subsequently changed the allocation of some prior year numbers.

Note 1: Virement reallocates underspends on one part of the Estimate to cover overspends on another part of the Estimate.

Note 2: The Countryside and Rural Services Estimate line has been merged within existing Estimate lines and has subsequently changed the allocation of some prior year numbers.

The total Estimate columns include virements. Virements are the reallocation of provision in the Estimates that do not require parliamentary authority (because Parliament does not vote to that level of detail and delegates to HM Treasury). Further information on virements are provided in the Supply Estimates Manual, available on GOV.UK.

The outturn versus estimate column is based on the total including virements. The Estimate total before virements have been made is included so that it can be reconciled by users to the Estimates laid before Parliament.

As noted in the introduction to the SOPS above, outturn and the Estimates are compiled in line with the budgeting framework, which is similar to, but different from, IFRS. Therefore, this reconciliation bridges the resource outturn to net operating expenditure, linking the SOPS to the financial statements.

The SoCNE includes capital grants; these score in capital budgets. Note 3.3 below details the breakdown of grants and subsidies expenditure. Note 4.2 details capital grant income.

Capital Expenditure on Flood and Coastal Defence Work (£523.9 million) is included in the SoCNE (Note 3.1) but is scored against capital budgets.

The SoCNE includes Research and Development costs that meet the ESA10 definition; these score in capital budgets.

Details of the Income payable to the Consolidated Fund can be found at Note SOPS 4.1 below.

As noted in the introduction to the SOPS above, outturn and the Estimates are compiled in line with the budgeting framework, not on a cash basis. Therefore, this reconciliation bridges the resource and capital outturn to the net cash requirement.

Explanations of significant variances between estimate and outturn for resource, capital and net cash requirement are shown in Chapter 3 – Financial Analysis.

In addition to income retained by the department, the following income is payable to the Consolidated Fund (cash receipts are shown in italics).

The income paid to the Consolidated Fund includes; income in relation to the index linked annual payment for the HMG provision of the insurance element of the Government contingent support package (GSP) for the Thames Tideway (£0.473 million), income in relation to an agreement with the National Institute for Agricultural Botany (£2.005 million) for land sales where the income has been accrued but the cash not yet received, and income relating to disease outbreak costs that APHA incurred in prior years (£0.941 million).

Consolidated Fund income shown in SOPS 4.1 above does not include any amounts collected by the department where it was acting as agent for the Consolidated Fund rather than as a principal.

The long term expenditure trends can be found in the Core Tables in Annex 1: Core Tables 2021 to 2022.

The names of any public sector bodies outside the boundary for which Defra had lead policy responsibility in the year, together with a description of their status can be found in Note 19 Entities Outside the Departmental Boundary.

Losses are reported on an accruals basis.

Defra has recognised a constructive loss of £11.1 million relating to non-current assets used in the treatment of the Water and Abandoned Metal Mines. These assets were fully impaired in 2020 to 2021 due to insufficient records being available to support their inclusion on Defra's balance sheet, with formal write-off confirmed in 2021 to 2022.

HMRC launched an enquiry into Defra's compliance with the off-payroll working (IR35) rules in relation to contingent labour in 2019. That enquiry has found instances where contractors were incorrectly assessed as out of scope. For 2021 to 2022, Defra accepted there was an outstanding liability of £63.2 million with HMRC. A payment of £42.6 million was made to HMRC on 30 March 2022, with the remaining balance of £20.7 million being accrued as at 31 March 2022. This liability was based on detailed calculations of tax and national insurance lost between 6 April 2017, when the rules came into force, and 31 March 2022.

EA made a special payment of £1.2 million to settle a dispute relating to maintenance of a small section of sea defence where the shoreline is eroding. The benefit of the payment is that future obligations under a private agreement entered into by our predecessor organisations to maintain the sea defence have been extinguished with regard to the landowner in this location, where the cost benefit to maintain cannot be demonstrated under the shoreline management plan.

In 2021 to 2022, the MMO made one special payment for £1.8 million in settlement of a legal case brought against the MMO.

Defra made a payment of £0.7 million to settle a liability claim made as a result of the Department conceding a judicial review. This followed external legal advice that this was less than the expected cost of reaching a settlement in court.

As we move to UK Exchequer funded schemes the department will be required to monitor and estimate the levels of Fraud and Error within the schemes which in time will become increasingly material.

In the short-term Defra corporate services are planning to create a central grants hub. This will be a multi-disciplinary team to drive consistency, effectiveness and efficiency in grant making across the Defra group, covering governance, assurance and compliance, management information, counter-fraud, capability, standard processes and business partner support. Consideration is also being given as part of the Defra Transformation Programme to moving to a more consolidated operating model for delivering grants in the longer term.

Information on the estimated values of undetected irregulaties within the UK funded schemes managed by the RPA, for which the net expenditure is material, are reported in the RPA ARA.

Details of the material fees and charges across the Defra family are disclosed in the table below.

The financial objective for EA's Environment and Business charging schemes is full cost recovery taking one year with another, based on all costs including current cost depreciation and a rate of return on relevant assets. Please see EA's ARA for a full analysis of these schemes and the extent of cost recovery.

All other details regarding income from the sale of goods and services provided by the delivery bodies can be found in their respective ARAs.

This information has been subject to audit.

In addition to contingent liabilities reported in accordance with IAS 37, the department also reports liabilities for which the likelihood of a transfer of economic benefit in settlement is too remote to meet the definition of contingent liability.

The department has the following remote contingent liabilities as at 31 March 2022. Unless otherwise stated liabilities relate to the Core department.

A transfer of economic benefits is considered to be remote on the following:

Due to the variable nature of these contingent liabilities they are classified as unquantifiable.

Tamara FinkelsteinAccounting Officer for the Department for Environment, Food and Rural Affairs21 October 2022

The Certificate of the Comptroller and Auditor General to the House of Commons and Report by the Comptroller and Auditor General are produced by National Audit Office. The Department is unable to publish these in HTML format. The Report by the Comptroller and Auditor General and Certificate of the Comptroller and Auditor General to the House of Commons can be viewed in the PDF.

The Government Financial Reporting Manual requires that the department prepares financial statements and related disclosures in accordance with International Financial Reporting Standards. The notes to the financial statements provide additional detail to users on the accounting policies of the entity and the numbers included in the core financial statements. They are only included where additional information is material, such as where its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements.

This account summarises the income and expenditure generated and consumed on an accruals basis. It also includes other comprehensive income and expenditure, which include changes to the values of non-current assets and other financial instruments that cannot yet be recognised as income or expenditure.

EU funding for the department totalling £486 million (2020 to 2021, £925 million) is included within income totals. Further details can be found in Note 4 Income – Analysis of Operating Income.

Flood Re pays corporation tax. The charge included in other costs in the SoCNE was £25 million (2020 to 2021 £27 million).

The Notes to the Departmental Accounts form part of these accounts.

This statement presents the financial position of Defra. It comprises three main components: assets owned or controlled; liabilities owed to other bodies; and equity, the remaining value of the entity.

Note 1: The unrestricted charitable funds figure includes RBG Kew and NFC's revaluation reserves totalling £130.4 million (2020 to 2021, £107.4 million).

The Notes to the Departmental Accounts form part of these accounts.

Tamara FinkelsteinAccounting Officer for the Department for Environment, Food and Rural Affairs21 October 2022

This statement shows the changes in cash and cash equivalents of Defra during the reporting period. It shows how Defra generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of service costs and the extent to which these operations are funded by way of income from the recipients of services provided by the department.

Investing activities represent the extent to which cash inflows and outflows have been made for resources which are intended to contribute to Defra's future public service delivery. Cash flows arising from financing activities include parliamentary supply and other cash flows, including borrowing.

The Notes to the Departmental Accounts form part of these accounts.

This statement shows the movement in the year on the different reserves held by Defra. The General Fund reflects financing and balances from the provision of services, such as it reflects the contribution from the Consolidated Fund. The revaluation reserve reflects the change in asset values that have not been recognised as income or expenditure. Other specific reserves are shown separately where there are statutory restrictions of their use. The hedging reserve recognises the effective portion of changes in the fair value of Rural Payments Agency's foreign currency derivatives that are designated and qualify as cash flow hedges. Charitable funds represent the fair value of donations, including revaluation, given to RBG Kew and NFC. Unrestricted reserves are those donations that have no restrictions on their use, or income flow.

The Notes to the Departmental Accounts form part of these accounts.

The Notes to the Departmental Accounts form part of these accounts.

The financial statements have been prepared in accordance with the 2021 to 2022 Government Financial Reporting Manual (FReM) issued by HM Treasury.

The accounting policies in the FReM apply International Financial Reporting Standards (IFRS), as adapted or interpreted for the public sector.

Where the FReM permits a choice of accounting policy, a judgement has been made to select the most appropriate policy to suit the particular circumstances of the department, for the purpose of giving a true and fair view. The department's accounting policies set out below have been applied consistently in dealing with items which are considered material in relation to the accounts.

1.1 Significant Judgements and Estimation Uncertainty

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities and the reported amount of income and expenditure. All estimates are based on knowledge of current facts and circumstances, assumptions concerning past events, and forecasts of future events and actions. Where appropriate, the relevant notes to the accounts provide further detail on estimation techniques.

Details of significant judgements and estimation techniques that management have made in the process of applying the department's accounting policies are:

These accounts have been prepared on an accruals basis under the historical cost convention, modified where materially significant to account for the revaluation of property, plant and equipment, intangible assets and certain financial assets and liabilities.

In common with other government departments, the future financing of Defra's liabilities is to be met by future grants of supply and the application of future income approved annually by Parliament. Annually parliament provides approval for amounts prior to the parliamentary recess and there is no reason to believe that future approvals will not be made.

These accounts comprise a consolidation of the core department, executive agencies and those other delivery bodies which fall within the departmental boundary, and transactions between entities within the consolidation are eliminated.

IFRS 10 as adapted by the FReM results in the criteria used by the ONS in determining control by the parent over the subsidiary; as such the departmental boundary defines the Defra group in a manner similar to the group concept under generally accepted accounting practice. Note 18 provides for a list of delivery bodies within the boundary, and the FC is consolidated in the results for the Core department and executive agencies, and Flood Re is fully consolidated into the group results pending confirmation of ONS status.

All expenditure recognised in the RPA Accounts in 2021 to 2022 has been UK Exchequer funded, and prior year expenditure was UK Exchequer funded for payments made for 16 October 2020 onwards, except for the reimbursement of Financial Discipline Mechanism funds relating to prior scheme years. Payments made up to 15 October 2020 were funded by the European Commission.

The accounting policies applying to both income and expenditure under Commission funded schemes, and expenditure under UK Exchequer funded schemes, are detailed below.

Where payments were made to customers on or before the 15 October 2020, or where the expenditure relates to the reimbursement of Financial Discipline Mechanism funds deducted from scheme expenditure in earlier years, these are funded by the Commission. The UK Exchequer has pre-funded these schemes and following receipt of reclaims from the Commission the surplus funds are repaid to HM Treasury.

Commission funded BPS expenditure for England is recognised by RPA when there is a present obligation to make payments to the claimants as a result of substantive processes to validate each claim against Commission rules for the schemes, and when the amount payable to each claimant is considered reliably measurable and probable.

For other European Agricultural Guarantee Fund schemes administered by RPA an accrual point has been established according to the application scheme rules and regulations, When a present obligation for payment is identified to fall on or before the Statement of Financial Position date it is shown as payable in the current year financial statements which a corresponding Commission receivable. Any element paid in advance of the accrual point is treated as a prepayment.

The impact of any foreign exchange movements between the claim date and the date of actual reimbursement by the Commission are borne by RPA and accordingly recognised in the Statement of Comprehensive Net Expenditure.

With the exception of the reimbursement of the Financial Discipline Mechanism funds deducted from earlier years’ scheme expenditure, payments made to customers on or after 16 October 2020 are funded directly by the UK Exchequer.

RPA recognises the expenditure relating to all UK Exchequer funded schemes when the following criteria are judged to be met:

This commonly results in expenditure being recognised on receipt of claims, however, expenditure may be recognised a later date when claims are received in advance of other underlying performance obligations being completed by the claimant.

RPA administers several schemes, principally the Fruit and Vegetables and School Milk Schemes, for all UK claimants. Where payments are made outside of England these are reclaimed from the associated devolved administrations in Scotland, Wales and Northern Ireland. RPA recognises the income when it is probable that it will receive a reimbursement from the devolved administration for scheme expenditure incurred and the amount to be received is considered reliably measurable. These conditions are deemed to be met at the point that the related scheme expenditure is recognised.

Payments under RDPE are made by RPA on behalf of Defra and FC. Defra's status as managing authority for RDPE conveys the risks and rewards associated with budget responsibility and consequently RDPE expenditure and associated Commission income is recognised in the core department. Defra delegates authority to RPA to administer certain elements of RDPE, including validation and payments of eligible claims as authorised by NE and RPA.

RDPE capital expenditure is generally recognised at the point the claims are received, given this is the point at which Defra is deemed to have a present obligation where the amount payable can be reliably measured. Expenditure for agri-environment scheme revenue agreements is recognised on the anniversary of the agreement start date, when it is deemed that contractual obligations have been met. Commission income is recognised at the same time as the EU element of the expenditure is recognised.

With the exception of EA's operational assets (see below) and Natural England's non operational Heritage Assets (see Note 1.8), freehold land and buildings are subject to professional valuation at no more than five yearly intervals. Due to the exceptional circumstances in 2020 to 2021, the Natural England quinquennial valuation was delayed until 2021 to 2022 resulting in an interval of six years since the previous valuation. These are carried out by professionally qualified independent valuers, who adhere to the principles outlined in the Royal Institution of Chartered Surveyors Red Book. The most recent valuation at the Core department was completed in March 2020 by Montagu Evans, under the guidance of a qualified director in their valuation department. This included the valuation of the Weybridge site. The next valuation at the Core department will be in March 2025. The quinquennial revaluation of EA's freehold land, including operational land and buildings was carried out in March 2021.

Land and buildings are stated at fair value, which is either DRC, open market value (MV) or existing use value (EUV). Non-specialised properties are stated at existing use value.

Land and property assets are revalued annually. Every five years a full inspection and valuation of Defra's property assets is conducted to assess fair value. Methodology will reflect the nature of the asset, being either MV, EUV, or DRC. This is referred to as a quinquennial review. In the intervening years an annual desktop valuation is conducted through the application of appropriate indices. An annual valuation report is produced regardless of whether the valuation is a desktop or based on inspection. As an exception, in light of additional uncertainty arising from COVID-19 and its potential impact on land and building asset values, RBG Kew's valuers have undertaken desktop valuation exercises in respect of the 2019 to 2020 and 2020 to 2021 accounts. A revaluation was then undertaken in 2021 to 2022.

The last quinquennial asset valuation exercise for the Corporate Estates, including the APHA and administrative buildings, was carried out in March 2020 with a valuation date of 31 March 2020.

EA's land and buildings (including dwellings), except assets under construction, were revalued at 31 March 2021 by Royal Institution of Chartered Surveyors (RICS) qualified external chartered surveyors Savills and Avison Young. The valuation was on the basis of open market value for administrative land and buildings and existing use for operational land. EA's plant and machinery, vehicles, furniture and fittings, IT equipment and operational assets were revalued internally at 31 March 2022 using suitable indices.

EA uses operational assets to deliver its environmental outcomes. These assets are often relatively unique in nature and function. Typically, these assets include flood risk management works, such as barriers, pumping stations, flood risk management landholdings, and water resource assets, such as weirs, sluices, gauging stations, pipelines and tunnels, and navigation assets such as locks. The FReM requires these assets to be accounted for in the statement of financial position at their Depreciated Replacement Cost. Due to the enormous logistical and technical challenge as well as substantial expenditure that would be required to obtain replacement cost professional valuations for over 8,000 operational assets, EA uses a Modified Historic Cost method as a proxy for Depreciated Replacement Cost.

This means that an appropriate annual cost inflation index is used to revalue the gross book value of these assets each year. EA is taking action to change the valuation methodology for operational assets in order to be compliant with the FReM, the non-compliance of which has resulted in a qualified audit opinion of EA's accounts. Further details can be found in EA's accounts and Annual Governance Statement.

The specialist science estate operated by APHA is valued using the depreciated replacement cost method taking into account the expected construction costs to rebuild equivalent assets.

In accordance with IFRS 13, Fair Value Measurement, non-property tangible assets are generally carried at fair value. However, where assets have short useful lives or low values, they are stated at depreciated historic cost as a proxy for fair value. Fair value for non-current assets held for their service potential is current value in existing use.

Minimum levels of capitalisation within the departmental boundary are generally in the ranges of £1,000 to £10,000 although, for all land at EA, no de minimis threshold is in force. Capitalisation thresholds vary, as these are set within reference to the nature and complexity of assets and related projects at each entity.

Defra holds operating leases with landlords for rented properties. The expense is recognised in the SoCNE on a straight line basis over the length of the lease. The future commitment for the leases is shown in the Operating Lease disclosure at Note 8.2.1. Government spending controls and national property controls guidelines advise that lease breaks should be exercised upon expiry, unless a business case for retention is approved by the Minister for the Cabinet Office. Financial commitments are therefore recognised to the first break or lease end, whichever is sooner. If, however, the evidence suggests that it is unlikely individual lease breaks will be exercised, the commitment is until the end of the lease.

Where Defra hold the lease, the costs are recharged through allocation of floor space back to tenants. For bodies that are within Defra group the floor spaces are signed off by delivery body finance directors after consultation with their operational businesses, and recharged back notionally. For any other government departments and external tenants, the costs are hard charged through invoicing.

Income received from subtenants is also recognised on a straight-line basis over the term of the sub lease arrangement, with the rent received being recognised in the SoCNE for the period occupied in year.

Flood Re account for leases in accordance with IFRS 16, however, the impact on the group is immaterial and is not adjusted on consolidation (Note 1.22.1).

Assets under construction are shown at accumulated cost with depreciation commencing when the asset is completed and brought into service. Costs are regularly reviewed to ensure only costs directly associated with bringing the asset into use are included in the balances.

A heritage asset is a tangible asset with historical, artistic, scientific, technological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture.

National Nature Reserves (NNRs) are defined as land that is held in support of our strategic outcome to support a healthy natural environment and continue to ensure that our rich biodiversity thrives across the landscape, with ecosystems and habitats resilient to climate change. Although they are open to the public for quiet recreation, they are held principally for their contribution to knowledge and culture and are classified as heritage assets.

NE has one operational heritage asset which is being held for the contribution to knowledge and culture but also used to provide other services. The remaining Heritage Assets are classified as non-operational.

NE's Heritage Assets are reported in the SoFP at fair value, and are subject to professional valuation every five years, the latest being in March 2022. In between valuations, a detailed desk top review is undertaken by external valuers to ensure the valuations remain current and are in line with RICS red book guidance. Any surplus compared to the historic cost is recognised in the revaluation reserve.

Although only operational Heritage Assets have to be valued externally every five years and non-operational ones could be completed by NE's own surveyors, NE have opted to have all their Heritage Assets, both operational and non-operational, valued externally. Valuation of non-operational Heritage Assets has always proved complex due to the unique qualities of each site making it challenging to identify comparative information. As a result valuations, although compliant with RICS methodology, rely on professional judgement, knowledge of the area, status of comparable data, status of site being valued and other subjective judgements.

RBG Kew also holds heritage assets. RBG Kew has not capitalised heritage buildings and collections acquired before 2001 to 2002, as the cost of obtaining valuations for older collections and buildings is onerous compared to the benefit to the readers of the accounts. Subsequent to 2001 to 2002, additions for heritage land and buildings are recognised at cost and revalued every five years by external professionally qualified valuers, on the basis of either open market value for existing use or depreciated replacement cost. The last professional revaluation was carried out in March 2022, by Montagu Evans, Chartered Surveyors. Between professional revaluations, values are usually updated using indices provided by the professional valuers. Heritage collections purchased subsequent to 2001 to 2002 are recognised at cost and are neither revalued nor depreciated but are subject to impairment review at five yearly intervals, or when circumstances dictate.

Intangible assets are defined as identifiable non-monetary assets without physical substance. These comprise software licences and internally developed IT software, including assets under construction.

The department holds various software licences, which were capitalised at purchase cost where this exceeded capitalisation thresholds. Such assets are revalued only where it is possible to obtain a reliable estimate of their market value.

The department's expenditure on research activities is written off to the SoCNE as incurred. Capitalisation of development costs is contingent on fulfilment of the criteria noted in IAS 38, Intangible Assets.

Internally developed computer software includes capitalisation of internal IT employee costs on projects - appropriate supporting evidence is required of both their time and their roles to meet the criteria of being directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. The department does not hold any intangible assets with an indefinite useful life.

The capitalisation threshold for the Defra family generally ranges between £2,000 and £100,000. Capitalisation thresholds vary, as these are set with reference to the nature and complexity of assets and related projects at each entity.

When fully operational in the business, internally generated computer software is stated at a proxy for fair value, which generally, if it is not income generating, is indexed depreciated replacement cost.

Depreciation and amortisation are provided using the straight line method over the estimated useful life of the asset.

Land, assets under construction, non-operational heritage assets and assets held for sale are not depreciated.

Componentisation has been adopted by certain entities within the consolidation boundary. In these instances, each component of an asset with a value deemed material to the total fair value of the asset is capitalised and depreciated separately. Where componentisation is not yet fully in place, proxy values have been estimated using the weighted average useful life method. Estimated useful lives, component values and residual values are appropriately set across the Defra group and are revised annually.

Assets are depreciated over the following timescales:

Impairments are recognised when the recoverable amount of non-current assets falls below their carrying amount. An impairment review is carried out on an annual basis.

Any permanent diminution in the value of an asset due to clear consumption of economic benefit or service potential is recognised in full as an impairment loss in the SoCNE. An amount up to the value of the impairment is transferred from the revaluation reserve (to the extent that a balance exists) to the General Fund for the individual asset concerned.

Downward revaluations, resulting from changes in market value, only result in an impairment where the asset is revalued below its historical cost carrying amount. In these cases the accounting treatment is as for any other impairment, with amounts being firstly set against any accumulated balance in the revaluation reserve, and any amount in addition to this being recognised as an impairment and recorded in the SoCNE.

Revenue is measured based on the consideration specified in a contract with a customer. Income from Government Grants (accounted under IAS 20: Accounting for Government Grants), insurance income and charity income are recorded as other operating income.

The group recognises revenue from contracts with customers in accordance with the five stage model set out in IFRS 15 Revenue from contracts with customers. This is a framework to establish the timing and value of revenue recognised within the accounts; revenue is either recognised ‘at a point in time’ or ‘over time’ depending on the assessment of criteria within the framework.

Significant judgements are required to assess the timing of revenue recognition based on the satisfaction of performance obligations. A performance obligation is a promise to deliver a good or service (or series of substantially the same good or service). In determining whether a performance obligation is met and whether income is recognised over time a set of criteria has been established which considers the following;

The transaction price is the amount that Defra expects to receive for the goods and services provided and is determined in accordance with Managing Public Money and for sales of goods will be transacted at the value agreed on the invoice. Fees and Charges will be established either by the Secretary of State or by the entities Board. Defra considers the impact of any variable consideration within a contract including any significant financing component and any non-cash consideration, however, this is not generally relevant to contracts within the group.

Further details can be found in Note 4.1.

EU funding, most significantly relating to RPA scheme payments, is the biggest constituent of income. This is covered in detail in Notes 1.5.1 and 1.5.2.

Accrued income may involve a greater element of judgement, requiring management to make an estimate of the liability accruing to the department based on the information they hold at that point in time (for example, accruing for the value of work completed but not yet invoiced).

Within receivables and payables there are accrued and deferred income balances for EA's fees and charges where there is a surplus or deficit. Charging schemes are required to break even over a reasonable period of time and judgement is required in assessing the factors behind whether the surplus or deficit will result in a break even position over this reasonable period.

Flood Re's insurance income is accounted through IFRS 4 (Insurance Contracts). This includes:

See Flood Re's ARA for more details.

Cash and cash equivalents comprise cash in hand and current balances with banks and other financial institutions, and short term investments that are cancellable on demand.

Grant-in-aid from the Core department to NDPBs, both in respect of capital and revenue expenditure, is accounted for on a cash basis in the period which the payment is made. In the Core department Grant-in Aid is recognised as expenditure and within the NDPB's as funding. Grant-in-Aid is eliminated within the group account.

Expenditure is recognised on an accruals basis.

Accrued expenditure is recognised when the department has an unconditional obligation to pay customers, and is based on agreed amounts, contractually or by another form of mutual agreement.

Where the EA undertakes works which are capital in nature but will not itself receive direct future economic benefits (although the work will reduce national flood risk) or cannot reliably estimate the useful life of the asset or is restoring an asset to target condition the expenditure is reported as capital works expensed in year, see Note 3.1. Further details can be found in EA's Annual Report and Accounts.

Gross insurance claims expenses, relating to Flood Re, are based on the estimated liability for compensation owed to contract holders. Claims include all insurance claims occurring during the year, an estimate of claims incurred but not reported and any adjustments to claims outstanding from previous years.

A significant period of time can elapse before the ultimate claims cost can be established with certainty. The ultimate liability for claims made under insurance contracts is estimated using standard actuarial techniques, based on empirical data and current assumptions. Estimation of the ultimate cost of losses resulting from catastrophic flood events is inherently difficult, due to the possible severity of catastrophe claims.

Flood Re has a high dependency on its outwards reinsurance programme. The ceded premium is recognised on the date that the policy incepts and is earned in line with the underlying risk. Premiums include any adjustments arising in the accounting period in respect of reinsurance contracts incepting in prior accounting periods. Unearned reinsurance premiums are deferred to subsequent accounting periods.

As indicated above, Flood Re's insurance claim expense (and related reinsurance claim income) is related to the severity of flood events, and therefore may be subject to considerable fluctuation.

The functional and presentational currency of the department is sterling.

Transactions in foreign currencies, mainly relating to the BPS and RDPE, are translated into sterling using the appropriate exchange rate. Balances held in foreign currencies are translated at the rate of exchange at the date of the SoFP.

Exchange differences are recognised in the SoCNE in the period in which they arise, except for exchange differences on transactions entered in to hedge certain foreign currency risks (RPA only, see Note 1.12).

These comprise financial assets and financial liabilities. See Note 9, Note 10, Note 11 and Note 12 for details of financial instruments.

Financial assets are categorised according to the entity's business model for managing the asset and the assets’ contractual cash flow characteristics. This could be either collecting the contractual cash flows, selling the financial assets, or both, and contractual cash flows’ characteristics test (or Solely Payments of Principal and Interest (SPPI) – Test). This looks at whether cash flows are consistent with a basic loan arrangement (such as repayments of principal and interest on agreed dates).

The Financial Assets are then categorised as one of the three groups:

Loans and Investments are initially held at fair value plus transaction cost, then at amortised cost. Trade and other receivables are also measured at amortised cost, which is generally invoiced value, as these are generally short term in nature. Trade and other receivables includes income accruals which do not meet the definition of financial instruments.

Flood Re's short term investments with a duration of greater than three months are classified as other financial assets in Note 11. These are initially held at fair value and then measured at amortised cost using the EIR Method and are subject to impairment.

Fair Value through Profit and Loss (FVTPL).

Derivative financial instruments held for trading are valued at FVTPL, with changes in fair value recorded against expenditure.

Fair Value through Other Comprehensive Income (FVOCI).

The Eco Business Fund and Land Degradation Neutrality Fund investments, forming part of the department's official development assistance spend, are classified at FVOCI, as are derivative instruments in designated hedging relationships.

These comprise trade and other payables and other financial liabilities (including derivatives). They are initially recognised at fair value and are subsequently measured at amortised cost. Trade and Other Payables includes accrued expenses which do not meet the definition of financial instruments.

EA holds certain financial instrument liabilities as a result of entering into operating agreements with a number of water companies entered into at their privatisation. These liabilities are treated as perpetuities and recorded in the SoFP at amortised cost. The annual payments arising from these liabilities increase annually in line with the Retail Price Index (RPI).

Promissory Notes payable have been classified as financial liabilities measured at amortised cost. They are carried as current liabilities in the Consolidated Statement of Financial Position, and by law are payable on demand. In practice drawdown of the department's promissory notes is dependent upon the fulfilment of agreed criteria. Note 12 provides an analysis of the expected maturity profile of payments against promissory notes in future years.

Contract liabilities are measured at amortised cost, which is the invoiced amount payable.

RPA enters into a variety of foreign exchange forward and option contracts to manage its exposure to foreign exchange rate risk. Derivative financial instruments are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each SoFP date. The resulting gain or loss is recognised in the SoCNE immediately.

A derivative with a positive fair value is recognised as a financial asset, whereas a derivative with a negative fair value is recognised as a financial liability. A derivative is presented as a current asset or current liability if the remaining maturity of the instrument is less than 12 months or is greater than 12 months but is expected to be realised or settled within 12 months.

As Basic Payment Scheme expenditure is now domestically funded by the UK, designated hedge accounting ceased on 30 November 2020. Prior to 16 October 2020, the agency elected to designate certain foreign currency derivatives as cash flow hedges of the euro denominated receipts from the Commission in relation to the Basic Payment Scheme, in accordance with IFRS 9 Financial Instruments: Recognition and Measurement.

When forward contracts were used to hedge forecast transactions, RPA designated only the change in fair value of the forward contract related to the spot component as the hedging instrument. Gains or losses relating to the effective portion of the change in the spot component of the forward contracts were recognised in the cash flow hedge reserve within Taxpayers’ Equity. The change in the forward element of the contract that related to the hedged item was recognised within Other Comprehensive Expenditure in the costs of hedging reserve within Taxpayers’ Equity.

When option contracts were used to hedge forecast transactions, the agency designated only the intrinsic value of the options as the hedging instrument. Gains or losses relating to the effective portion of the change in intrinsic value of the options were recognised in the cash flow hedge reserve within Taxpayers’ Equity.

The changes in the time value of the options that relate to the hedged item were recognised within Other Comprehensive Expenditure in the costs of hedging reserve within Taxpayers’ Equity.

When the forecast transaction was no longer expected to occur a cumulative gain or loss and deferred costs of hedging that were reported in Taxpayers’ Equity were recognised immediately in the SOCNE.

For further detail please see the RPA Accounts.

Generally, pension benefits are provided through the Civil Service pension arrangements, full details of which can be found in the Remuneration Report.

Although the Principal Civil Service Pension Scheme (PCSPS) and the Civil Servant and Other Pension Scheme (CSOPS), known as alpha, are unfunded defined benefit schemes, in accordance with explicit requirements in the FReM, departments, agencies and other bodies account for the schemes as if they were defined contribution plans. The expected costs of the pension schemes are recognised on a systematic and rational basis over the period during which they benefit from employees’ services by payment to the schemes of amounts calculated on an accruing basis.

Liability for payment of future benefits is a charge on the schemes. The PCSPS and alpha pension schemes undergo a reassessment of the contribution rates by the Government Actuary at four-yearly intervals. In respect of defined contribution schemes, the department recognises the contributions payable for the year.

Where the department is responsible for pension schemes for delivery bodies, it has fully adopted IAS 19, Employee Benefits. The department recognises a liability in respect of any deficit, being the excess of the present value of the scheme's liabilities over the value of the assets in the scheme, to the extent that the department has a legal or constructive obligation to make good the deficit in the scheme.

Scheme managers and trustees are required to undertake a sensitivity analysis for each significant actuarial assumption, showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumption that were reasonably possible at that date. Details of this can be found in Note 15.

The department recognises a provision where it has a present obligation as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where material, future costs have been discounted using the rates as directed by HM Treasury.

The material provisions disclosed by the department include legacy liabilities relating to abandoned metal mines and FMD burial sites, potential liabilities in relation to changes in IR35 legislation and Disallowance Payments to the EU, where the timing and the value is subject to uncertainty. Details of the department's policy on disallowance provisions can be found in Chapter 3.

Some of Flood Re's insurance claims liabilities are subject to uncertainty in value and details are disclosed in these accounts in the section in Note 14.4 on Flood Re Insurance Provision.

See Note 14 for full details of all material provisions, including key management judgements and disclosures around estimation uncertainty.

In addition to contingent liabilities disclosed in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets, the department discloses, for parliamentary reporting and accountability purposes, certain statutory and non-statutory contingent liabilities where the likelihood of a transfer of economic benefit is remote. Further information is provided in the Remote Contingent Liabilities section in Chapter 6.

Where the time value of money is material, contingent liabilities are stated at discounted amounts.

IFRS 16 (Leases) has been effective since 1 January 2019 for the private sector. Due to the impact on government departments of COVID-19, HM Treasury agreed with the Financial Reporting Advisory Board (FRAB) to defer the implementation of IFRS 16 across central government to 1 April 2022.

When implemented, IFRS 16 will replace IAS 17 (Leases) and related IFRIC and Standard Interpretations Committee (SIC) interpretations. For lessees, it will remove the previous distinction between finance leases and operating leases. Under IFRS 16, all qualifying leases will recognise a right of use asset and lease liability. As a result, former operating leases will come on to the Statement of Financial Position. The Statement of Comprehensive Net Expenditure will reflect related charges for the depreciation of the right of use asset and interest on the lease liability in place of rental expenses, and continue to reflect irrecoverable VAT where applicable on any leases as HM Treasury guidance on the application of IFRS 16 Leases states this should not form part of the initial measurement of the right of use asset.

Within government, the scope of the standard has been extended to include lease-like arrangements that are not legally binding, for example Memorandum of Terms of Occupation (MOTOs). As mandated by the FReM, exemptions will be applied to short term leases with full terms or outstanding terms on transition of less than 12 months. The Defra group has set a value of £5,000 as the low value exemption threshold applied to the cost of the underlying asset when new, although may still choose to treat specific low value leases as ROU assets. Many of the land leases within the Environment Agency's operational estate will be covered by the low value exemption where they are leases for plots of land of 1-3m2 housing equipment with very low market rents and no alternative use.

On initial application, the FReM requires government bodies to adopt the option of recognising the net cumulative effects of applying IFRS 16 as an adjustment to the opening balance of taxpayers’ equity at 1 April 2022. This means that prior year comparatives will not be re-stated in Defra's 2022 to 2023 accounts. On transition, the opening cost of right of use assets will equal lease liabilities, adjusted for any lease prepayments or accruals that exist immediately prior to 1 April 2022. Lease liabilities will be calculated as the present value of outstanding payments due under the lease. Lease and non-lease components will be separated for vehicle leases, with the non-lease element continuing to be treated as an expense in the Statement of Comprehensive Net Expenditure.

The subsequent measurement of right of use assets, and the opening measurement of peppercorn leases, will be at fair value or current value in existing use where assets are held for their service potential, unless cost represents a reasonable proxy. For land and buildings, valuations will be determined by appropriately qualified professionals in accordance with RICS Guidance.

The estimated impact of IFRS 16 on the Statement of Financial Position at 1 April 2022 is to increase right of use assets by £118 million for the Core department and Agencies and £187 million for Defra group. Lease liabilities increase by £115 million for the Core department and Agencies and £177 million for Defra group. Land and buildings account for approximately 92 per cent of opening balances, with the corporate estate accounting for 84 per cent of the total. Depreciation and finance charges to the Statement of Comprehensive Net Expenditure in 2022 to 2023 are estimated at £24 million for the Core department and £40 million for the Defra group.

Lessor accounting is largely unchanged by IFRS 16 with lessors continuing to distinguish finance and operating leases. If a sub lease is judged to be a finance lease, the intermediate lessor will derecognise the right of use asset and recognise a receivable for the net investment in the finance lease equivalent to discounted future income. Defra has sub-let some properties to third parties as finance leases and expects to derecognise right of use assets of around £9 million at 1 April 2022. Occupation of the corporate estate by Defra group bodies is on a flexible shared basis with no formal occupancy agreements in place between the leaseholder (either Core department or the Environment Agency) and the occupant. Corporate estate leases will therefore be recognised in full by the leaseholder.

Accounting under IFRS 16 involves key judgements for lessees with respect to the conditions required to recognise the existence of a lease, the valuation of right of use assets and setting the lease term over which cash flows are discounted, including where leases have no fixed end date. Lessors and intermediate lessors must make judgements about the balance of risks and rewards of ownership attached to the underlying asset and the right of use asset respectively. Hindsight will be applied where judgements have been made.

Flood Re and Livestock Information Ltd follow the Companies Act which requires them to implement IFRS 16 from 1 April 2019, three years ahead of the revised FReM implementation date of 1 April 2022. We have not adjusted our group consolidated accounts to remove their IFRS 16 transactions as the impact is not material (Note 1.6.2).

The Royal Botanic Gardens Kew and the National Forest Company will be consolidated into the Defra group accounts from 1 April 2022 on an IFRS 16 basis. As charities preparing accounts under FRS102 Statement of Recommended Practice, Accounting and Reporting by Charities (SORP) there is no current requirement for them to implement IFRS 16 when preparing their own accounts.

This standard will apply to all types of insurance contracts and proposes an approach based on the expected present value of future cash flows to measuring insurance contract liabilities. The adoption of IFRS 17 is anticipated to have a material impact on Flood Re's financial statements and disclosures and the department will work with Flood Re to monitor the impact of adoption. IFRS 17 is effective for annual periods beginning on or after 1 January 2023, and will be effective for Flood Re from the financial year commencing 1 April 2023. The date of implementation for public sector accounts may be delayed, however, this has not yet been determined and published in the FReM.

There have been no changes to accounting policies during 2021 to 2022.

At the date of authorisation of these financial statements no new standards have become effective and been adopted.

The segmental analysis detailed below covers the key spending areas of the Department and is aligned with the internal reporting to the Defra Board and Executive Committee. Defra reports regularly on this basis and performance is monitored against these areas. The reportable segments are split by the Core department director general structure. Where a reportable segment's revenue is 10 per cent or less of the combined revenue of all operating segments, they have been grouped together.

The basis for accounting for any transactions between reportable segments is compliant with the rest of the Annual Report and Accounts and eliminates transactions between Defra's delivery bodies.

In 2021 to 2022 Defra received funding of £486 million from the EU, 33 per cent of its income (2020 to 2021 £925 million, 48 per cent). The majority of this falls to the Rural Payments Agency and Core Department. This is in respect of rural development schemes for Defra and the other UK paying agencies where reimbursement, against existing budgets, can still be sought under the CAP. The decrease in income is as a result of previous CAP funding for direct aid measures, principally the Basic Payment Scheme, switching to being funded by the UK government following the UK's departure from the EU. Of the remaining income, Defra does not rely on any one major customer.

Note 1: Includes CAP Disallowance.

Note 2: Includes ALB's CCW, Cefas, EA, FC, Flood Re, JNCC, MMO, NE, NFC, OEP, RBG Kew and SFIA.

Note 3: Includes ALB's AHDB, APHA, RPA and VMD.

The internal reporting to the Board and the Executive Committee has changed and therefore the format of the disclosure has changed to the new structure as detailed above.

For more detailed disclosures regarding staff costs, see the Staff Report in Chapter 5.

The Core department figures for NAO auditors’ remuneration include cash fees for EA and NE.

In addition to the NAO auditors’ remuneration stated above the OEP fee has subsequently increased by £4,000, this increase in cost will be reflected in the 2022 to 2023 ARA.

In addition to the NAO auditors’ remuneration stated above the VMD fee has subsequently increased by £9,000, this increase in cost will be reflected in the 2022 to 2023 ARA.

Material income streams disclosed in accordance with IFRS 15 Contracts with Customers are determined as detailed in the table below.

The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period is:

Plant and machinery includes vessels owned by Cefas with a net book value of £5.8 million (2020 to 2021, £6.2 million). Infrastructure assets include flood defences owned by EA, including the Thames Barrier with a net book value of £1,387 million (2020 to 2021, £1,183 million). Additions include a non-cash element represented by payables and transfers.

A heritage asset is a tangible asset with historical, artistic, scientific, chronological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture.

Heritage assets are held by both NE and RBG Kew. NE's heritage assets comprise NNR, whilst RBG Kew's heritage assets comprise land and buildings and collections. Further details regarding the stewardship functions relating to these heritage assets can be found in their respective ARAs.

Cash additions (adjusted for capital accruals) for property, plant and equipment, heritage assets and agricultural assets amount to £221 million (2020 to 2021, £221 million) as per the Consolidated Statement of Cash Flows (SoCF).

The effective date of revaluation was 31 March 2022.

The net book value for internally developed software includes the following.

Cash additions (adjusted for capital accruals) shown in the SoCF amount to £108 million (2020 to 2021, £52 million).

The impairment table includes significant impairments as follows; EA £42.5 million (2020 to 2021 £45.3 million), APHA £8.5 million and NE £4.9 million, with EA and NE reported in the Marine, Natural Environment and Rural operating segment and APHA in Food, Farming, Animal and Plant Health operating segment. In 2020 to 2021, the Core department reported £12.9 million which was recorded in the Core department operating segment, and the EA £45.3 million was reported within the EA Operating Segment.

EA's annual review exercise was carried out which looked at assets with signs of reduced service potential below the carrying value due to damage, obsolescence or aborted capital projects which included assets under construction impairment of £2.4m for property, plant and equipment and £20.7m for intangible assets. Other Asset categories affected by impairment were operational assets £16.8 million, freehold land £1 million and freehold buildings £1.6 million.

APHA's net impairment of £8.5 million comprises £6.6 million of impairment reversals and £15.1 million of downward revaluations, which includes two buildings planned for demolition as part the Weybridge development impaired by £6.6 million, one building impaired by £6.7 million as it no longer has laboratory capabilities and also a writedown of £1.8 million of capital costs transferred from Defra Estates exceeding the valuation of a building.

NE includes net revaluation and impairment costs of £5.4 million resulting from the quinquennial review of NE's Land and Buildings assets at the year-end undertaken by external valuers

The total future minimum lease payments under operating leases are given in the table below.

The total future minimum lease payments under finance leases are given in the table below.

The total future minimum lease payments under service concession arrangements are given in the table below.

The department has entered into non-cancellable contracts (which are not leases or other service concession arrangements). The payments to which the department is committed are as follows:

The Core department has agreements with local authorities on 24 Waste Infrastructure Grant Projects that are receiving grant payments. Defra will continue to support these projects while they meet the terms of their agreement with Defra. Future commitments are £1,339 million (2020 to 2021 £1,428 million). All projects are now in receipt of grant and no further agreements are planned.

The Canal & River Trust grant is committed until 31 March 2027. A review will conclude in 2022 whether a new grant will be agreed from April 2027. The value of the remaining five year commitment from 2022 to 2023 to 2026 to 2027 is £263 million (2021 to 2022 to 2026 to 2027 was £316 million).

£157 million (2020 to 2021 £207 million) relating to service contracts for information technology.

Within the other financial commitments disclosure, £63 million (2020 to 2021, £90 million) relates to facilities management costs associated with the occupation of buildings that are either owned or leased by Defra or specialised properties held on executive agencies’ SoFPs.

IFRS requires disclosures in the financial statements that enable users to evaluate the significance of financial instruments to the financial position and performance, and the nature and extent of risks arising from financial instruments to which Defra is exposed during the year and at the financial year end, and how those risks are being managed.

As the cash requirements of the department are met through the Estimates process, financial instruments play a more limited role in creating and managing risk than would apply to a non-public sector body of a similar size. The majority of financial instruments relate to contracts for non-financial items in line with the department's expected purchase and usage requirements and the department is therefore exposed to little credit, liquidity or market risk, except where detailed below.

Other receivables and other payables are disclosed in Note 11 and Note 12 respectively. These financial instruments are simple in nature, and carried at amortised cost, which is deemed to be a reasonable approximation of their fair value. Notes 11 and 12 also include non-financial instrument balances relating to taxation, accruals and prepayments. Flood Re's short term investments with a duration of greater than three months are classified as other financial assets in the receivables note, therefore these short term deposits are shown separately from cash and cash equivalents within Note 11.

The department holds a 25 per cent shareholding in FSL, with the remaining 75 per cent held by Capita. The investment in FSL is accounted for as an Investment in Associate, which is outside the scope of IFRS 9 and is therefore excluded from the above table.

Those financial instruments measured at fair value are classed under IFRS 13 as either level one or level two inputs, with no unobservable inputs being relevant. Financial assets measured at amortised cost (which is generally invoiced value) are usually short term in nature. Accordingly, their fair value is not materially different from their carrying value.

The RPA has financial guarantee contracts in the form of non-cash guarantees totalling £0.452 billion as at 31 March 2022. (£1.766 billion, 31 March 2021). Please see RPA accounts for more details.

The contractual liability relating to the return on asset component payable to water companies under Reservoir Operating Agreements by EA is accounted for as a financial liability. The cash payments relating to these financial liabilities are recoverable under legislation through water resources abstraction licences.

Water companies who receive payments for operating reservoirs also pay the majority of the charges for water abstraction. Increases in the liability as a result of accounting treatment (such as, the element of the liability that will not result in a cash payment) have been approved by HM Treasury as being non-recoverable from charge payers. The payments for a return on investment in the reservoir assets are indexed upwardly annually based on the RPI and are payable in perpetuity in line with the agreements negotiated on privatisation. Further details can be found in EA's accounts.

With respect to trade and other receivables the business model of Defra is chiefly to collect payments of principal from customers. This also includes receivables from the EU in respect of money owed for schemes processed. Also, the hold to collect and SPPI test, which requires that the contractual cash flows relating to financial assets are solely payments of principal and interest on the principal amounts outstanding (such as cash flows that are consistent with a basic lending arrangement), is assessed as being passed. Therefore, Defra records the receivables at amortised cost which, for receivables with no financing component, is the invoiced amount.

For the Eco Business Fund and the Land Degradation Neutrality (LDN) fund, the shares are neither classified as hold to collect nor hold to collect and sell, so by default would be classified at FVTPL. However, under the provisions of IFRS 9, Defra has made an irrevocable election at initial recognition to present subsequent changes in fair value in other comprehensive income. This is appropriate, given that the department's incentive is to bolster the fund and support its initiatives, with any dividends being reinvested, and not to invest for profit.

Derivative financial assets fall outside of this assessment.

Receivables that are not due from other public bodies are grouped together for the purpose of assessing the lifetime Expected Credit Loss. In general, Defra's customers tend to be other public sector entities, to which no real prospect of default applies.

For trade receivables with no significant financing components, IFRS 9 allows an entity to use a simplified method for calculating expected losses using historical default rates over the expected life of the trade receivables and adjusting for forward-looking estimates. Defra's receivables tend to be short term in nature (for example, trade receivables), and any longer term elements are not subject to financing components. Therefore the majority of receivables are shown net of expected credit loss using the simplified method. Forward-looking estimates are inherently difficult given the current pace of political and economic developments.

Defra has created a provision matrix for receivables, which gives the latest estimated lifetime Expected Credit Loss for each stream. This is based on the department's experience of credit losses over the past few financial years, updated for any known future credit issues. The greatest impact across the Defra group is at EA, who have based their estimate on their historic experience of credit losses by charge scheme over the past four financial years, updated for any known future credit issues.

While the pandemic was expected to increase credit losses, cash collection rates actually improved and so the adjustment made to increase the expected credit loss for pandemic impacts has been removed. There has not been a material change in the expected credit losses for any charge scheme.

Details of financial instruments held by the department are included in Notes 9, 10, 11 and 12 (non-financial instrument balances relating to taxation and prepayments are also included in these notes). Further details are given below only where the risks are significant. For further information on financial instruments see RPA's, EA's and Flood Re's ARAs.

A significant proportion of the department's customers and counterparties are other public sector organisations. Minimal credit risk arises from these organisations.

For those customers and counterparties that are not public sector organisations the department has policies and procedures in place to ensure credit risk is kept to a minimum. The department is not exposed to material credit risk.

Excluding RPA, there is no significant exposure to liquidity risk, as the department's net resource outturn is financed through resources voted annually by Parliament.

RPA does not undertake borrowing of funds other than from HM Treasury. Such borrowing, arising from short term in-year fluctuations in expenditure, if required, would be affected by Defra drawing monies from HM Treasury's Contingencies Fund on behalf of RPA. This facility is the subject of a formal standing arrangement agreed by HM Treasury. Drawings are normally repayable within the financial year.

Excluding RPA, there is no significant foreign currency risk.

RPA's activities expose it primarily to the financial risks of changes in foreign currency exchange rates. RPA enters into forward foreign exchange contracts to manage its exposure to foreign currency risk relating to euro denominated receipts from the Commission for the BPS and Rural Development Programme scheme expenditure.

From January 2003, in accordance with Commission Regulation (EC) No.1997/2002 (as amended), non-eurozone member states, such as the UK, are reimbursed by the Commission in euros. However, the majority of distributions by RPA are paid in sterling, which creates an exposure to gains or losses from fluctuations in foreign exchange rates between the euro and sterling. RPA has managed its exposure to this risk through the purchase of forward foreign currency contracts.

The carrying amounts of RPA's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

The following table details RPA's, and therefore the department's, sensitivity to a 10 per cent increase and decrease in sterling against the euro.

EA is exposed to the risk of changes in the rate of inflation as a result of the reservoir operating agreements. The Retail Price Index has fluctuated significantly over the life of these financial liabilities. This is a macroeconomic risk that EA cannot manage in any way. However, EA is able to recover the full cash cost of reservoir operating agreements through its charges on water abstraction.

As at 31 March 2022, the department has £47.6 million in investments (2020 to 2021 £46.1 million), £30.2 million of this is invested in the Eco-Business Fund, £8.3 million in the LDN Fund and the majority of the remainder is a shareholding in Fera Science Limited.

The risks described below are attributable to Flood Re, which is consolidated into the departmental accounting boundary.

Flood Re defines counterparty credit risk as the risk of not recovering money owed to Flood Re by third parties. Flood Re's maximum exposure to credit risk is the gross carrying value of its levy receivables, reinsurance premium receivables, reinsurance recoveries, trade and other receivables, debt instruments at fair value through other comprehensive income and cash and short-term deposits.

Flood Re uses issuer credit ratings provided by external credit rating agencies to monitor the ongoing creditworthiness of its counterparties together with other publicly available data and market information.

Ceded reinsurance arrangements do not relieve Flood Re from its obligations to policy holders. Reinsurance is only placed with counterparties that have a minimum credit rating of A (S&P equivalent) or provide alternative collateralisation as a credit risk mitigant. Flood Re's Credit Risk Appetite Statements set out the maximum single counterparty exposure aligned to their credit ratings.

Flood Re is exposed to premium risk, which is defined as the risk of loss or of adverse change in the value of insurance liabilities due to inadequate pricing assumptions. The premium Flood Re charges is not reflective of the underlying risk that Flood Re assumes. Flood Re's principal objective is to enable the continued availability of affordable flood cover for households at risk of flooding. Accordingly, Flood Re's premium risk strategy is to charge insurers a subsidised fixed rate that is set according to the council tax band associated with the insured property.

The Company expects that assumed premium will not be sufficient to cover the estimated mean cost of claims. The cost of the subsidy provided through the premium charged is met by a levy raised from all insurers writing home insurance in the UK. The levy for the first six years of the scheme is set at £180 million a year, with this shifting to £135 million for the next three years.

Reserve risk is defined as the risk of loss or of adverse change in the value of insurance liabilities due to the actual future costs of claims differing from expectations based on reserving assumptions. This is influenced by the frequency of claims, the severity of claims, the timing of actual claims payments and the development of the claims over a period of time.

Flood Re monitors flood risk exposure on a per risk basis and on an aggregate sum insured basis and performs exposure modelling on at least a quarterly basis or on the occurrence of an event.

Flood Re uses scenario analysis to illustrate the potential financial impact of assumptions varying from expectations where there is limited historical data.

Flood Re's most significant insurance risk exposure is to losses arising from low frequency, high severity catastrophe flood events. A catastrophe flood is defined by Flood Re as a UK flood that:

Catastrophe loss events may result in a high level of volatility in the financial results of Flood Re.

During the year ended 31 March 2022, Flood Re classified and reserved for flash floods in London in July 2021 as a catastrophe loss event.

During the year ended 31 March 2021, Flood Re classified and reserved for December (Storm Bella) and January (Storm Christoph) flooding as catastrophe loss events.

Flood Re uses risk management software to assess catastrophe exposure. However, there is always a risk that the assumptions used in these models are unreliable or that claims will be greater than the model would suggest.

Flood Re purchases reinsurance as part of its overall risk mitigation programme. Reinsurance ceded is Flood Re's primary mechanism for managing and mitigating insurance risk.

The Flood Re Scheme document establishes the requirement for Flood Re to set an annual aggregate loss amount (liability limit). The scheme liability limit for the year ended 31 March 2022 was £2,286 million (2021: £2,273 million). Each financial year the Liability Limit is adjusted for the increase or decrease in the Consumer Price Index (CPI) in the prior calendar year. Subject to these adjustments, the Liability Limit is set for a period of three years. If claims were to exceed the Liability Limit, relevant insurers would continue to be liable to policyholders in accordance with the terms of the insurance policy sold.

Flood Re requires that its outwards reinsurance protections match the liability limit and has purchased an extensive reinsurance programme to meet this need. In addition, Flood Re protects itself from an annual accounting loss of £100 million.

Flood Re defines liquidity risk as the risk of not being able to meet current and future financial obligations as and when they fall due, or only being able to do so at excessive cost.

Flood Re must maintain sufficient liquidity at all times to support its cedents by settling claims quickly. Flood Re generates cash inflows primarily from Levy I, premium and investment income and is exposed to significant cash outflows arising from reinsurance claims costs and operating expenses.

Flood Re monitors its liquidity and future cash flow requirements on a regular basis and maintains a high quality, well balanced and liquid investment portfolio. There is uncertainty around the timing and severity of claims costs. The maturity profile of Flood Re's invested assets is aligned to the short-term nature of the business underwritten, whereby insurance contract liabilities are generally incurred and settled within one year.

For the year ending 31 March 2023, Flood Re anticipates generating positive cash flows, unless there is a series of large flood events.

Flood Re has a conservative market risk strategy which prioritises capital preservation over investment return. The investment mandate restricts the type of holdings that may be invested in. Flood Re only invests in UK government backed securities (gilts, treasury notes and UK government backed liquidity funds).

Flood Re has complied at all times with the regulatory minimum capital requirements and the solvency capital requirements.

For more information on Insurance Risk, see Flood Re's Annual Report and Financial Statements.

For further information see the Net Cash Requirement section of Chapter 3.

The majority of the short term investments relate to Flood Re's short term deposits with a maturity of three months or less which are subject to insignificant risk of changes in value.

For Flood Re deposits with a maturity greater than 3 months at inception, additions are £1,592 million (2020 to 2021, £1,467 million) with repayments and redemptions of £1,462 million (2020 to 2021, £1,404 million) and interest capitalised is nil (2020 to 2021, £0.9 million).

Included within promissory notes payable is an amount of £31.8 million (2020 to 2021, £36.9 million) which is expected to be encashed within 1 year and £65.0 million (2020 to 2021, £87.5 million) which is expected to be encashed after 1 year based on non-legally binding encashment schedules.

The contract liabilities relate primarily to the advance consideration received from customers at EA. Revenue is recognised on completion of performance obligations and acceptance by the customer of the service provided (such as when the receivable is recognised).

Costs to obtain a contract or fulfil a contract should be capitalised under IFRS 15. During 2021 to 2022, this has not been relevant to Defra.

The timing of cash flows for the provisions requires management to make estimates and assumptions. All estimates for provisions are based upon knowledge of current facts and circumstances, and forecasts of future events and actions. Some of the assumptions made have limitations that will mean that the actual timings of cash flows could vary significantly from these estimates.

As can be seen from the sensitivity tables in Notes 14.5 and 14.6, a modest change in the discount rate for general provisions can have a significant impact on the stated value of liabilities. These rates are advised by HM Treasury (see below) and are therefore not within the control of the department.

HM Treasury provide both nominal and real discount rates, the real rate being the nominal rate inflated in line with the OBR CPI inflation forecast. Under HM Treasury guidance, there is a rebuttable presumption that departments will use the inflation rates obtained from OBR CPI forecasts when inflating provision cash flows. This presumption can only be rebutted in exceptional circumstances. The HM Treasury real rates are used for all discounted provisions in the ARA, as no logical basis has been identified for any alternatives.

The Commission can apply financial corrections if Defra (through RPA) does not comply with the Commission's regulations for payments funded through the CAP. Any amounts disallowed depend on the assessed severity of the breach of regulations and on subsequent negotiations with the Commission, in accordance with the Commission's clearance of accounts procedure. If disallowance is imposed by the Commission this materialises as cash refused (such as a deduction) in the UK's claim for reimbursement of claims under CAP. This results in Defra being liable for the amount of deduction.

Liabilities exist for all schemes where the results of external Commission audit have indicated that a financial correction is likely, and where there is an indication of the severity of the issues leading to that correction. This enables an estimate to be made. The final estimates reflect the best information available at the year end.

Liabilities which are expected to impact in future accounting periods are disclosed as provisions, covering all relevant schemes. As the process of Commission reviews progresses, the likelihood of disallowance penalties are confirmed by the Commission (and are reasonably certain). In practice, this is when the Commission has notified a penalty which, following the conciliation process between Defra and the Commission, the department will not contest further. It is at this stage that amounts are reflected in the financial statements as an accrual. Finally, the point at which the cash refused is physically transacted may come sometime after the accrual point and typically in a later accounting period. Therefore, it is important to recognise that liabilities for disallowance can cover a number of scheme years and do not just reflect any disallowance imposed in the financial year covered by any single year's accounts.

Limited notice is given of future Commission conformity audits and it is not therefore known which scheme areas will be audited during the coming year. Where there has not been an audit, then we declare a remote contingent liability in the Accountability Report. Once audits have taken place and until a reliable estimate can be made a contingent liability is disclosed. Once reliable estimates are available and a letter of the findings received from the Commission, a provision/accrual can be accounted for.

For further information on the Disallowance provision, please refer to Chapter 3 – Financial Analysis.

Flood Re most critical accounting estimate is the estimation of the ultimate liability arising from claims made under inwards reinsurance contracts.

Estimates have to be made both for the expected ultimate cost of claims reported at the reporting date and for the expected ultimate cost of claims incurred but not yet reported (IBNR), at the reporting date. It can take a significant period of time before the ultimate claims cost can be established with certainty.

The ultimate cost of outstanding claims is estimated using standard actuarial techniques, supplemented with bespoke methods where appropriate.

The main assumption underlying these techniques is that past claims development experience can be used to project future claims development and hence ultimate claims costs. These methods extrapolate the development of paid and incurred losses, average costs per claim and claim numbers based on the observed development of earlier years and expected loss ratios. Flood Re commenced underwriting in April 2016 and has limited historical claims data of its own. The actuarial techniques used utilise historical industry data.

Estimating the ultimate cost of losses resulting from catastrophic events is inherently difficult due to the uncertainty of catastrophe claims. As a result of this uncertainty, it is often harder to determine the future development of these claims with the same degree of reliability as with other types of claim.

Additional qualitative judgement is used to assess the extent to which past trends may not apply in future: for example to reflect one-off occurrences (including changes in external or market factors such as public attitudes to claiming, economic conditions, levels of claims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy features and claims handling procedures) in order to arrive at the estimated ultimate cost of claims from the range of outcomes, taking account of all the uncertainties involved.

Similar judgements, estimates and assumptions are employed in the assessment of the premium deficiency provision. Using reinsurance premium thresholds as described in the Flood Reinsurance (Scheme Funding and Administration) Regulations 2015 restricts the amount that Flood Re can charge insurers for reinsuring flood risk. These thresholds are capped at a rate dependent on the council tax banding of the property insured and may give rise to less than adequate market pricing for the risk insured. An estimate of the premium deficiency provision is made for any anticipated claims and claims handling costs that are expected to exceed the unearned premiums.

The carrying value of gross insurance claims liabilities, including the premium deficiency provision, as at 31 March 2022 is £103.8 million (2021 £134.3 million).

Abandoned metal mines are responsible for about half the metals discharged into English rivers. Pollutants include Zinc, Cadmium, Lead, Copper, Nickel, Iron and/or Arsenic. Approximately 3 per cent of rivers (1,500 km) are polluted by one or more of these metals which can seriously impact environmental health, harming fish and other river wildlife and decreasing biodiversity.

Under the Water Resources Act 1991 (as amended by the Environment Act 1995) mine owners or operators cannot be held liable for permitting water pollution from mines abandoned before 2000, and most mines were abandoned before the 20th Century. Government funding and action is required to address this historical legacy.

Pollution can occur when mines are closed, pumps are switched off and mine water levels rise (through rainwater or flooding) to the point where waters are discharged into surface water bodies, for example, rivers, lakes, estuaries or into groundwater (including aquifers). Government has responsibility to set regional or river basin management plans to improve water quality under the Water Environment (Water Framework Directive) (England and Wales) Regulations 2017 (as amended), which is the regulatory framework underpinning good chemical and ecological status.

Where beneficial river basin management plans may include objectives to conserve important habitats and species set under other regulatory frameworks for land, inland water, estuaries and the sea. The Environment Act 2021 gave the Defra Secretary of State the power to set environmental targets; a target has been proposed specifically to address river and estuarine pollution from abandoned metal mines.

The treatment of contaminated groundwater discharging from abandoned metal mines and limiting inputs of metals from diffuse sources (such as mining waste spoil heaps) therefore contributes to achieving good status and the proposed Environment Act target so Defra decided to implement treatment facilities at certain sites. Accordingly, Defra has a constructive obligation at these sites, working in partnership with the Environment Agency and the Coal Authority (an NDPB of Business, Energy and Industrial Strategy) managed by Terms of Reference for all three partners and a separate memorandum of understanding (MoU) between Defra and the Coal Authority.

The department funds the ongoing running costs of the operational water treatment schemes built at three abandoned metal mine sites. The Wheal Jane scheme has been running since 2000, with Force Crag coming into operation in 2014 and Saltburn Gill in 2015.

A new scheme is under construction at Nent Haggs that should become operational during financial year 2022 to 2023. These schemes remove metals from contaminated groundwater flowing out of the abandoned mines and therefore improve water quality in the rivers and estuaries affected.

The department has a provision that reflects its long term liability to remediate the water from the mines. There is uncertainty over the estimation of the value of the liability due to long term factors. The department uses an evidenced cost base, with forecasts of the running costs provided by the Coal Authority in estimating the provision. The time frames involved are less certain, but are based on scientific and geological research on how long the contamination will exist.

Defra commissioned Newcastle University to explore alternatives to expensive active chemical treatment schemes and to develop lower whole life cost systems. The compost bioreactor designed by Newcastle University for the Force Crag mine water has resulted in lower costs for running that scheme compared to an active chemical treatment system. The likelihood of further technological advances makes it difficult to predict future costs for remediation.

Separately, Defra has explored local third party funding from those who benefit from the schemes, to reduce the amount of Defra funding required. This attracted £2.6 million from the North East Local Enterprise Partnership Local Growth Fund from 2016 to 2017 to 2019 to 2020.

In assessing the provisions there are inherent uncertainties in respect of future costs and timing of cash flow, which impact on the provision. These include new technologies; environmental standards and regulations; the impacts of adverse weather as a result of climate change; price inflation of construction and operating costs; positioning of schemes and related land costs; the number of future schemes required and the length of time they will be required to operate. Reasonable assumptions and best information have been used to inform the future costs and scientific evidence and experience has underpinned one of the more sensitive elements of the assumption, namely that underlying water treatment obligations will likely extend for many hundreds of years.

A management judgement has been taken to restrict the number of years to 100 for mine water treatment and diffuse measures, reflecting the absence of a precise estimate of the timeline for the liabilities and that an infinite provision would not be relevant to the decisions being made by the users of the financial statements.

Updates to the discount rates for provisions as advised by HM Treasury can cause the liability to vary significantly. The undiscounted value of the liability at the year end is £264.1 million (2020 to 2021, £219.2 million). A sensitivity analysis to ascertain the responsiveness of the provision to changes to the underlying assumptions, such as costs, the period of liability and discount rate in value and percentage has been carried out. Details are outlined in the following table.

These factors impacting volatility will continue to be monitored. The HM Treasury discount rate remains beyond the department's control and the department has no reason to apply an alternative discount rate. A change in discount rates of the scale outlined above is likely to have the most volatile impact on the provision value. The underlying cost continues to be monitored annually, in consultation with the Coal Authority. The Coal Authority continue to drive efficiencies in managing the abandoned metal mine sites, whilst also analysing the useful lives of assets used in managing and maintaining the sites.

Since the FMD outbreak in 2001, the department has a constructive obligation for managing several burial sites across the UK as it has committed to actively manage these sites to prevent the discharge of contaminants through groundwater pollution. The provision for FMD sites represents the ongoing future liabilities relating to preventing and remediating any leachate pollution arising from burial sites. There are significant uncertainties as to the time period over which the need to monitor and manage leachate will continue at the sites. The provision has therefore been estimated based on 100 years from burial with 80 years remaining. Conceptual reports were completed in March 2020, for each site, which showed the level of contamination is decreasing. It is recommended that this is reviewed every 5 years.

The current value of the provision at 79 years remaining is £294.26 million. This is with an annual running cost of £2.092 million. If the length of the provision was to increase, the cost of the provision would increase by £6.179 million each year. Each year the provision is reduced, then the average decrease is £3.725 million. For example, if the length of the provision is assumed to be 100 years then the value of the provision would be £442.85 million and if the assumption was 50 years then £146.41 million.

Further, sensitivity analysis has flagged potential volatility in the carrying value of the provision if there are changes to the lifetime, annual cost and discount rates in value and percentage as outlined in the following table. These factors impacting volatility will continue to be monitored. The HM Treasury discount rate remains beyond the department's control and the department has no reason to apply an alternative discount rate. Updates to the discount rates for provisions are advised by HM Treasury can cause the liability to vary significantly. The undiscounted value of the liability at the year end is £165.2 million (2020 to 2021, £154.4 million). A sensitivity analysis to ascertain the responsiveness of the provision to changes to the underlying assumptions relating to costs, the period of liability and discount rate in value and percentage has been carried out. Details are outlined in the table below. The underlying cost continues to be monitored annually and any future increases will likely be offset by efficiencies across the sites.

IR35, introduced in April 2017, requires public sector bodies to make an assessment of off-payroll workers employment status for tax and makes them liable for ensuring the correct tax is applied. The department uses HM Revenue and Customs’ own Check of Employment Status for Tax tool (CEST) and accompanying guidance to make those assessments.

During 2019 to 2020, internal checks and additional HM Revenue and Customs’ guidance highlighted inaccuracies in the historic assessment of some contractor's employment status. The department re-assessed the status of all Defra contractors in light of these inaccuracies. The work done on reassessments decreased the proportion of contractors outside IR35 from 85 per cent to 22 per cent of all current contractors as at 31 March 2021. A reliable estimate was calculated for the amount Defra owed to settle the tax liability for inaccurate IR35 assessments.

In calculating this liability, some assumptions were made that carried an element of estimation uncertainty and the provision was valued at £35 million, after utilising £19 million in a payment to HMRC on 31 March 2021.

Defra completed all the work on contractor reassessments during 2021 to 2022 which resulted in 4 per cent of contractors remaining outside IR35. Following update meetings with HMRC, the final estimation of the liability as at 31 March 2022 was calculated with enough detail to utilise the provision. The closing provision balance of £4.7 million represents a reliable estimate of interest chargeable on the liability.

HM Revenue and Customs’ compliance audit is now complete and any outstanding liabilities have been settled.

The department contributes to the Principal Civil Service Pension Scheme (PCSPS) and the Civil Servant and Other Pension Scheme (CSOPS), known as Alpha, but does not manage the scheme. Details are reported in Chapter 5 - Civil Service Pension Schemes. Employer contributions to the funds are included in the Statement of Comprehensive Net Expenditure (SOCNE) but the share of assets and liabilities are not disclosed in the Statement of Financial Position (SOCF), as they cannot be separately identified.

In addition to these there are also a number of pension schemes which are managed by the department and NDPB's, these include a mixture of funded and by analogy schemes (unfunded). The table below details the funds managed by the Core department and those disclosed by the NDPB's:

Disclosures in relation to these schemes are made in accordance with the accounting treatment in IAS 19. The standard has no impact on the level of cash contributions paid by the department which are set reference to assumptions agreed at periodic actuarial valuations of each scheme. The standard requires the disclosure of the net liability which is an assessment of the value of any gap between the assets help by the scheme and the total present value of the funded and unfunded obligations, however, there is no requirement to address this net liability by payment of a lump sum or otherwise.

Below are details of the most material schemes to the department– the EA Pension Closed and Active Funds – which are part of the Local Government Pension Scheme (LGPS) in England and Wales and the Meat and Livestock Commission Scheme recognised by AHDB. Robust governance arrangements are in place, to facilitate informed decision making, supported by appropriate advice, policies and strategies. The overriding objective is to act in the best interests of the members and employers. Those persons responsible for governing the scheme have sufficient expertise to be able to evaluate and challenge the advice they receive, ensure their decisions are robust and well based, and manage any potential conflicts of interest.

The EA Closed Fund (the Fund) is vested in EA by Regulation 2(1) of the Local Government Pension Scheme Regulations 1996 and the Environment Act 1996 and is maintained for the purposes of Section 7 of the Superannuation Act 1972. The Secretary of State has the function conferred by Section 173 of the Water Act 1989 to make such payments into the Fund as may be considered appropriate in respect of the actual and contingent liabilities falling from time to time. This was reaffirmed through the memorandum of understanding between the accounting officers of Defra and EA, 17 May 2005. These are met out of the Fund to persons who were ex-employees of regional water authorities and other water industry bodies at the time of water privatisation in 1989 (the Closed Fund members).

The Fund's approach to funding the pension liabilities is focused on ensuring that sufficient funds are available to meet all liabilities as they fall due for payment. Since 1 April 2006, Grant-in-Aid has been paid that is sufficient to meet the pension obligations and running costs of the Fund.

All calculations have been made by a qualified independent actuary. As required under IAS 19, the projected unit credit method of valuation has been used. The last formal valuation of the Fund was carried out as at 31 March 2019.

At the last actuarial valuation date, the weighted average duration of the defined benefit obligation was 9.3 years.

The estimated sponsor's contributions for the year to 31 March 2023 will be approximately £50 million.

EA operates a defined benefit pension scheme for current employees and transferees from predecessor organisations. The scheme is part of the LGPS, a statutory scheme primarily governed by the LGPS Regulations 2013 and the LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014. These are subject to amendment over time. Further details on the Pension Fund including its annual report and financial statements, are on the Environment Agency Pension Fund website.

EA has awarded a contract to SSCL, who participate in the Fund on a risk sharing basis. To reflect the risk sharing agreement between EA and SSCL:

Natural Resources Wales (NRW) also have employees who participate in the fund and pay contributions accordingly.

The Fund's approach to funding the pension liabilities is focused on ensuring that sufficient funds are available to meet all liabilities as they fall due for payment, recovering any shortfall in assets, relative to the value of accrued liabilities, over broadly the future working lifetime of current employees. Employer contributions are kept as stable as possible, and the fund is managed to maximise the returns from investments, within reasonable risk parameters.

All calculations have been made by a qualified independent actuary. As required under IAS 19, the projected unit credit method of valuation has been used. The last formal valuation of the fund was carried out as at 31 March 2019.

The total pension charge for the Environment Agency was £206.3 million for the financial year 2021 to 2022 (£109.4 million in 2020 to 2021). The pension charge relating to the scheme was assessed in accordance with the advice of an independent qualified actuary using the projected unit method of valuation to calculate the service costs.

The Environment Agency's funding arrangements are to pay 14.5 per cent of the monthly gross salary of members to the Pension Fund each month, and then pay a lump sum to meet the equivalent employer contribution of 19 per cent, although the EA made the lump sum that was payable in 2021 to 2022 a year early, meaning that only 14.5 per cent of the monthly pensionable salary of members was paid in 2021 to 2022.

The latest triennial actuarial valuation of the Environment Agency pension fund (EAPF) was at 31 March 2019. The assets taken at market value (£3.7 billion) were sufficient to cover 106 per cent of the value of liabilities in respect of past service benefits which had accrued to members.

EA accepted the independent actuary's recommendation to increase employer contributions by 0.5 per cent from 18.5 per cent to 19 per cent from April 2020 through to March 2023. This was to maintain a prudent funding plan in light of uncertainties over the cost impacts of the McCloud ruling, leaving the EU and climate change. Markets were disrupted over recent years by COVID-19 and the events in Ukraine which resulted in difficult market conditions, however, the Fund's assets have now recovered very well and as at 31 March 2022 the net asset value is over £4.1 billion.

When the LGPS was reformed in 2014, transitional protections were applied to older members within ten years of normal retirement age. The benefits accrued from 1 April 2014 by these members are subject to an underpin, giving them the better of the benefits between the previous and reformed schemes.

In December 2018, the Court of Appeal upheld a ruling that similar transitional protections in the Judges’ and Firefighters’ Pension Schemes were unlawful on the grounds of age discrimination, known as the ‘McCloud Ruling’. The implications of the ruling are expected to apply to the LGPS, and other public service schemes. At the end of 2018 to 2019, an initial liability was recognised within the IAS19 report of £28.3 million. In 2019 to 2020 this has reduced by £13.4 million following Ministry for Housing, Communities and Local Government (MHCLG),(now called the Department for Levelling Up, Housing and Communities), consultation which set out qualifying member criteria. No further adjustment has been made in 2021 to 2022.

In June 2020, a legal discrimination case, namely the Goodwin case, which related to unequal death benefit provision for male dependents of female scheme members was deemed successful. Whilst this case occurred in the Teacher's Pension Scheme, it is relevant to other public sector schemes including the LGPS. Initial analysis suggests this will affect a very small population of the scheme membership and may result in an increase in the cost of pensions from previous years’ service estimated at around £3.4 million, which for completeness has been included in the 2019 to 2020 IAS19 valuation with no further adjustment made since as there are no new details on the potential remedy relating to this case.

At the last actuarial valuation date, the weighted average duration of the defined benefit obligation was 23 years.

The estimated employers’ contributions for the year to 31 March 2023 will be approximately £57.6 million.

Further details can be found in the Environment Agency Annual Report and Accounts.

The AHDB is the principal employer in a contributory pension scheme providing defined benefits to legacy MLC employees and ex- employees, based on final pensionable salary. This scheme is closed to new entrants and, with effect from 31 March 2022, was also closed to the future accrual of all benefits. The assets of the scheme are held separately from those of AHDB, being invested with insurance and investment companies. Contributions to the scheme are charged to AHDB's income and expenditure account and are determined by a qualified actuary on the basis of triennial valuations, using the projected unit method.

For the purposes of the IAS 19 accounts, the employer's contributions to the scheme in 2022 to 2023 are estimated to be nil. An accurate future contribution rate will be established during the 2022 to 2023 year once the triennial actuarial valuation is finalised. Actuarial valuations are usually prepared on a triennial basis. The latest valuation was completed as at 31 March 2018. At 31 March 2022, 60.3 per cent of the scheme's total assets were represented by the buy-in policies.

The effect of the ruling in the Lloyds Trustees vs Lloyds Bank PLC and Others [2018] case on Guaranteed Minimum Pensions (GMP) has been taken into account in the valuation of the liabilities of the scheme. On the 20 November 2020, the High Court ruled that pensions schemes should revisit transfer payments made since 17 May 1990 and the actuary has therefore included an additional liability within past service cost.

The defined contribution section of the MLC Pension Scheme was closed to new members in 2008. As noted above, on 31 March 2022 both sections of the MLC Pension Scheme ceased all future accrual of benefits. Consequently, the defined contribution section of the MLC Pension Scheme had no active members as at 31 March 2022.

Further details can be found in the AHDB Annual Report and Accounts.

The assets in the scheme were:

The major financial assumptions, based on market data, are used by the actuary when providing the assessment of the accrued liabilities as at the following dates.

There is also uncertainty around the life expectation of the UK population. The value of current and future pension benefits will depend on how long they are assumed to be in payment. The mortality assumptions used by the actuary were:

IAS 1 requires the disclosure of the sensitivity of the results to the methods and assumptions used. Any changes in assumptions would impact on the EA and MLC pension schemes. Please note that the below sensitivities are approximate and only show the likely effect of an assumption being adjusted whilst all other assumptions remain the same.

The sensitivities regarding the principal assumptions used to measure the EA Closed scheme liabilities are set out below:

The sensitivities regarding the principal assumptions used to measure the EA Active scheme liabilities are set out below:

The sensitivities regarding the principal assumptions used to measure the MLC Pension scheme liabilities are set out below:

The department has the following quantifiable contingent liabilities as at 31 March 2022. Unless otherwise stated liabilities relate to the Core department:

The department has the following contingent liabilities which are unquantifiable due to their variable nature. Unless otherwise stated liabilities relate to the Core department:

The department is the sponsor of the executive agencies, NDPBs and levy funded bodies, all of which are within the departmental accounting boundary, shown in Note 18. Public corporations are outside the accounting boundary and are shown in Note 19. All the bodies above are regarded as related parties with which the department has had various material transactions during the year. These bodies also trade with each other and have had material transactions during the year.

The department has a 25 per cent shareholding in FSL. The investment in FSL is accounted for as an Investment in Associate due to the department having significant influence, but not control or joint control. Significant influence is conveyed by the power to participate in the financial and operating policy decisions of FSL but not control them. The amount of the investment is shown in the Statement of Financial Position.

In addition, the department has had a number of transactions with other government departments and the devolved administrations.

Where the board members claim CAP scheme payments as detailed below, the standard EU terms and conditions for these schemes apply.

Victoria Prentis’ (Minister of State) father runs the family farm which received £37,019 in BPS and woodland scheme payments.

Rt. Hon. Lord Benyon (Parliamentary Under Secretary of State - Minister for Rural Affairs, Access to Nature and Biosecurity) received £93,910 in BPS and stewardship scheme payments for a trust corporation and farm.

Katrina William's (Director General) husband, Paul Green, is employed by Defra. He is employed on normal terms and conditions and receives no preferential treatment.

Elizabeth Buchanan (Non-Executive Director) has received £14,145 in BPS payments for the family farm.

Ben Goldsmith (Non-Executive Director) received £15,015 in BPS and woodland scheme payments.

Other than those disclosed above, none of the board members or other related parties has undertaken any material transactions with the department during the year.

Compensation (including remuneration) paid to key management personnel falls within the definition of related party transactions. Please see the Remuneration Report for further details.

Details for related party transactions for executive agencies, NDPBs and levy funded bodies can be found in the notes to their ARA.

The entities within the departmental boundary during 2021 to 2022 comprise supply financed agencies and those entities listed in the designation and amendment orders presented to Parliament.

Animal and Plant Health AgencyCentre for Environment, Fisheries and Aquaculture Science Rural Payments AgencyVeterinary Medicines Directorate

The executive agencies’ ARAs have been prepared under the direction of HM Treasury in accordance with Section 7(2) of the Government Resources and Accounts Act 2000 (GRAA) and are published separately.

Forestry Commission (FC) is a non-ministerial department but is included in Defra's Estimate and therefore is fully consolidated and included within the results for the Core department and executive agencies.

Executive NDPBs, levy funded bodies, National Forest Company and Flood Re's ARA are published separately.

The advisory and tribunal NDPBs do not produce a separate ARA as they are accounted for as part of the Core department accounts.

The public sector bodies which have not been consolidated in these accounts, but for which Defra's ministers had lead policy responsibility during the year, are as follows:

Defra's financial statements are laid before the House of Commons by HM Treasury. IAS 10, Events after the Reporting period, requires Defra to disclose the date on which the accounts are authorised for issue.

The Annual Report and Accounts were authorised by the Accounting Officer for issue on the date of the Comptroller and Auditor General's audit certificate.

In accordance with accounting standards, the fair value of employer assets as disclosed in 15.3 (EA Active and Closed schemes) reflects the economic conditions in existence as at 31 March 2022. Since the reporting date there has been significant market volatility due to a number of factors including the events in Ukraine and substantially increased inflation. UK gilt market conditions have put downward pressure on government bond valuations and increased the occurrence of recapitalisation events for pension schemes with leveraged Liability-Driven Investment (LDI) mandates. The EAPF has unlevered LDI so no collateral is required to maintain hedging positions, which are implemented through physical bonds. Despite difficulties within the market, the EAPF is confident that the fund is sufficiently liquid and has adequate cash to meet expected cashflow over the foreseeable future.

This does not affect the figures reported at 31 March 2022 but reflects changes since then. For further details please refer to the published EAPF Active Pension Fund Annual Report and Accounts for 2021 to 2022.

These tables provide an analysis of departmental expenditure, split between resource consumption and capital investment, covering the period from 2017 to 2018 to 2024 to 2025.

These tables follow the layout of the Part II Table of the 2021 to 2022 Supplementary Estimate and have been produced from HM Treasury's Online System for Central Accounting and Reporting (OSCAR) database and are on the same basis as the Statement of Parliamentary Supply. Details of the Parliamentary Main Estimate and Parliamentary Supplementary Estimate are published separately.

Table 1 sets out a summary of the net resource and capital expenditure for the department. It shows DEL and AME elements separately for control purposes. Future years’ figures reflect the budgeted figures agreed with HM Treasury for the department. Spending has increased across the period due to the UK exiting the EU. This is due to initial transition work and embedding new regulatory processes, supporting the UK's food, farming, and fishing industries as the UK exited the EU.

Capital spending also increases across the period following the government's manifesto commitment to guarantee the current annual budget to farmers in every year of the new Parliament, plus additional funding for Science Capability in Animal Health (SCAH) and the Critical Works programme at Weybridge; flood and coastal defence programmes; biodiversity; and Nature for Climate Fund (NCF).

Table 2 shows the administration costs of running the department in more detail. The administration budget includes staff costs, resource expenditure on accommodation, utilities and services etc., where they are not directly associated with front-line service delivery. The commentary on administration costs is included in the detailed analysis below, but in general terms, the underlying administration budget reflects savings required by Spending Reviews, which have been met to a large extent by the transformation of Defra's corporate services.

These savings have been offset by increased expenditure on EU exit, COVID-19 and increases in the SR21 budget, which gave the department a three- year spending settlement and provides more certainty to plan for the delivery of our ambitious outcomes, including a commitment to make savings and efficiencies across the Defra group.

The changing profile in the early years is primarily due to the profile of CAP Disallowance payments. In line with HM Treasury guidance, CAP Disallowance has been transferred between years to match the expected profile of payments. The increase from 2019 to 2020 reflects increased spending on EU exit as explained above. The large additional increase from 2020 to 2021 onwards relates to direct payments for farmers following the UK's departure from the EU.

Additional budget was announced on 9 January 2020 confirming that the 2020 Direct Payment scheme would be funded by the UK government, these payments were previously funded from the European Commission (the Commission). The slight decrease from 2021 to 2022 reflects internal transfers of budget from direct aid to environmental measures.

The increases from 2022 to 2023 onwards reflect funding provided in SR21 for the wider Northern Ireland programme, including the Digital Assistance Scheme, additional funding for Official Development Assistance and new funding for biodiversity, as set out in the Environment Bill.

The increase in 2023 to 2024 and 2024 to 2025 relates to budgets held in the core department for a range of flood related activities, the majority of which will be transferred to the EA in the respective years.

Overall, we are maintaining expenditure on Animal and Plant Health and investing in vital scientific facilities. The increase in 2018 to 2019 outturn relates to an impairment to one of the buildings at the APHA Weybridge site. The increases from 2019 to 2020 onwards reflect additional budget for preparation to exit the EU and continuing investment following the UK's departure from the EU. The increase in 2022 to 2023 relates to the BBTP.

This is a relatively new programme, which will incur a number of one-off costs relating to the completion of two Border Control Posts (BCPs) and IT development, as well as associated operational costs and lease payments.

The increases from 2018 to 2019 onwards primarily reflect additional budget for preparation to exit and transition from the EU and continuing investment following the UK's departure from the EU. 2020 to 2021 sees further EU transition increases and the impact of the department's response to COVID-19 for the marine and fisheries sectors. The decrease in 2021 to 2022 relates to the reprofiling of the UK Seafood Fund, where the government has confirmed the £100 million investment in the UK Seafood Fund to improve the long-term sustainability of the UK fisheries sector.

The overall operating costs of the Defra group have reduced over the Spending Review periods, this has been offset by increases in spending due to EU exit and increases in cross- cutting functions including preparations for international trade agreements and new border arrangements. The corporate services budget for future years is held centrally under Departmental operating costs to allow for better planning and control, whereas outturn is reported against the Estimate Line for the relevant business area or ALB.

The spending pattern largely reflects the agreed spending profile for the EA across the SR periods. The higher outturn in 2021 to 2022 reflects higher depreciation and impairment charges due to some fixed asset adjustments at the EA.

The spending pattern largely reflects the agreed spending profile for the EA across the SR periods. The larger increase in 2020 to 2021 is mainly due to the extra funding announced in the 2020 Budget to support flood defence asset repairs.

The increase from 2019 to 2020 onwards reflects the Marine Management Organisation's (MMO) expenditure on preparations to exit and transition from the EU and continuing investment following the UK's departure from the EU.

Resource AME balances vary greatly over the years due to the volatility of provisions recorded as AME. A debit (a positive) is recorded as provisions are created, and a credit (a negative) recorded when a provision is utilised.

As described in the DEL section earlier, the changing profile in this area is primarily due to the CAP Disallowance provision and the Commission's audit findings. Disallowance has been transferred between years so that the AME credit entries recorded here match the expected profile of the payments recorded under resource DEL. In addition to this, any movements to the CAP Disallowance provision are recorded in this section. Debit balances are seen where increases to the provision are higher than payments made in that particular year. As with the timing of Disallowance payments, changes in the value of the provision are also reliant on Commission decisions. The increase in 2019 to 2020 reflects an increase to the CAP Disallowance provision, primarily relating to BPS scheme years 2017 to 2019.

This was required following the receipt of the Commission's audit findings, as reported in the Article 34 letter received in November 2019. The large credit in 2020 to 2021 relates to the write back of the CAP Disallowance provision for BPS scheme years 2017 to 2019 following bilateral meetings and challenge on the original calculation method used.

The fluctuations in trends mainly reflect movements in the provision for the Metal Mines, due to changes in the discount rate used for valuing provisions, as per HM Treasury guidance.

The fluctuations in trends mainly reflect movements in the provision for the FMD burial sites. These fluctuations mainly reflect changes in the discount rate used for valuing provisions, as per HM Treasury guidance. The provision represents the ongoing future liabilities relating to preventing and remediating any leachate pollution arising from burial sites.

The fluctuations in trends mainly reflect the movements in the EA pension fund.

The changing profile is mainly due to Flood Re, a limited company set up to administer the Flood Re scheme which aims to protect property owners who were previously unable to procure home insurance against the risk of flooding. The 2017–18 to 2021–22 outturn reflects the surplus position for Flood Re's final accounts in those years. The surplus for 2019–20 is lower than in previous years due to the widespread flooding between November 2019 and February 2020. The 2021 to 2022 outturn includes an accounting entry for the EA reservoir operating agreement whereby the net movement in the liability scores to AME. The budget for 2022 to 2023 onwards includes cover in case a significant flood event occurs and reflects the maximum impact Flood Re can have on public sector net borrowing. The fluctuations in trends on this line also include movements in the EA pension fund.

The increase from 2021 to 2022 onwards is mainly driven by an increase to the SR20 and SR21 budgets for capital scheme costs for future farming and countryside schemes following the UK's departure from the EU.

The increase from 2022 to 2023 onwards relates to additional funding in SR21 for NCF and biodiversity. The government has expanded the NCF, ensuring total spending of more than £750 million by 2024 to 2025 in support of ambitious tree planting and peat restoration goals. The additional increase in 2023 to 2024 relates to the Collection and Packaging Reforms programme which includes extended producer responsibility, deposit recovery scheme and consistency in collections.

The increase in 2021 to 2022 reflects APHA's investment in stabilising, enhancing and transforming a number of IT systems relating to endemic diseases, science, trade and biosecurity. This investment was agreed as part of SR20. The increases from 2022 to 2023 are mainly driven by an increase in the capital budget in SR21 for the BBTP and some research and development (R&D) budgets including Weybridge which were previously held in the centre under the Departmental Operating Costs Estimate line.

Increases in 2022 to 2023 and 2023 to 2024 relate to increased capital funding for marine programmes whereby the government has confirmed the £100 million investment in the UK Seafood Fund to improve the long-term sustainability of the UK fisheries sector over the SR period.

The increases from 2020 to 2021 onwards are primarily due to increases in the capital budget for R&D funding to support SCAH and the Critical Works programme at Weybridge and Defra, and funding to support EU exit transition. The budgets from 2022 to 2023 onwards also include additional budget for the UK's potential contribution to the EU's Copernicus Programme of Earth Observation Satellites.

The decrease in 2019 to 2020 relates to a capital disposal, involving the sale of surplus land by the EA. The increase in 2021 to 2022 relates to extra budget for National Nature Reserves. The increase from 2022 to 2023 largely reflects the agreed spending profile for the EA across the SR periods.

There has been increased investment across the years in flood and coastal erosion risk management which includes part of the six-year flood defence programme.

2022 to 2023 includes the budget for dilapidation provisions capitalised as part of the right-of-use asset under IFRS 16. This accounting standard states how leases should be presented, recognised, measured and disclosed in the annual accounts. Future year's budgets are still to be agreed with HM Treasury.

The increase in budget from 2022 to 2023 is required for potential reclassification of R&D expenditure from resource to capital in the Agriculture and Horticulture Development Board.

The figures for 2019 to 2020 onwards relate to capital additions in Flood Re. Flood Re adopted IFRS 16 leases in 2019 to 2020.

Note 1: Includes impairments.

Note 2: Total departmental spending is the sum of the resource budget and the capital budget less depreciation. Similarly, total DEL is the sum of the resource budget DEL and capital budget DEL less depreciation in DEL, and total AME is the sum of resource budget AME and capital budget AME less depreciation in AME.

The 2022 to 2023, 2023 to 2024 and 2024 to 2025 plans figures are based on provisional allocations and are subject to change, following further business planning decisions.

The Countryside and Rural Services Estimate line has been merged within existing Estimate lines and has subsequently changed the allocation of some prior year numbers.

The Countryside and Rural Services Estimate line has been merged within existing Estimate lines and has subsequently changed the allocation of some prior year numbers.

The underlying administration budget reflects the savings required by Spending Reviews which have been met to a large extent by the transformation of Defra's corporate services. These savings have been offset by increased expenditure on EU exit, COVID-19 and increases in the SR21 budget, which gave the department a three-year spending settlement and provides more certainty to plan for the delivery of our ambitious outcomes, including a commitment to make savings and efficiencies across the Defra group.

Within the detail of the table, Departmental Operating Costs increases over the years. This largely reflects the administration element of the consolidation of Defra Group Corporate Service functions. The remaining increases from 2022 to 2023 onwards reflect additional budget in the SR21 for digital funding, BBTP and property rationalisation and places for growth.

This information is not subject to audit.

This table provides an analysis of total operating income, total operating expenditure and net expenditure for the year, also staff numbers and costs.

Total operating income, total operating expenditure and net expenditure are defined against the accounts set out in the illustrative statements, specifically NDPB Green and Agency Pink.

The figures in the table may not agree directly to the published ALB accounts, due to FReM alignment, intergroup eliminations, timing differences and other consolidation adjustments.

The environmental data and associated financial costs presented in the following pages are consistent with the requirements of HM Treasury's Public Sector Annual Reports: Sustainability Reporting Guidance 2021 to 2022.

The information contained within this annex has not been subject to audit and does not form part of the auditors’ opinion on the accounts.

This annex sets out Defra's performance against the sustainability objectives of its estate and operations.

This report focuses on the most significant estate and travel impacts identified through the departmental group's Environmental Management Systems measured against the Greening Government Commitments (GGC) targets. These targets are for reductions in GHG emissions, waste arisings, water use and for increasing procurement of more sustainable goods and services.

Other aspects of Defra group's operations contribute to its environmental impact including the embedded carbon and water of purchased items, supplier transport, waste handling and water supply. These impacts are not captured by this report but some of these are mitigated through sustainability criteria stipulated in procurement and services contracts.

The targets, which are measured from a 2017 to 2018 baseline, include:

The targets to be met by the end of March 2025.

Performance against these targets is defined using the following terms:

The data in Table 1 presents the GHG, energy consumption, water use, and waste arisings figure as reported as part of the GGC and reports performance for 1 April 2021 to 31 March 2022. Cost data is not reported as part of the GGC, therefore all financial data presented in this report is sourced from accounting records for this period.

Energy and water data is primarily taken from supplier invoices. In most cases, the data in these invoices is informed by manual meter readings or Smart Meter readings.

Waste data is derived from figures provided by the Defra group's waste contractors. Wherever possible actual weights are used but where this is not possible waste data is calculated using a metric based on the number of bins emptied. Audits have been undertaken to validate and improve the accuracy of this data for common waste streams. This estimation methodology will result in a small margin of error. It is not currently cost effective to weigh all waste streams.

Departmental Group Performance

The data contained in this annex is reported as absolute values. It has not been normalised against metrics such as FTE staff, financial turnover or metre squared floor space. The diverse business delivery across the Estate is influenced by numerous factors such as weather, scientific undertakings and tourism numbers. This makes it difficult to report trends and make fair comparisons to other organisations.

This section of the report provides an overview of Defra group performance against the GGC targets. For the purposes of GGC reporting the departmental group comprises the following bodies:

Non-ministerial departments:

Executive agencies:

Executive non-departmental public bodies:

Others:

Progress against the GGC targets is reported to the Director of Group Property on a quarterly basis.

Quality assurance is managed through the Sustainability and Energy team who are responsible for producing the Defra group sustainability reports. These have been subject to internal audit in the past and found to be compliant with GGC and HM Treasury guidelines.

The Defra group aims to keep sustainability at the heart of its business delivery and operations and the Defra group strategy puts environmental improvement as its first objective. It strives to operate in the most sustainable and environmentally responsible manner: improving the way we use our workspaces; reducing energy and water use; reducing the amount of waste generated; making strategic energy and waste savings from IT services; and assessing the products and services that are purchased to support all operational activities. We recently completed a Departmental-wide analysis of our complete carbon footprint for 2019 to 2020 which will be the basis of our future net zero performance.

Business activities in Defra group's buildings are the most significant contributor to overall environmental impact. The Defra group portfolio comprises a diverse mix of properties which includes office buildings, storage facilities, pumping stations, forestry facilities, botanic gardens, farms and complex laboratory campus facilities.

The wide range of activities undertaken presents considerable challenge in delivering savings in energy and water used and waste generated. The following section details performance and summarises some future plans for meeting the GGC targets.

In October 2021, the government launched a new round of GGC targets that replace the previous targets that had since expired. The new targets will help the government achieve its net zero goal and the aims of Defra's 25-year environment plan.

Full detail on the new GGC targets can be found at Greening Government Commitments 2021 to 2025.

The new targets have a new baseline year (2017 to 2018) and we began collecting data for the new targets in 2021 to 2022. We have also changed the scope of our GGC reporting to include more organisations across the wider department.

Performance and data used in this report relates to the new target requirements.

Any data for years in-between 2017 to 2018 and 2021 to 2022 is taken from prior GGC reporting and therefore does not cover the same scope of organisations. It is included merely for general comparative purposes.

Our sustainability performance has been impacted by the COVID-19 pandemic. This has paused most of our plans to improve the sustainability of our estate over the last year.

We have reduced our total carbon emissions by 32 per cent from our baseline. COVID-19 has had a significant impact in the way we work. Many of our offices were empty or underutilised throughout much of 2021 to 2022. To ensure COVID security increased air handling commitments mitigated savings.

Direct carbon emissions from our buildings have increased by one per cent.

Water use, which can fluctuate significantly from one year to the next due to the need to maintain plant life and large areas of land, has performed well this year.

FE, who through their operations, are disposing of large volumes of contaminated wood to landfill which require special handling and cannot be easily recycled. FE's assessment of this waste stream concludes that these amounts of waste wood are likely to continue to be generated but are reducing over time. It is difficult to find alternatives to landfill for this type of waste due to their not being many facilities with the required licences to process the waste. Due to this waste increase from contaminated wood, this masks the successes elsewhere in Defra group.

As part of RBG Kew's new sustainability strategy, in June 2021 RBG Kew opened the first building at Kew Gardens to achieve BREEAM (Building Research Establishment's Environmental Assessment Method) Outstanding, the highest level of environmental, social, and financial sustainability credentials.

The Arboretum Headquarters is a ‘net-zero ready’ building, with no reliance on fossil fuel heating systems. The building has elevated levels of insulation and heating is provided by an air source heat pump. The available roof-space is fully utilised with the installation of 39 photovoltaic panels, which will generate enough energy over the course of a year to power all building services.

Arboretum Headquarters is built using cross-laminated timber, larch cladding, and timber studwork – safely sequestering over 170 tonnes of CO2e within the building itself. As well as locking away biogenic carbon, the use of timber in construction avoids emissions from alternative material use, such as steel. The whole life carbon analysis identified that the carbon sequestered within this building comes close to balancing the embodied carbon emissions from the construction.

Bat and bird boxes and bee bricks on the exterior walls further improve the Arboretum Headquarters’ relationship with the environment.

A certified ISO 14001 Environmental Management System (EMS) covering over 100 sites operates across the Defra group Estates. This covers our larger sites and those which carry the most significant environmental risk across the portfolio, and smaller sites amounting to 95 per cent of our Estate. Achieving and retaining the standard recognises continuing commitment to reducing environmental impact, implementing sound environmental practice, and ensuring environmental policy is considered when making decisions and delivering projects across the estate.

There are several grounds maintenance and land management regimes at Defra properties that aim to enhance biodiversity including: reducing the frequency of mowing regimes and leaving grassland patches to grow wild providing food and shelter for pollinators; incorporating features such as bird and bat boxes, indigenous planting and maintenance and care of wildflower meadows and areas. The EMS system is supported by Environmental and Energy policies and the Director of group Property is signatory to these policies.

In the financial year 2020 to 2021, the department spent approximately £1.7 billion buying goods and services from suppliers. Addressing the negative sustainability impacts and the opportunities associated with purchases is a core and embedded part of our approach. We prioritise the work we do with supply markets and suppliers based on sustainability impacts, business risk and spend so that we can focus our efforts in the highest risk areas. A sustainability risk assessment is completed as part of commercial strategies to determine which impacts are relevant to the contract and how they will be managed throughout procurement and for the entire life of the contract.

Our approach covers a range of sustainability topics and government policies and commitments such as the Greening Government Commitments, the Timber Procurement Policy as well as wider government commitments such as social value, modern slavery, small and medium enterprises and the Public Sector Equality Duty.

We work with government to support and shape approaches relating to sustainable purchases and share our approach with others.

We have made good progress at eliminating consumer single use plastics from our offices and continue to pursue options to reduce further.

In addition to the high level GGC targets, the Defra group also publishes a transparency statement as part of its commitment. This covers sustainable procurement, Climate Change Adaptation, nature recovery, and any Sustainable Construction.

Defra has adopted the Greening Government ICT & Digital Services Strategy.

As part of the strategy Defra reports the GHG and Power Consumption for all our Defra group ICT, a full breakdown of waste, using the waste hierarchy, including value retained and charitable donations, strategy statements and results. More information can be found in the Greening Government ICT and Digital Services annual reports.

Defra owns and chairs the Sustainable Technology Advice and Reporting (STAR) team for government.

Quarterly updates on the Defra group's performance towards the GGC can be found online.

This report should be read in conjunction with the Annual Report and Account Sustainability Reports produced by each of the Defra group bodies.

GGC reporting processes use the Defra reporting standards. All energy and carbon reporting in this document uses the conversion factors described in this document.

Note 1: Under GGC reporting, areas of a building occupied by non-government occupants are not included. Where this is the case buildings have been apportioned according to floor space occupancies.

Note 2: Scope 3: Emissions from Official Business Travel’ data does not include international travel in accordance with the GGC reporting requirements.

Note 3: Gas used in CHP units is not included in the gas figure as GGC reporting guidance states that this energy is reported as CHP output.

Note 4: All consumption data presented in this report reflects reported GGC figures. Cost figures reflect the accounting records for the respective year.

Note 5: Hazardous waste is included in the landfill waste figure as per GGC reporting.

Note 6: Previous year's data has been revised from last year's publication to incorporate any corrections, adjustments and to reflect the increased GGC reporting scope. For this reason tables and performance may appear differently to previous year's reports.

Note 7: Emissions from electricity are captured across scope 2 and 3 as electricity generated and supplied to the national grid and due to losses in transmission and distribution of electricity through the national grid to the consumer, as defined by the GHG Protocol.

Note 8: Public transport emissions are captured within the scope 3 emissions. For the purposes of Taxi travel, mileage is estimated from spending on taxis using a rate of £2.39 per mile.

Note 9: Some ICT waste information is currently unavailable. Changes to our contract are being [put in place for future reporting. It is not expected that the ICT waste data is material to overall waste targets performance.

Note 10: Data for years 2018 to 2019 to 2020 to 2021 is taken from prior GGC reporting and therefore does not cover the same scope of organisations. It is included for general comparative purposes.