Corporate report

Defra's annual report and accounts for 2023 to 2024: financial statements

Updated 20 January 2026

Parliamentary Accountability and Audit Report

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.

Statement of Outturn against Parliamentary Supply

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 voted 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 Consolidated Statement of Comprehensive Net Expenditure (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 2022-23 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.

 Summary of Resource and Capital Outturn 2023-24

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

	2023-24 Note/Ref	2023-24 Outturn Voted	2023-24 Estimate Voted	2023-24 Voted Outturn Compared With Estimate: Saving/ (Excess)	2022-23 Outturn Total
		£000	£000	£000	£000
Departmental Expenditure Limit
Resource	SOPS 1.1	5,285,778	5,381,611	95,833	4,632,934
Capital	SOPS 1.2	1,984,115	2,112,646	128,531	1,463,708
Total		7,269,893	7,494,257	224,364	6,096,642
Annually Managed Expenditure
Resource	SOPS 1.1	1,441,854	1,747,505	305,651	(449,687)
Capital	SOPS 1.2	13,216	31,355	18,139	9,084
Total		1,455,070	1,778,860	323,790	(440,603)
Total Budget
Resource	SOPS 1.1	6,727,632	7,129,116	401,484	4,183,247
Capital	SOPS 1.2	1,997,331	2,144,001	146,670	1,472,792
Total Budget Expenditure		8,724,963	9,273,117	548,154	5,656,039
Non-Budget Expenditure	SOPS 1.1	176,947	210,000	33,053	79
Total Budget and Non-Budget		8,901,910	9,483,117	581,207	5,656,118

The table above details the 2023-24 figures for voted totals subject to parliamentary control and outturn. Refer to the Supply Estimates Guidance manual, available on gov.uk, for detail on the control limits voted by Parliament.

 Net Cash Requirement 2023-24

		2023-24 Outturn Voted	2023-24 Estimate	2023-24 Voted Outturn Compared with Estimate: Saving/(Excess)	2022-23 Outturn Total
		£000	£000	£000	£000
Net cash requirement	SOPS 3	6,463,599	7,418,027	954,428	5,914,173

 Administration costs 2023-24

	2023-24 Outturn Voted	2023-24 Estimate	2023-24 Voted Outturn Compared with Estimate: Saving/(Excess)	2022-23 Outturn Total
	£000	£000	£000	£000
Administration costs	1,060,814	1,084,923	24,109	938,764

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

The department has Prior Period Adjustments (PPAs) resulting from the incorrect categorisation of costs as capital DEL rather than resource DEL on EA projects during financial years 2014-15 to 2022-23. In addition to this, the department has a PPA relating to correcting revaluation errors from EA’s quinquennial revaluation of land and building assets in 2020-21 along with subsequent indexation errors. It is proper for the department to seek parliamentary authority for the provision that should have been sought previously. In 2023-24, the following such PPAs have been made, which have been included within voted Supply in the Estimate.

PPA Description	Resource/Capital	DEL/AME	Amount (£000)
Reclassify costs from capital DEL to resource DEL for EA projects.	Resource	DEL	£176,508

Explanations of variances between the Estimate and outturn are given in the Financial Analysis section.

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

SOPS 1 – Outturn detail, by Estimate Line

SOPS 1.1 – Analysis of Resource Outturn by Estimate Line

	2023-24 Outturn Administration Gross	2023-24 Outturn Administration Income	2023-24 Outturn Administration Net	2023-24 Outturn Programme Gross	2023-24 Outturn Programme	2023-24 Outturn Programme Income	2023-24 Outturn Programme Net	2023-24 Outturn Total	2023-24 Estimate Total	2023-24 Estimate Virements (Note)	2023-24 Estimate Net Total Adjusted for Virements	2023-24 Estimate Outturn Compared to Estimate, saving/ (excess)	2022-23 Outturn Net Total
	£000’	£000’	£000’	£000’		£000’	£000’	£000’	£000’	£000’	£000’	£000’	£000’
Spending in Departmental Expenditure Limits (DEL)
Voted
Food and farming	83,284	46	83,330	1,821,044		(14,965)	1,806,079	1,889,409	1,944,665	(55,256)	1,889,409	-	1,924,129
Improve the environment and rural services	144,846	(2,889)	141,957	587,422		(24,801)	562,621	704,578	783,653	(34,097)	749,556	44,978	615,373
Protect the country from floods	2,375	(24)	2,351	90		-	90	2,441	2,531	90	2,621	180	1,551
Animal and plant health	74,496	(70)	74,426	414,189		(102,680)	311,509	385,935	451,672	(40,462)	411,210	25,275	424,965
Marine and fisheries	24,025	(126)	23,899	78,369		(24,145)	54,224	78,123	116,624	(31,937)	84,687	6,564	73,672
Departmental operating costs	564,083	(14,148)	549,935	174,565		(1,468)	173,097	723,032	786,346	(51,381)	734,965	11,933	546,954
Improve the environment and rural services (ALB) (net)	85,779	-	85,779	432,025		-	432,025	517,804	452,770	71,937	524,707	6,903	417,346
Protect the country from floods (ALB) (net)	93,721	-	93,721	853,950		-	853,950	947,671	804,359	143,312	947,671	-	596,562
Marine and fisheries (ALB) (net)	5,416	-	5,416	31,369		-	31,369	36,785	38,991	(2,206)	36,785	-	32,382
Total	1,078,025	(17,211)	1,060,814	4,393,023		(168,059)	4,224,964	5,285,778	5,381,611	-	5,381,611	95,833	4,632,934
Spending in Annually Managed Expenditure Limits (AME)
Voted
Food and farming	-	-	-	1,540,502		-	1,540,502	1,540,502	1,635,801	-	1,635,801	95,299	8,791
Improve the environment and rural services	-	-	-	(82,648)		-	(82,648)	(82,648)	(94,215)	11,567	(82,648)	-	(332,893)
Animal and plant health	-	-	-	1,153		-	1,153	1,153	3	1,150	1,153	-	(6,741)
Marine and fisheries	-	-	-	(138)		-	(138)	(138)	6	-	6	144	(246)
Departmental operating costs	-	-	-	8,184		-	8,184	8,184	(27,627)	35,811	8,184	-	(178,244)
Food and farming (ALB) (net)	-	-	-	7,908		-	7,908	7,908	5,535	2,373	7,908	-	7,320
Improve the environment and rural services (ALB) (net)	-	-	-	(34,214)		-	(34,214)	(34,214)	50,824	-	50,824	85,038	27,393
Protect the country from floods (ALB) (net)	-	-	-	(31)		-	(31)	(31)	177,113	(51,974)	125,139	125,170	12,368
Marine and fisheries (ALB) (net)	-	-	-	1,138		-	1,138	1,138	65	1,073	1,138	-	12,565
Total	-	-	-	1,441,854		-	1,441,854	1,441,854	1,747,505	-	1,747,505	305,651	(449,687)
Spending in Non Budget Expenditure Limits
Voted
Food and farming	-	-	-	85,154		(84,715)	439	439	10,000	-	10,000	9,561	79
Prior period adjustments	-	-	-	176,508		-	176,508	176,508	200,000	-	200,000	23,492	-
Total	-	-	-	261,662		(84,715)	176,947	176,947	210,000	-	210,000	33,053	79
Resource Outturn	1,078,025	(17,211)	1,060,814	6,096,539		(252,774)	5,843,765	6,904,579	7,339,116	-	7,339,116	434,537	4,183,326

Note: 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 the Financial Analysis section.

SOPS 1.2 – Analysis of Capital Outturn by Estimate Line

	2023-24 Outturn Gross	2023-24 Outturn Income	2023-24 Outturn Net Total	2023-24 Estimate Total	2023-24 Estimate Virements (Note)	2023-24 Estimate Total Adjusted for Virements	2023-24 Outturn Compared to Estimate, saving/ (excess)	2022-23 Outturn Net Total
	£000	£000	£000	£000	£000	£000	£000	£000
Spending in Departmental Expenditure Limits (DEL)
Voted
Food and farming	282,706	(2,807)	279,899	361,903	(57,813)	304,090	24,191	274,376
Improve the environment and rural services	541,399	(40)	541,359	591,546	-	591,546	50,187	134,080
Protect the country from floods	61	-	61	500	-	500	439	2,940
Animal and plant health	33,384	(2)	33,382	176,319	(109,630)	66,689	33,307	27,333
Marine and fisheries	47,288	(28)	47,260	60,169	3,948	64,117	16,857	21,792
Departmental operating costs	235,860	(863)	234,997	125,566	110,385	235,951	954	159,951
Improve the environment and rural services (ALB) (net)	223,592	-	223,592	191,624	32,325	223,949	357	145,774
Protect the country from floods (ALB) (net)	623,335	-	623,335	602,550	20,785	623,335	-	696,965
Marine and fisheries (ALB) (net)	230	-	230	2,469	-	2,469	2,239	497
Total	1,987,855	(3,740)	1,984,115	2,112,646	-	2,112,646	128,531	1,463,708
Spending in Annually Managed Expenditure (AME)
Voted
Departmental operating costs	479	-	479	11,394	(7,695)	3,699	3,220	9
Food and farming (ALB) (net)	(560)	-	(560)	14,359	-	14,359	14,919	1,805
Improve the environment and rural services (ALB) (net)	6,330	-	6,330	1,803	4,527	6,330	-	-
Protect the country from floods (ALB) (net)	6,553	-	6,553	3,721	2,832	6,553	-	7,214
Marine and fisheries (ALB) (net)	414	-	414	78	336	414	-	56
Total	13,216	-	13,216	31,355	-	31,355	18,139	9,084
Capital Outturn	2,001,071	(3,740)	1,997,331	2,144,001	-	2,144,001	146,670	1,472,792

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

SOPS 2 – Reconciliation of Net Resource Outturn to Net Operating Expenditure

	Note/Ref	2023-24 Outturn	Restated 2022-23 Outturn
		£000	£000
Total resource outturn in SOPS
Budget		6,727,632	4,183,247
Non budget		176,947	79
		6,904,579	4,183,326
Add:
Capital grants / income		821,573	467,750
Capital works expensed in year		289,664	301,143
Capital research and development		250,500	146,639
Adjustment to IFRIC 12		258	2,919
Total		1,361,995	918,451
Less:
Income payable to the Consolidated Fund		(21,265)	(8,272)
Prior period adjustments		(176,508)	67,475
Total		(197,773)	59,203
Net Operating Expenditure in SoCNE	SoCNE	8,068,801	5,160,980

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 £302.3 million (2022-23 £256.6 million (restated)) is included in the SoCNE (Note 3.1) but is scored against capital budgets. This reflects project spend which does not meet the accounting criteria to be treated as an addition to AUC on the SoFP, for example, because it is incurred on an asset which is pre-agreed for transfer to a Local Authority, but which satisfied National Accounts criteria to be treated as capital for budgeting purposes.

The SoCNE includes Research and Development costs that meet the ESA10 definition; these score in capital budgets. These costs occur predominantly in the Core department and Natural England, the largest spend categories in the Core department relate to plant and animal health programmes. For Natural England, the largest spend categories relate to the Natural Capital Ecosystem Assessment programme and Species Recovery programme.

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

Long Term Expenditure Trends

The long-term expenditure trends can be found in the Core Tables in Annex 1. 

SOPS 3 – Reconciliation of Net Resource Outturn to Net Cash Requirement

	Note/Ref	2023-24 Outturn	2023-24 Estimate	2023-24 Net total Outturn vs Estimate: saving/ (excess)	2022-23 Outturn
		£000	£000	£000	£000
Resource outturn	SOPS 1.1	6,904,579	7,339,116	434,537	4,183,326
Capital outturn	SOPS 1.2	1,997,331	2,144,001	146,670	1,472,792
Accruals to cash adjustments (Core and agencies only):
Accrual to cash basis - capital expenditure		(75,064)	-	75,064	50
Accrual to cash basis - capital disposals		11,039	-	(11,039)	(2,266)
Service concession adjustment and other finance leases		17,984	-	(17,984)	7,453
Adjustments for NDPBs:
Remove voted resource		(1,764,413)	(1,529,657)	234,756	(1,199,796)
Remove voted capital		(854,626)	(816,604)	38,022	(828,035)
Add cash grant-in-aid		1,968,628	2,082,904	114,276	1,604,330
Add Defra Contribution to EA Closed Pension Scheme Fund		42,500	-	(42,500)	43,600
Adjustments to remove non cash items (Core and agencies only):
Depreciation / amortisation / impairment	3.2	(169,020)	(197,983)	(28,963)	(94,735)
New provisions and adjustment to provisions	3.2	(652,232)	(1,558,338)	(906,106)	472,245
Prior period adjustments		-	(200,000)	(200,000)	-
Other non cash items		59,555	(19,372)	(78,927)	41,021
Adjustments to reflect movements in working capital balances (Core and agencies only):
Increase/(decrease) in inventories	SoCF	112	-	(112)	(301)
Increase/(decrease) in receivables excluding derivatives	SoCF	36,082	168,000	131,918	134,824
Adjustment for derivative financial instruments	SoCF	5,386	-	(5,386)	(1,402)
Movement in receivables affecting items not passing through the SOPS	SoCF	-	-	-	(4,202)
(Increase)/decrease in payables excluding derivatives	SoCF	(1,226,086)	-	1,226,086	225,690
Movement in payables affecting items not passing through the SOPS	SoCF	96,952	-	(96,952)	(210,294)
Use of provisions	SoCF	64,649	5,960	(58,689)	69,897
Funding to / from other bodies	SoCF	243	-	(243)	(24)
Net cash requirement		6,463,599	7,418,027	954,428	5,914,173

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 the Financial Analysis section.

SOPS 4 – Income Payable to the Consolidated Fund

SOPS 4.1 – Analysis of income payable to the Consolidated Fund

In addition to income retained by the department, the following income is payable to the Consolidated Fund.

	Outturn 2023-24 Accruals basis	Outturn 2023-24 Cash basis	Outturn 2022-23 Accruals basis	Outturn 2022-23 Cash basis
	£000	£000	£000	£000
Income due to the Consolidated Fund	41,986	15,884	8,272	4,070
Total income payable to the Consolidated Fund	41,986	15,884	8,272	4,070

The income paid to the Consolidated Fund includes:

• £26.102 million income relating to the NE District Level Licensing Scheme.

• £15.296 million relating to in-year capital grant income received in the form of asset under construction balances received.

• £0.579 million relating to the insurance income element of the government contingent support package (GSP) for the Thames Tideway.

Further Information Relating to Parliamentary Accountability

 Public Sector Bodies Outside the Boundary

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 21.

 Losses and Special Payments (Audited)

 Losses Statement

Losses are reported on an accruals basis.

	2023-24 Core department and Agencies	2023-24 Defra group	2022-23 Core department and Agencies	2022-23 Defra group
	£000	£000	£000	£000
Losses values
Cash losses	1,286	1,681	852	756
Stores losses	-	-	-	1
Administrative write-offs	-	1,116	7	2,749
Fruitless payments	950	8,830	-	1,019
Constructive losses	8,940	8,940	7,504	7,504
Claims abandoned	2	2	4	4
Total	11,178	20,569	8,367	12,033
Number of cases
Cash losses	2,079	2,268	718	880
Stores losses	-	-	-	2
Administrative write-offs	-	1,364	2	2,100
Fruitless payments	2	53	1	32
Constructive losses	1	1	3	3
Claims abandoned	2	2	6	6
Total	2,084	3,688	730	3,023

 Details of Cases over £300,000

 Losses (shown in the table above)

There are two individual cases over £300,000 within the table above.

The Core department made a payment to HM Revenue and Customs for over-recovered VAT on ‘digital’ contracts relating to the managed service review. This incurred interest of £950,000 which is considered a fruitless payment.

The Core department has recognised a constructive loss of £8.94 million in relation to the impairment of the Incinerator project which comprised two significant contracts. The incineration equipment design underwent material change post contract, and as a result the building extension contract suffered from significant delays and additional costs.

The EA have recorded a fruitless payment to the value of £7.86 million in respect of the development of a new reporting system. It was assessed during the development that the additional costs of developing the full system versus a simplified product would not provide value for money. Stopping the project avoided spending in the region of an additional £7 million and continuing to invest in a solution that was increasingly unlikely to offer a suitable return on investment.

 Special Payments

	2023-24 Core department and Agencies	2023-24 Defra group	2022-23 Core department and Agencies	2022-23 Defra group
Value (£000)	12,125	12,664	324	495
Number of cases	2,157	2,171	226	236

In 2023-24, one special severance payment was made by the Marine Management Organisation (MMO) and two were made by Natural England (NE). As there was a limited number of cases, no further disclosures relating to values are being made as doing so could contravene Data Protection legislation.

There has been a significant increase in the number and value of special payments in 2023-24. This is largely due to an increase in the number of small value special payments made by RPA. On 21 June 2023, RPA closed applications to the Sustainable Farming Incentive (SFI) 2022 scheme and advised existing agreement holders of its intention to curtail existing agreements to allow earlier take up of the improved SFI 2023 scheme. Where agreements featured actions which will not be available in SFI 2023, RPA undertook to compensate agreement holders for any loss of income which this created. As a result, in 2023-24, £11.6 million of SFI 2022 special payments are recognised in the above table and there will be further payments in 2024-25. Further details can be found in RPA’s Annual Report and Accounts.

 Details of cases over £300,000

There are no individual cases over £300,000 within the table above.

 Regularity of expenditure in grant schemes (Audited)

During the year to 31 March 2024, the department spent approximately £4.6 billion through grant funding agreements with a portfolio of activity delivering a wide variety of grant outcomes and benefits. The diversity of the grants portfolio results in a range of design, delivery, and control types, each of which lead to differing risks of irregular expenditure.

An assessment has been undertaken to assure the extent of irregular grant expenditure to test whether the impact on the department accounts is material or not.

Depending on the type, scale, and complexity of each grant, differing mechanisms for assessing assurance are used, with grants being grouped into five typologies:

• Grants spending more than £5 million with formal irregularity estimates.

• Grants spending more than £5 million where expenditure is to Central or Local government.

• Grants spending more than £5 million where irregularity estimates are being developed for 2024-25 onwards.

• Grants spending more than £5 million with assurance derived from scheme controls.

• Grants spending £5 million or less.

The table below outlines the value of grant expenditure in each typology and where applicable, the irregularity estimate.

The criteria for recognising grants for fraud and error assessment purposes does not align in all cases with the financial accounting recognition, this is largely as a result of 2025-26, and beyond de-linked payments which are shown as provisions in the financial statements but are recognised as grants in the irregularity estimate. Therefore, there is a difference in the values between the irregularity estimate and the SoCNE.

Typologies	Grant Expenditure 2023-24	Grant Expenditure 2023-24	Estimated Irregularities	Estimated Irregularities
	£m	% of total	£m	% of expenditure
Grants spending more than £5 million with irregularity estimates	3,716.7	81.0	30.5	0.82
Grants with estimates	3,716.7	81.0	30.5	0.82
Grants spending >£5 million where expenditure is to Central or Local government	345.4	7.5	N/A	N/A
Grants spending >£5 million where irregularity estimates are being developed	326.0	7.1	N/A	N/A
Grants spending >£5 million with assurance derived from scheme controls	125.5	2.7	N/A	N/A
Grants spending £5 million or less	79.7	1.7	N/A	N/A
Total	4,593.3

Approximately 81 per cent (£3.7 billion) of grant expenditure was subject to estimation of undetected irregularity. Within this estimated expenditure, an estimate of £30.5 million (0.82 per cent) irregular expenditure has been identified.

Whilst the remainder of grant expenditure is not formally estimated, the schemes likely to have the highest value undetected fraud and error risk have irregularity estimates. The level of irregular expenditure in the remainder of grant expenditure would not be sufficient to cause the overall irregularity rate across all grant expenditure to be material and the department’s assessment is therefore that the extent of undetected irregularity across all grant expenditure is not material in 2023-24.

The Defra Grants Hub (the Grants Hub) became operational in June 2023. The Grants Hub is undertaking a review of the group approach to grant irregularity as the portfolio of grant schemes evolves. This work includes the development of irregularity estimates for an increased number of grants schemes for 2024-25, focused on the schemes with highest levels of spend and / or those with the greatest fraud risk (identified through our Fraud Risk Assessment work). This is part of a programme to drive up the quality and quantity of irregularity estimation with the ultimate goal of reducing losses to fraud and error through improved insight.

In addition, the Grants Hub is providing materials, guidance, tools and advice to enable new schemes to build in best practice on fraud and error risk management, including irregularity estimation.

 Grant typologies

 Grants spending more than £5 million with formal irregularity estimates

These are higher value and higher risk schemes where an assessment of irregularity has been undertaken through random sampling and extrapolation. This population equates to 81 per cent of group grant expenditure and has resulted in a combined estimate of 0.82 per cent (£30.5 million) of irregular expenditure. This is broken down as follows:

Scheme	Spend (£m)	Estimated Irregularity Rate (%)	Estimated Irregularity Value (£m) (Note)
Basic Payment Scheme - Delinked Payments	1,608.2	0.27	4.3
Basic Payment Scheme	1,087.4	0.32	3.5
Lump Sum Exit Scheme	9.2	0.27	-
Overall - Legacy Schemes	2,704.7	0.29	7.8
Countryside Stewardship (Revenue)	395.7	3.02	12.0
Countryside Stewardship (Capital)	163.7	5.40	8.8
Environmental Stewardship	109.4	0.65	0.7
Farm Equipment and Technology Fund	34.2	-	-
Sustainable Farm Incentive (22)	18.8	1.86	0.3
Sustainable Farm Incentive (Pilot)	13.3	2.23	0.3
Farm Transformation Fund	11.6	-	-
Overall - New and Enhanced Schemes	746.6	2.97	22.1
Local Authority Schemes (S31)	177.1	-	-
Fruit and Vegetable Scheme	36.7	-	-
RDPE (Legacy)	28.6	0.86	0.3
Other RPA Schemes	12.5	1.69	0.2
Fisheries Schemes (EMFF & FASS)	10.5	0.31	-
Other Schemes	265.4	0.18	0.5
Total	3,716.7	0.82	30.5

Note: Rounded to one decimal place and therefore there may be rounding differences within the table.

The measurement of irregularity for 2023-24 takes place in the context of a period of transition for the department as the portfolio of work shifts from a previous parliamentary intent which gave rise to direct payment schemes and schemes with limited environmental benefit, to a new intent with new or enhanced schemes which reflect the policy ambition for better environmental outcomes and increased value for money. These schemes are more ambitious than predecessors and have an associated higher potential for error. This transitional phase sees the ending of legacy schemes such as delinked payments and the growth and development of outcome-focused schemes such as Sustainable Farming Incentive, but whilst this transition concludes, error rates from fundamentally different schemes contribute to the overall error rate. The different nature of the scheme designs from the two approaches should be considered in interpreting the measurement of irregularity.

Most schemes with estimates are managed by the Rural Payments Agency (RPA) and additional details are included in the 2023-24 Disclosure statement that accompanies the RPA’s Annual Report and Accounts.

In addition, this population includes £28.6 million expenditure for the Rural Development Programme for England which has not been directly assessed. Comparable outputs from the irregularity assessment for the EU (European Union) funded element of this scheme have been used.

It also includes £10.5 million European Maritime Fisheries Fund (EMFF) and Fisheries and Seafood Scheme (FASS) expenditure which has not been directly assessed but is based on EU irregularity assessment average for the period 2014-2022 for the UK, as these schemes continue to operate in the same way with identical controls in place.

There are eight grant schemes paid to central and local government under section 31 of the Local Government Act 2003, which provides for a general power of central government to pay grants to local authorities, amounting to £177.1 million. The department has chosen not to stipulate conditions on these grants, which means that this funding cannot be considered irregular, and these are included as nil per cent irregular payments in the table above.

 Grants spending more than £5 million where expenditure is to Central or Local government

This group represents agreements the department holds with other public bodies where the responsibility for the delivery of the grant is held by the central or local government delivery body. This typology relates to a group of six grants schemes across the department, amounting to total expenditure of £345.4 million or approximately eight per cent of total grant spend in 2023-24. Whilst there are ambitions to streamline grants to local authorities which could include reporting, Defra remain committed to working with our public sector delivery partners to ensure effective delivery and achievement of intended outcomes.

 Grants spending more than £5 million where irregularity estimates are being developed

This is a group of ten grants schemes across the department, amounting to total expenditure of £326 million or approximately seven per cent of total grant spend in 2023-24. We will build on the work we have done in 2023-24 to extend measurement, adding further depth. This follows a process starting with fraud risk assessments to identify the most appropriate and proportionate controls for the specific scheme, and then identifies the areas in which residual risk is greatest after implementation of controls. These are the areas that are sampled for estimates and each scheme is developing an appropriate assessment methodology.

 Grants spending more than £5 million with assurance derived from scheme controls

This group of grants utilises a range of controls including fraud risk assessments, audits of both the control environment and delivery bodies’ counter fraud capability, external assurance, and reporting of detected and prevented fraud and error. Additionally, governance forums routinely consider the risk of fraud and error at both design and delivery stages. This typology relates to a group of seven grants schemes representing approximately three per cent of total grant spend (£125.5 million). The Grants Hub intends to review these schemes and introduce formal estimates as part of the three-year programme, using cross scheme sampling where appropriate.

 Grants spending £5 million or less

These grants represent a significant volume (54 per cent) of Defra grants (across 69 unique schemes or programmes), but only two per cent of total grant spend (£79.7 million). Notwithstanding the relatively low cumulative value, assurance was derived from activity such as bespoke fraud risk assessments or that they are single beneficiary grants which are then controlled at an individual agreement level. As part of the three-year programme, cross scheme sampling is planned to enable estimates of the smaller schemes to be introduced.

 Comparison with 2022-23

 Grants Landscape

Typologies	Expenditure 2023-24 (£m)	% Total Grant Expenditure	Expenditure 2022-23 (£m)	% Total Grant Expenditure
Grants spending more than £5 million with formal irregularity estimates	3,716.7	81	1,898.4	71
Grants spending >£5 million where expenditure is to Central or Local government	345.4	8	394.3	15
Grants spending >£5 million where irregularity estimates are being developed	326.0	7	-	-
Grants spending >£5 million with assurance derived from scheme controls	125.5	3	310.8	12
Grants spending £5 million or less	79.7	2	85.6	3
TOTAL	4,593.3		2,689.1

The table above, provides an overview of the department’s overall grants spend, illustrating that it has increased by 71 per cent from 2022-23 to 2023-24, mainly due to the inclusion of the Delinked payments (£1.6 billion).

The proportion of schemes for which irregularity estimates are available has also increased since 2022-23, however it should be noted that in future years as Delinked payments and BPS payments cease, a considerably smaller proportion of the overall grants spend will be measured.

 Irregularities

Year	Expenditure Value (£m)	% Total Grant Expenditure	Estimated Irregularity Value (£m)	Estimated Irregularity Rate (%)
2023-24	3,716.7	81	30.5	0.82
2022-23	1,898.4	71	16.1	0.85

The table above, provides a comparison between this and the previous year’s reporting. At group level, whilst the rate of irregularities has remained consistent since 2022-23, the value of irregularities has increased significantly.

This is primarily because there is a significant increase in overall grants expenditure from 2022-23. This is due to the inclusion of ‘delinked payments’ which have resulted from the change in grants approach for the department as a programme of transition has begun, in which Basic Payments Scheme (BPS), an area-based subsidy scheme, is being phased out. 2023-24 is the final year for BPS. Recognising beneficiaries’ need to adjust to this transition, the department has implemented an annual grant, reducing in value between 2024 and 2027. These are described as ‘delinked payments’, reflecting the fact that beneficiaries only have to demonstrate their previous entitlement to BPS, rather than fulfil any continuing performance conditions. Within this irregularity assessment, a provision has been made for the three-year value of delinked payments. In contrast to these area-based subsidy schemes, there is significantly increasing expenditure on agri-environmental schemes such as Countryside Stewardship (CS) which contract with beneficiaries for the achievement of specific outputs.

The table below shows the changes in scheme expenditure across these three schemes from 2022-23 to 2023-24 reflecting the current point in the transition.

Scheme Type	Scheme	Expenditure (£bn) 2023-24	Expenditure (£bn) 2022-23
Subsidy	BPS	1.1	1.4
Subsidy	Delinked payments	1.6	0.0
Subsidy	Total Subsidy Schemes	2.7	1.4
Agri-environmental	Countryside Stewardship	0.6	0.3

There is a link between the scheme types and levels of irregularity, or non-compliance found. A subsidy scheme based predominantly on farm area (such as BPS) has an inherently lower risk of non-compliance compared to multi-option agri-environmental schemes which require the grant recipient to deliver specific, more complex outputs. This is reflected in the irregularity levels reported above.

The Grants Hub is working to enhance understanding of this increasing irregularity risk. To do this, the Grants Hub is building a database of identified instances of fraud and error at scheme level over time to identify any patterns that will inform potential control enhancements. This includes the categorisation of schemes according to similarities in their fraud risk profiles, enabling historic data to be used to predict irregularities and develop appropriate control mechanisms and measurement methodologies.

 Fees and Charges (Audited)

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

	2023-24 Income	2023-24 Full Cost	2023-24 Surplus/ (deficit)
	£m	£m	£m
Abstraction charges (EA)	172.2	195.7	(23.5)
Environmental Permitting Regulations water quality (EA)	71.2	80.0	(8.8)

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.

 Statement Relating to the Use of Functional Standards

This section is not subject to audit.

The approach to applying Functional Standards has continued to mature across the department during 2023-24. Methods of assessing compliance are in place for all Functional Standards and these are being used to assess future development areas. Assessments have shown that over half of Functional Standards in Defra are rated in the “Good” or “Better” categories.

 Remote Contingent Liabilities (Audited)

In addition to contingent liabilities disclosed in the financial statements the department also reports liabilities for which the likelihood of a transfer of economic benefit in settlement is remote but are still in scope of IAS 37.

The department has the following remote contingent liabilities as at 31 March 2024. Unless otherwise stated liabilities relate to the Core department.

 Quantifiable

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

• Indemnity signed by Defra, Canal & River Trust and British Waterways pension trustees in relation to the historic public sector pension liability. The potential liability is estimated at £125 million (2022–23, £125 million).

• Small potential liabilities are estimated at £nil (2022–23, £nil).

 Unquantifiable

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

• Defra retains a potential pension liability in respect of the staff that transferred from Fera to Fera Science Limited under the New Fair Deal.

• In the unlikely event that the department stops funding the National Fruit Collection or relocates it to a different site, there is a possible obligation to return the current site to a suitable state.

• There is an ongoing potential liability in respect of financial corrections for disallowance, which at present is uncertain and unquantifiable as a Commission audit has yet to take place.

• In unlikely circumstances, there is a remote possibility that Defra would need to provide a government support package for the Thames Tideway Tunnel project.

Tamara Finkelstein

Accounting Officer for the Department for Environment, Food and Rural Affairs 

12 December 2024

The Certificate of the Comptroller and Auditor General to the House of Commons

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.

Financial Statements

Consolidated Statement of Comprehensive Net Expenditure

For the year ended 31 March 2024

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.

	Note/ Ref	2023-24 Core department and Agencies	2023-24 Defra group	Restated 2022-23 Core department and Agencies	Restated 2022-23 Defra group
		£000	£000	£000	£000
Revenue from contracts with customers	4.1	(149,683)	(873,695)	(148,943)	(828,917)
Other operating income	4.2	(228,861)	(514,789)	(323,133)	(486,645)
Total income		(378,544)	(1,388,484)	(472,076)	(1,315,562)
Staff expenditure	3.1	901,978	1,795,910	775,076	1,526,299
Other expenditure	3.1	999,412	2,147,224	876,872	1,972,333
Non-cash items	3.2	771,436	1,592,137	(422,655)	80,030
Grants and subsidies	3.3	5,711,898	3,922,014	4,331,180	2,897,880
Total operating expenditure		8,384,724	9,457,285	5,560,473	6,476,542
Net operating expenditure		8,006,180	8,068,801	5,088,397	5,160,980
Net expenditure for the year		8,006,180	8,068,801	5,088,397	5,160,980
Other Comprehensive Net Expenditure
Items that will not be reclassified to net operating expenditure
Net (gain)/loss on:
Revaluation of PPE	SoCTE	(4,303)	(533,671)	(33,103)	(6,686,763)
Revaluation of right of use assets	SoCTE	(5,467)	(6,710)	5,428	1,750
Charitable funds revaluation	SoCTE	-	(5,367)	-	(23,288)
Revaluation of intangibles	SoCTE	(6,515)	(9,811)	(8,661)	(14,666)
Pension actuarial movements	16	12,356	(255,398)	(15,238)	(1,323,955)
Changes in the fair value of equity investments at fair value through OCE	SoCTE	8,262	8,262	-	-
Items that may be reclassified subsequently to net operating expenditure
Net (gain)/loss on:
Revaluation of investments		-	(856)	-	184
Total comprehensive net expenditure for the year		8,010,513	7,265,250	5,036,823	(2,885,758)

EU funding for the department totalling £109 million (2022-23, £240 million) is included within income totals. Further details can be found in Note 4. Flood Re pays corporation tax. The charge included in other costs in the SoCNE was a refund of £3.5 million (2022-23, £21 million payment).

The prior period restatement is described in Note 19.

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

Consolidated Statement of Financial Position

As at 31 March 2024

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/ Ref	31 March 2024 Core department and Agencies	31 March 2024 Defra group	Restated 31 March 2023 Core department and Agencies	Restated 31 March 2023 Defra group
		£000	£000	£000	£000
Non-current assets
Property, plant and equipment	5.1	567,462	11,562,750	540,716	11,150,730
Right of use assets	5.2	102,525	183,359	115,468	183,920
Investment properties		613	13,077	613	13,941
Heritage assets	5.3	-	316,903	-	303,732
Agricultural assets		-	115	-	141
Intangible assets	6	341,711	518,674	277,984	422,018
Financial assets	9	81,214	117,318	39,014	68,804
Investment in Associate		121	29,111	7,769	17,514
Net pension assets		-	797,054	-	503,350
Receivables and contract assets falling due after more than one year	11	4,672	8,113	5,901	6,632
Total non-current assets		1,098,318	13,546,474	987,465	12,670,782
Current assets
Assets classified as held for sale		-	13,064	-	13,403
Inventories		5,207	22,365	5,095	6,794
Financial assets	11	1,362	878,870	117	740,993
Trade, other receivables and contract assets	11	558,371	854,587	521,060	655,333
Cash and cash equivalents	10	208,974	498,713	192,536	471,776
Total current assets		773,914	2,267,599	718,808	1,888,299
Total assets		1,872,232	15,814,073	1,706,273	14,559,081
Current liabilities
Trade, other payables and contract liabilities	12	(2,050,332)	(2,660,648)	(824,326)	(1,403,093)
Lease Liability	13	(26,471)	(49,510)	(32,708)	(49,129)
Provisions	15.2	(13,308)	(277,713)	(81,010)	(159,119)
Net pension liability		(43,229)	(43,239)	(47,577)	(47,581)
Financial liabilities	12	(706)	(26,306)	(4,847)	(29,147)
Total current liabilities		(2,134,046)	(3,057,416)	(990,468)	(1,688,069)
Non-current assets plus/less net current assets/liabilities		(261,814)	12,756,657	715,805	12,871,012
Non-current liabilities
Provisions	15.2	(1,046,651)	(1,155,022)	(352,732)	(426,957)
Lease Liability		(85,724)	(120,283)	(94,475)	(134,545)
Net pension liability		(101,300)	(106,319)	(127,351)	(132,512)
Other payables and contract liabilities	12	(192)	(170,955)	(112)	(145,779)
Financial liabilities	12	-	(435,601)	-	(423,742)
Total non-current liabilities		(1,233,867)	(1,988,180)	(574,670)	(1,263,535)
Assets less liabilities		(1,495,681)	10,768,477	141,135	11,607,477
Taxpayers’ equity and other reserves
General Fund	SoCTE	(1,654,560)	803,403	(30,281)	2,103,241
Revaluation reserve	SoCTE	158,879	9,574,573	171,416	9,156,602
Charitable funds - restricted funds	SoCTE	-	134,457	-	132,222
Charitable funds - unrestricted funds (Note)	SoCTE	-	256,044	-	215,412
Total equity		(1,495,681)	10,768,477	141,135	11,607,477

Note: The unrestricted charitable funds figure includes Royal Botanic Gardens Kew (RBG Kew) and National Forest Company’s (NFC) revaluation reserves totalling £153.0 million (2022-23, £151.8 million).

The prior period restatement is described in Note 19.

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

Consolidated Statement of Cash Flows

For the year ended 31 March 2024

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.

	Note/Ref	2023-24 Core department and Agencies	2023-24 Defra group	Restated 2022-23 Core department and Agencies	Restated 2022-23 Defra group
		£000	£000	£000	£000
Cash flows from operating activities
Net operating expenditure	SoCNE	(8,006,180)	(8,068,801)	(5,088,397)	(5,160,980)
Adjust for non-cash transactions		761,697	1,552,358	(418,531)	81,293
(Increase)/decrease in trade and other receivables excluding derivatives		(36,082)	(200,735)	(134,824)	(107,376)
Less movements in receivables relating to items not passing through the SoCNE		-	-	4,202	4,202
Adjustments for derivative financial instruments		(5,386)	(5,386)	1,402	1,402
(Increase) / decrease in inventories	SOFP	(112)	(15,571)	301	(22)
Increase / (decrease) in trade payables and other liabilities excluding derivatives		1,226,086	1,295,890	(225,690)	(124,386)
Less movements in payables relating to items not passing through the SoCNE		(96,952)	(96,952)	210,294	229,614
IFRS16 Implementation adjustment		-	-	-	(2,288)
Use of provisions / pension liabilities		(64,649)	(186,813)	(69,897)	(170,098)
Net cash outflow from operating activities		(6,221,578)	(5,726,010)	(5,721,140)	(5,248,639)
Cash flows from investing activities
Purchase of PPE, heritage and agricultural assets	5.4	(77,993)	(363,332)	(81,495)	(351,428)
Purchase of Right of Use assets		-	(35)	-	-
Purchase of intangible assets	6	(111,579)	(167,050)	(78,777)	(128,949)
Purchase / repayment of financial assets		-	(1,325,050)	12	(131,243)
Proceeds of disposal of PPE, heritage and agricultural assets		29	3,069	52	1,773
Proceeds of disposal of financial assets		-	1,196,626	-	18,000
Repayments from other bodies		44	1	44	(1)
Net cash outflow from investing activities		(189,499)	(655,771)	(160,164)	(591,848)
Cash flows from financing activities
From Consolidated Fund (supply): current year	SoCTE	6,465,000	6,465,000	5,720,000	5,720,000
Capital element in respect of service concession arrangements and finance leases and non balance sheet PFI contracts		12	84	(241)	(313)
Payment of lease liabilities		(36,407)	(55,290)	(24,823)	(38,749)
Funding (to) / from other bodies		(243)	(229)	24	(5)
Net financing		6,428,362	6,409,565	5,694,960	5,680,933
Net increase/(decrease) in cash and cash equivalents in the period before adjustment for receipts and payments to the Consolidated Fund		17,285	27,784	(186,344)	(159,554)
Receipts due to the Consolidated Fund which are outside the scope of the department’s activities		-	-	(4,202)	(4,202)
Payments of amounts due to the Consolidated Fund		(847)	(847)	(4,309)	(4,752)
Net increase/(decrease) in cash and cash equivalents in the period after adjustment for receipts and payments to the consolidated fund	10	16,438	26,937	(194,855)	(168,508)
Cash and cash equivalents at the beginning of the period	10	192,536	471,776	387,391	640,284
Cash and cash equivalents at the end of the period	10	208,974	498,713	192,536	471,776

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

Consolidated Statement of Changes in Taxpayers’ Equity

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, i.e., 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. 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.

For the year ended 31 March 2024

Defra group

	Note/Ref	2023-24 General Fund	2023-24 Revaluation Reserve	2023-24 Total Taxpayers’ Equity	2023-24 Charitable Funds - Restricted/ Endowment	2023-24 Charitable Funds - Unrestricted	2023-24 Total Reserves
		£000	£000	£000	£000	£000	£000
Balance at 1 April 2023 (Restated)		2,103,241	9,156,602	11,259,843	132,222	215,412	11,607,477
Net parliamentary funding - drawn down	SoCF	6,465,000	-	6,465,000	-	-	6,465,000
Net parliamentary funding - deemed		192,277	-	192,277	-	-	192,277
Funding (to)/ from other bodies		(229)	-	(229)	-	-	(229)
Supply (payable) adjustment		(193,678)	-	(193,678)	-	-	(193,678)
CFER Income Payable to the Consolidated Fund	SOPS 4.1	(41,986)	-	(41,986)	-	-	(41,986)
Net operating costs for the year	SoCNE	(8,105,484)	-	(8,105,484)	2,235	34,448	(8,068,801)
Non-cash adjustments
Non-cash charges-auditors’ remuneration	3.2	1,329	-	1,329	-	-	1,329
Notional recharges and other non-cash items	3.2	(8)	-	(8)	-	-	(8)
Movement in reserves
Recognised in other comprehensive expenditure:
Revaluation of PPE	OCE	-	533,671	533,671	-	-	533,671
Charitable funds revaluation	OCE	-	-	-	-	5,367	5,367
Revaluation of intangibles	OCE	-	9,811	9,811	-	-	9,811
Revaluation of Right of use assets	OCE	-	6,710	6,710	-	-	6,710
Revaluation of investments	OCE	-	(7,406)	(7,406)	-	-	(7,406)
Pension actuarial movements	OCE	255,398	-	255,398	-	-	255,398
Contributions in respect of unfunded benefits		4,600	-	4,600	-	-	4,600
Transfers between reserves		123,998	(124,815)	(817)	-	817	-
Other movements in reserves		(1,055)	-	(1,055)	-	-	(1,055)
Balance at 31 March 2024		803,403	9,574,573	10,377,976	134,457	256,044	10,768,477

Consolidated Statement of Changes in Taxpayers’ Equity

For the year ended 31 March 2023

Defra group

	Note/Ref	Restated 2022-23 General Fund	Restated 2022-23 Revaluation Reserve	Restated 2022-23 Total Taxpayers’ Equity	Restated 2022-23 Charitable Funds - Restricted/ Endowment	Restated 2022-23 Charitable Funds - Unrestricted	Restated 2022-23 Total Reserves
		£000	£000	£000	£000	£000	£000
Balance at 31 March 2022 (Restated)		(55,192)	2,570,371	2,515,179	102,687	185,249	2,803,115
IFRS 16 Initial Recognition	1.9	5,762		5,762	-	-	5,762
Adjusted opening balance 1 April 2022		(49,430)	2,570,371	2,520,941	102,687	185,249	2,808,877
Net parliamentary funding - drawn down	SoCF	5,720,000	-	5,720,000	-	-	5,720,000
Net parliamentary funding - deemed		387,391	-	387,391	-	-	387,391
Funding (to)/ from other bodies		(5)	-	(5)	-	-	(5)
Supply (payable) adjustment		(192,277)	-	(192,277)	-	-	(192,277)
CFER Income Payable to the Consolidated Fund	SOPS 4.1	(8,272)	-	(8,272)	-	-	(8,272)
Net operating costs for the year	SoCNE	(5,197,363)	-	(5,197,363)	8,348	28,035	(5,160,980)
Non-cash adjustments
Non-cash charges-auditors’ remuneration	3.2	1,211	-	1,211	-	-	1,211
Notional recharges and other non-cash items	3.2	(5)	-	(5)	-	-	(5)
Movement in reserves
Recognised in other comprehensive expenditure:
Revaluation of PPE (Note)	OCE	-	6,686,763	6,686,763	-	-	6,686,763
Charitable funds revaluation	OCE	-	-	-	-	23,288	23,288
Revaluation of intangibles	OCE	-	14,666	14,666	-	-	14,666
Revaluation of Right of use assets	OCE	-	(1,750)	(1,750)	-	-	(1,750)
Revaluation of investments	OCE	-	(184)	(184)	-	-	(184)
Pension actuarial movements	OCE/16	1,323,955	-	1,323,955	-	-	1,323,955
Contributions in respect of unfunded benefits		4,800	-	4,800	-	-	4,800
Transfers between reserves		113,237	(113,264)	(27)	21,187	(21,160)	-
Transfer to General Fund - net asset transfer		(1)	-	(1)	-	-	(1)
Balance at 31 March 2023		2,103,241	9,156,602	11,259,843	132,222	215,412	11,607,477

Note: Revaluation of PPE includes the effect of business as usual revaluations reported in Notes 5 and 6, as well as the £6.5 billion impact of the transition to DRC reported in Note 5, which has been processed as an in year revaluation amount due to the impracticability of a retrospective application of this change in accounting policy.

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

Consolidated Statement of Changes in Taxpayers’ Equity

For the year ended 31 March 2024

Core department and Agencies

	Note/Ref	2023-24 General Fund	2023-24 Revaluation Reserve	2023-24 Total Taxpayers’ Equity	2023-24 Total Reserves
		£000	£000	£000	£000
Balance at 1 April 2023		(30,281)	171,416	141,135	141,135
Net parliamentary funding - drawn down	SoCF	6,465,000	-	6,465,000	6,465,000
Net parliamentary funding - deemed		192,277	-	192,277	192,277
Funding (to)/ from other bodies		(243)	-	(243)	(243)
Supply (payable) adjustment		(193,678)	-	(193,678)	(193,678)
CFER Income Payable to the Consolidated Fund		(41,986)	-	(41,986)	(41,986)
Net operating costs for the year	SoCNE	(8,006,180)	-	(8,006,180)	(8,006,180)
Non-cash adjustments
Non-cash charges-auditors’ remuneration	3.2	1,329	-	1,329	1,329
Notional recharges and other non-cash items	3.2	(53,796)	-	(53,796)	(53,796)
Movement in reserves
Recognised in other comprehensive expenditure:
Revaluation of PPE	OCE	-	4,303	4,303	4,303
Revaluation of intangibles	OCE	-	6,515	6,515	6,515
Revaluation of Right of use assets	OCE	-	5,467	5,467	5,467
Revaluation of investments	OCE	-	(8,262)	(8,262)	(8,262)
Pension actuarial movements	OCE	(12,356)	-	(12,356)	(12,356)
Contributions in respect of unfunded benefits		4,600	-	4,600	4,600
Transfers between reserves		20,560	(20,560)	-	-
Other movements in reserves		194	-	194	194
Balance at 31 March 2024		(1,654,560)	158,879	(1,495,681)	(1,495,681)

Consolidated Statement of Changes in Taxpayers’ Equity

For the year ended 31 March 2023

Core department and Agencies

	Note/Ref	2022-23 General Fund	2022-23 Revaluation Reserve	2022-23 Total Taxpayers’ Equity	2022-23 Total Reserves
		£000	£000	£000	£000
Balance at 1 April 2022		(841,689)	146,604	(695,085)	(695,085)
IFRS 16 Initial Recognition		2,871	-	2,871	2,871
Adjusted Opening balance 1 April 2022		(838,818)	146,604	(692,214)	(692,214)
Net parliamentary funding - drawn down	SoCF	5,720,000	-	5,720,000	5,720,000
Net parliamentary funding - deemed		387,391	-	387,391	387,391
Funding (to)/ from other bodies		24	-	24	24
Supply (payable) adjustment		(192,277)	-	(192,277)	(192,277)
CFER Income Payable to the Consolidated Fund		(7,829)	-	(7,829)	(7,829)
Net operating costs for the year	SoCNE	(5,088,397)	-	(5,088,397)	(5,088,397)
Non-cash adjustments
Non-cash charges-auditors’ remuneration	3.2	1,211	-	1,211	1,211
Notional recharges and other non-cash items	3.2	(43,697)	-	(43,697)	(43,697)
Movement in reserves
Recognised in other comprehensive expenditure:
Revaluation of PPE	OCE	-	33,103	33,103	33,103
Revaluation of intangibles	OCE	-	8,661	8,661	8,661
Revaluation of Right of use assets	OCE	-	(5,428)	(5,428)	(5,428)
Pension actuarial movements	OCE	15,238	-	15,238	15,238
Contributions in respect of unfunded benefits		4,800	-	4,800	4,800
Transfers between reserves		11,524	(11,524)	-	-
Transfer to General Fund - net asset transfer		549	-	549	549
Balance at 31 March 2023		(30,281)	171,416	141,135	141,135

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

Notes to the Departmental Accounts

1 Statement of Accounting Policies

The financial statements have been prepared in accordance with the 2023-24 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.

In the process of applying the department’s accounting policies, significant judgements and / or estimation techniques have been made by management in the following areas:

Revenue Recognition

The point at which it is appropriate to recognise revenue in the Statement of Comprehensive Net Expenditure (SoCNE), most notably:

• Rural Development Programme for England (RDPE) income (see Note 1.5.2),

• Operating Income (see Note 4.2).

• Accrued and deferred income, and contract assets / liabilities within Trade Payables and Receivables, where it is expected that income from fees and charges will break-even over a reasonable period of time (see Note 1.13).

• Judgements are used to assess the expected timing for the satisfaction of performance obligations, and determination of transaction prices per IFRS 15 (see Note 1.13).

Disallowance

• Determining the timing and value of revenue recognition and measurement basis for disallowance penalties (see Note 15.3).

Property, Plant and Equipment

• The valuation of property, plant and equipment requires professional valuers to make assessments which affect the value including the estimation of the assets’ useful lives (see Note 1.6).

• The impairment of property, plant and equipment and intangible assets (Note 7).

• The selection of appropriate indices to apply in the valuation of property, plant and equipment (see Note 5) and intangible assets (see Note 6).

• The classification of expenditure in the Environment Agency (EA) between property, plant and equipment or intangible assets and capital works expensed in year (see Note 1.16).

• The estimation uncertainty around asset costings and depreciation relating to Depreciated Replacement Cost (DRC) valuations of EA’s operational assets (see Note 1.16 and Note 5.1).

Leases

• Professional judgement has been applied to estimate a reasonable length for the term when calculating lease liabilities and right of use asset valuations (see Note 1.9).

Provisions and Liabilities

• Recognition of provisions according to the existence of 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 (see Note 1.20).

• Flood Re’s liability arising from claims made under insurance contracts can fluctuate between years and requires an estimate of the values remaining unclaimed from events and the estimation of a provision where there is uncertainty in relation to the value (see Notes 1.16 and 1.20).

• Pension liabilities (see Note 1.19 and Note 16). Independent and qualified actuaries assess the specific factors that influence the pension fund position, such as life expectancy and age of scheme members, prevailing interest and inflation rates, informing the valuation of the Defined Benefit Obligation. Estimation uncertainty also features in the asset base for non market quoted assets. Finally, Defra group makes judgements based on IFRIC 14 principles on whether to constrain the recognition of surpluses where these arise.

• RPA’s Delinked payments are subject to progressive reductions, which decrease the value of payments each year from 2024 to 2027. As at 31 March 2024, progressive reduction rates for 2025 and onwards were not yet published, and therefore management have used judgement and historical trends to estimate future progressive reduction rates. (Note 1.21).

Financial Instruments and Liabilities

• Assessment and calculation of Expected Credit Losses, according to IFRS 9 business model including the estimation of the impact of future events (see Note 9).

• The recognition and treatment of financial liabilities relating to EA reservoir operating agreements compliant with IFRS 9 (see Note 9), including recognition of the liability as a perpetuity at amortised cost and the expected future Retail Prices Index (RPI). The liability is discounted using the Effective Interest Rate (EIR) method, which is the rate that exactly discounts the estimated future cash payments through the expected life of the financial liability to its’ amortised cost.

1.2 Accounting Convention

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.

1.3 Going Concern

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. Parliament provides approval for amounts annually, prior to the parliamentary recess and there is no reason to believe that future approvals will not be made.

1.4 Basis of Consolidation

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

IFRS 10, as adapted by the FReM, requires the department to apply the criteria used by the Office for National Statistics (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 20 provides details of entities within the departmental boundary, comprising supply financed agencies and those entities listed in the designation and amendment orders presented to Parliament.

1.5              Scheme Costs and Grants

1.5.1           Rural Payments Agency Reported Income and Expenditure

The accounting policies applying to both income and expenditure under Commission funded schemes, and expenditure under UK Exchequer funded schemes, excluding delinked payments (Note 1.21) are detailed below.

1.5.1.1 Rural Payments Agency European Commission funded schemes

European Commission Funding for EU schemes recognised in the accounts prior to 1 April 2023 ceased on 15 October 2020 and was replaced by UK Exchequer funding from that point onwards. These schemes were principally the Basic Payments Scheme, Fruit and Vegetables Scheme, and School Milk Scheme. However, RPA continues to recover debts from farmers in relation to scheme payments which were originally funded by the European Commission and continues to repay a proportion of the monies recovered to the European Commission. These recoveries are presented as negative expenditure, whilst the corresponding repayments to the European Commission are presented as negative income. Entries are against expenditure and income, rather than the Statement of Financial Position, since RPA is recovering and paying over money owed by customers ultimately to the European Union, rather than owed by customers to the RPA itself.

1.5.1.2       Rural Payments Agency UK Exchequer funded schemes

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

• The claimant has fulfilled all their performance obligations in line with the applicable scheme rules and regulations; and

• The value of the claim can be reliably estimated by RPA.

This commonly results in expenditure being recognised on receipt of claims, or annual declarations from customers. However, expenditure may be recognised later when claims, or declarations are received in advance of other underlying performance obligations being completed by the claimant. This is the case for the Basic Payment Scheme (BPS), where recognition is the later of the receipt of claims, and the 15 May eligibility date when claimants must have land at their disposal; and Sustainable Farming Incentive (SFI) revenue agreements where recognition is on the latter receipt of a claimant’s annual declaration and the final day of their agreement year.

Delinked payments will replace the BPS in England in 2024 and the accounting policy is described below (Note 1.21).

RPA administers several schemes for all UK claimants, principally the Fruit and Vegetables and School Milk Schemes. Where RPA makes payments to claimants 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.

1.5.2 RDPE Scheme Income and Expenditure

Up until the 31 March 2023, payments under RDPE were made by RPA on behalf of Defra and Forestry Commission (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 was recognised in the Core department. Defra delegated authority to RPA to administer certain elements of RDPE, including validation and payments of eligible claims as authorised by Natural England (NE) and RPA.

As of 1 April 2023, EU funding was exhausted and Defra’s status as the controlling Managing Authority for RDPE ceased to be meaningful, with control of the schemes transferred to RPA with all RDPE expenditure and recoveries recognised within RPA’s Statement of Comprehensive Expenditure. Note that because Defra recognised expenditure for these schemes on average, in advance of cash payments being made, RPA continued to make cash payments to claimants on behalf of Defra during the 2023-24 financial year to settle in cash terms expenditure which was accrued by Defra during financial year 2022-23.

The impacts of any foreign exchange movements between the claim date and the date of actual reimbursement by the European Commission are recognised in the Statement of Comprehensive Net Expenditure.

1.6 Property, Plant and Equipment

Recognition and Valuation

Basis of Valuation

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

The specialist science estate operated by the Animal and Plant Health Agency (APHA) is valued using the DRC method taking into account the expected construction costs to rebuild equivalent assets.

EA dwellings, typically lock keeper cottages are valued at EUV Social Housing to reflect that the property is being held and occupied for the delivery of a service in existing use.

Since 2022-23, EA’s operational assets are valued using Depreciated Replacement Cost and details of the accounting policies relating to recognition and valuation can be found in Note 5.

Capitalisation Threshold

Minimum levels of capitalisation within the departmental boundary are generally in the ranges of £1,000–£10,000. Capitalisation thresholds vary, as these are set within reference to the nature and complexity of assets and related projects at each entity.

Revaluation

With the exception of some of EA’s assets (see below) freehold land and buildings are subject to professional valuation at no more than five yearly intervals (quinquennial valuation).

Quinquennial Valuations 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 of the corporate estates including the Core department, administrative buildings and APHA, 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 last quinquennial valuation of EA’s land and buildings (including dwellings), except Assets Under Construction (AUC), was as at 31 March 2021 and the valuation was undertaken by Royal Institution of Chartered Surveyors (RICS) qualified external chartered surveyors Savills and Avison Young. This 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 2024 using suitable indices.

Following the 2021 valuation EA has implemented a rolling programme of revaluation of operational land, buildings and dwellings whereby around 20 per cent of land and building assets are selected for valuation each year. The valuation is prepared by a RICS qualified surveyor and reviewed by EA Estates and Finance apply the valuation to the assets. Administrative land and buildings, such as offices and depots are not specialised assets and are valued on a comparable replacement basis every five years as part of a quinquennial review.

In between quinquennial valuations and 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.

Details of the revaluation of EA’s operational assets can be found in Note 5 below.

1.7 Assets Under Construction (AUC)

AUC are carried on the Statement of Financial Position (SoFP) at accumulated cost with depreciation commencing when the asset is completed and available to be brought into service. Balances are regularly reviewed to ensure that they only include costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

1.8 Heritage Assets

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 the department’s 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 Statement of Financial Position (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 due to insufficient specialist valuation resource to undertake the valuations. 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. Valuations of heritage assets, while 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.

Royal Botanic Gardens, Kew (RBG Kew) also holds heritage assets. RBG Kew has not capitalised heritage buildings and collections acquired before 2001-02, as the cost of obtaining valuations for older collections and buildings is onerous compared to the benefit to the readers of the accounts. Since 2001-02, 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 after 2001-02 are recognised at cost and are neither revalued nor depreciated but are subject to impairment review at five yearly intervals, or when circumstances dictate.

1.9 Leases

1.9.1 Defra as a Lessee

The department implemented IFRS 16 with effect from 1 April 2022, using the adaptations and interpretations set out by HM Treasury in the FReM.

The definition of a lease has been updated under IFRS 16 with more emphasis on being able to control the use of an asset identified in a contract. For lessees, there is no longer a distinction between operating and finance leases, instead leases in scope of IFRS16 are reflected on the SoFP as right of use (ROU) assets and corresponding lease liabilities.

Liabilities are measured at the present value of unavoidable future lease payments. ROU assets are calculated as the lease liability but may require further adjustment for initial direct costs, prepayments or incentives, and costs related to restoration at the end of a lease. There will also be a difference between the liability and asset value where lease payments do not reflect market value such as those known as peppercorn leases which is described in more detail below.

The SoCNE reflects related charges for the depreciation of ROU asset and interest on the lease liability in place of rental expenses. It continues to reflect irrecoverable VAT where applicable on any leases in line with HM Treasury guidance on the application of IFRS 16 Leases which state that VAT should not form part of the initial measurement of the ROU asset.

This treatment has been applied to all leases except short-term leases (12 months or less) or in some cases where the underlying asset is of low value, which continue to be accounted as expenses on a straight-line basis in the SoCNE for the duration of the lease term.

The definition of a contract is expanded in the FReM to include intra UK government agreements such as Memorandum of Terms of Occupation. The FReM also expands the definition of a lease to those with nil consideration, or significantly below market value, such as those known as peppercorn leases. For peppercorn leases, the department has obtained a professional valuation of the ROU assets from an appropriately qualified professional which is used to value the ROU asset, rather than any rent paid as this does not reflect a market value of the asset. This creates a difference between the ROU asset value and the lease liability which is recognised in the Statement of Changes in Taxpayers Equity (SoCTE).

Leases have been entered into across the Defra group for the use of buildings, land, IT and vehicles. Leases are used where they provide more flexibility than purchase, or because that is what is available for the location or purpose required. Some leases contain break clauses at defined points in the lease. This provides greater flexibility to the Defra group to exit leases early if circumstances change. Professional judgement has been applied where there are break clauses and the expected point of exiting the lease has been used when measuring the lease liability.

Professional judgement on the expected term of a lease is also applicable where the department is still in occupation after the lease end date and the lease is “holding over”. Reliance has been placed on estates staff, supported by information in the estate strategy, in forming an estimate of a reasonable length for the term when calculating lease liabilities and right of use asset valuations. The most material leases have a fixed end date, limiting the impact of this professional judgement.

When calculating the lease liability, if the interest rate cannot be readily determined within a lease, the department has calculated the lease liability using the discount rates set out in the latest HM Treasury’s Public Expenditure System paper as the incremental borrowing rate which for the 2022 calendar year is 0.95 per cent, 3.51 per cent for 2023, and 4.72 per cent for 2024. These rates are used when calculating and initial lease liability or transition, for a new lease or when reassessing the lease.

The adoption of IFRS16 does not affect the departments liquidity risk, which is not significant, as the department’s net resource outturn is financed through resources voted annually by Parliament.

The department is not exposed to any significant risk in future cash flows from extension clauses, termination clauses, variable lease payments or residual value guarantees as these are not standard in Defra lease agreements. There are no restrictions or covenants, or any current sale and leaseback transactions affecting these accounts, nor are there any lease agreements where we are committed but the lease has not yet commenced.

Subsequent measurement of ROU assets is 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. For the majority of assets cost is a reasonable proxy due to the relatively short term nature of leases compared to freehold assets, and also because most leases contain regular rent reviews. In practice Defra group has sought a valuation for ROU assets which are peppercorn leases, or where there is no rent review.

1.9.2 Defra as a Lessor

Lessor accounting is largely unchanged by IFRS 16 with lessors continuing to distinguish finance and operating leases. Leases which transfer substantially all the risks and economic benefits of the underlying asset have been classed as finance leases. All other leases have been classed as operating leases.

Where a sub-lease has been judged to be a finance lease, Defra has derecognised the ROU asset and recognised a receivable for the net investment in the finance lease equivalent to discounted future income.

Occupation of the corporate estate by Defra group bodies is on a flexible shared basis with very few 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 legal leaseholder unless there is a formal arrangement in place.

1.10 Intangible Non-Current Assets

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

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. Development costs may be capitalised where the criteria noted in IAS 38, Intangible Assets are satisfied.

Internally developed computer software includes the costs of internal employees where evidence demonstrates that these are necessarily incurred and directly attributable to creating, producing, and preparing 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.

Costs, including configuration and customisation costs, are only recognised on the SoFP under IAS 38 when the underlying asset is controlled by Defra group. Where this is not the case, as in some Software as a Service arrangements, costs of customisation will be taken directly to net expenditure even if the economic benefits of these costs are expected to last multiple years.

The capitalisation threshold for the Defra group generally ranges between £1,000 and £250,000. 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 depreciated replacement cost.

1.11 Depreciation and Amortisation

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

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

Where non-current assets contain components that have differing patterns of benefits and values that are significant relative to the total cost of the item, each component is capitalised, where possible, and depreciated separately over the appropriate estimated useful economic life of the component. Where componentisation is not possible or practicable, useful lives are estimated using the weighted average useful life method.

Non-current assets are depreciated over the following timescales:

Infrastructure assets (e.g. Thames Barrier)	Up to 100 years
Freehold and leasehold buildings	Up to 80 years or remaining life of lease
Vehicles, furniture and fittings and equipment	Up to 30 years
Plant and machinery	Up to 50 years
Intangible assets - Internally Developed Software	Up to 15 years
Intangible assets - Software Licenses	Up to 25 years

Depreciation on EA’s operational assets valued using the DRC method is calculated to write off the value of the asset over the expected useful economic life. Depreciation is charged in the month of capitalisation but not in the month of disposal and this is between 10 and 100 years.

Typically, intangible assets have no residual values and are not sold but are used until decommissioned and amortised over the life of the asset. Whilst the useful economic life (UEL) of intangible assets is normally within the ranges quoted above, there may be specific circumstances where a case by case assessment results in a UEL outside of these ranges.

1.12 Impairment

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.

1.13 Income

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.

Defra 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;

• whether any contract asset has an alternate use to Defra,

• the control of the customer over any asset created,

• whether the benefit to the customer is received and consumed simultaneously.

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 an entity’s board. The department 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 Defra group.

Further details can be found in Note 4.1.

Accrued income may involve a greater element of judgement, requiring management to make an estimate of the amount 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 representing previous surpluses or deficits of income compared to expenditure. Charging schemes are required to recover full costs over a reasonable period of time and judgement is required in assessing the factors behind whether the surplus or deficit will result in a full cost recovery position over this reasonable period.

Insurance income is accounted through IFRS 4 (Insurance Contracts). This includes:

• Gross written premiums are earned on a pro rata basis over the term of the underlying insurance contract as a proxy to the underlying risk.

• Ceded premiums, which comprise the total premiums payable for the whole cover provided by contracts entered into in the period and are recognised on the date on which the policy incepts.

• Fee and commission income consists entirely of commissions receivable on ceded reinsurance contracts.

• Commission income varies with, and is directly related to, the underlying reinsurance contracts.

1.14 Cash and Cash Equivalents

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.

The EA holds amounts within the Government Banking Service (GBS) and in escrow accounts as security for permitting deposits which are permits issued for landfill sites, dredging lagoons, mining waste and hazardous waste facilities. These are recognised as cash and cash equivalents as, although they require an environmental incident under section 57 The Environmental Permitting (England and Wales) Regulations 2016 to be utilised, they meet the definition of cash under IAS 7. On the occurrence of an environmental incident, funds would be withdrawn from demand accounts and recognised as income in line with IFRS15 as remedial actions are completed. The amounts held reduce over the life of the closure period of the sites, reducing each year as the obligations of the permit holder decrease. The deposits are held purely as security and on completion of obligations under site closure plans, are repayable to the permit holder. Interest earned on deposits in the accounts is payable to the permit holder. The corresponding liability is included within Note 12.

1.15 Grant-in-Aid Funding

Grant-in-aid from the Core department to non-departmental public bodies (NDPBs), both in respect of capital and revenue expenditure, is recognised in the period that the payment is made. In the Core department, Grant-in Aid is recognised as expenditure and within the NDPBs as funding. Grant-in-Aid is eliminated within the Defra group consolidated accounts.

1.16 Expenditure

Expenditure is recognised on an accruals basis.

Expenditure is recognised when the department has an unconditional obligation to settle an agreed amount, either 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 (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.

1.17 Foreign Currency Transactions

The functional and presentational currency of the department is sterling.

RPA receives reimbursements from the European Commission in Euros for funds administered by them and other UK paying agencies in relation to the Rural Development Programme. These foreign currency transactions are recognised as scheme expenditure and scheme income at the rates of exchange prevailing on the dates of recognitions. At each SoFP date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date.

Exchange differences are recognised in the SoCNE in the period in which they arise.

1.18 Financial Instruments

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

1.18.1 Financial Assets

Financial assets are categorised according to the entity’s business model for managing the asset and the asset’s 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 considers whether cash flows are consistent with a basic loan arrangement (i.e. repayments of principal and interest on agreed dates).

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

Amortised Cost

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 include accrued income that does 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 Effective Interest Rate (EIR) Method and are subject to impairment. (See Flood Re’s Annual Report and Accounts Note 2.8).

Fair Value through Profit and Loss (FVPL)

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

Fair Value through Other Comprehensive Income (FVOCI)

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

1.18.2 Financial Liabilities

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 that do not meet the definition of financial instruments.

EA recognises financial liabilities relating to 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 using the effective interest rate method. The annual payments arising from these liabilities increase annually in line with the RPI.

Promissory Notes payable have been classified as financial liabilities measured at amortised cost. They are carried as current liabilities in the Consolidated SoFP, 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.

1.18.3 Derivative Financial Instruments

RPA enters into foreign exchange forward contracts to manage its exposure to foreign exchange rate risk. Despite a number of schemes ceasing to be EU funded, RPA continues to be exposed to exchange rate risk in respect of reimbursements due from the EU (further detail can be found in RPA’s Annual Report and Accounts).

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 reporting period 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. RPA does not trade derivative arrangements for speculative purposes and does not perform designated hedge accounting.

1.19 Pensions

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 / 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 16.

1.20 Provisions

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 foot and mouth disease (FMD) burial sites, RPA Delinked Payments and some of Flood Re’s insurance claim liabilities, where the timing and the value is subject to uncertainty.

See Note 15 for full details of all material provisions, including key management judgements and disclosures around estimation uncertainty.

1.21 Rural Payments Agency Delinked Payments

Delinked payments will replace BPS payments in England in 2024 and will reduce each year until these payments finish. These reductions to BPS and delinked payments are known as progressive reductions.

The full value of delinked payments has been recognised during the 2023-24 financial year, in line with the recognition point of BPS 2023 expenditure, as eligibility for delinked payments is linked to the submission of valid BPS claims. As progressive reduction rates for 2024 have been published, there is considerable certainty over the value of delinked payments for that year. Therefore, this proportion of expenditure has been recognised in the Statement of Financial Position as an accrual. The value of delinked payments in 2025 onwards is subject to greater uncertainty and has therefore been recognised as a provision. The provision is measured at present value using discount rates issued by HM Treasury. See Note 1.1 for further details of the estimation uncertainty associated with the provision element of delinked payments and Note 15.4 for details of the delinked payments values recognised within the Statement of Financial Position.

RPA enters into multi-annual agreements in respect of some schemes. In accordance with the recognition criteria above, where such agreements contain obligations that customers have not yet performed, those elements of the agreements are not recognised as expenditure. The extent of these unrecognised commitments is disclosed in Note 8.2. To the extent that customers meet their future performance obligations, RPA expects that these commitments will be recognised as expenditure in future years.

1.22 Contingent Liabilities

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 as part of the Further Information Relating to Parliamentary Accountability section.

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

1.23 Impending Application of Newly Issued Accounting Standards Not Yet Effective

IFRS 17 – Insurance Contracts

IFRS 17 will apply to all types of insurance and reinsurance contracts and proposes an approach to measuring insurance contract liabilities that is based on the expected present value of future cash flows. It is being applied by HM Treasury in the FReM from 1 April 2025 (with limited options for early adoption). The Department is not adopting the standard early and therefore, the Consolidated Annual Report and Accounts will be prepared in accordance with IFRS 4 until 1 April 2025.

The impact of IFRS 17 within the consolidated ARA is still being assessed. However, early indications suggest that the material impact will relate to Flood Re’s activities and the arrangements relating to the Thames Tideway Tunnel.

The standard brings significant change to the accounting treatment of reinsurance inwards and reinsurance outwards contracts cash flows, which is expected to have a material impact on the Defra financial statements on initial recognition.

The amounts recognised in the Statement of Comprehensive Net Expenditure will be disaggregated into:

• An insurance service result, comprising insurance revenue and insurance service expenses.

• Insurance finance income or expenses.

Income or expenses from reinsurance contracts held will be presented separately from the expenses or income from insurance contracts issued.

Flood Re has applied IFRS 17 for the first time in their Annual Report and Accounts for the period ended 31 March 2024, including full retrospective adoption to the restatement of results of prior period balances. The adoption of IFRS 17 produced a material impact on the Flood Re’s Financial Statements and disclosures. Flood Re has also prepared statements for consolidation into the department’s financial statements in accordance with IFRS4 Insurance Contracts.

Flood Re

Under IFRS17, Flood Re’s reinsurance inward and outward contracts are all eligible to be measured by applying the Premium Allocation approach (PAA) which differs from IFRS4 in the following key areas:

• The carrying amount of the liability for remaining coverage (LFRC) excluding the loss component (LFRC ex-LC) or asset for remaining coverage (AFRC) excluding the loss-recovery component (AFRC ex-LRC) comprised of premiums relating to the contracts in-force within the boundary of one year from the beginning of the relevant accounting period and balances brought forward from the previous accounting period (if any).

• The LFRC reflects premiums received less amounts recognised in revenue for insurance services provided.

• Measurement of the LFRC does not include an adjustment for the time value of money because premiums are received on average within 1 month after the due date, and overall, below the 12 month thresholds required under IFRS 17.

• Measurement of the LFRC does not include an adjustment for non-financial risks. Management considers in its evaluation that non-financial risk relating to LFRC is extremely low.

• Measurement of the liability for incurred claims (previously claims outstanding and incurred but-not-reported (IBNR) claims) is determined on a discounted probability-weighted expected value basis and includes an explicit risk adjustment for non-financial risk. The liability includes Flood Re’s obligation to pay all incurred insurance expenses.

• Measurement of the LFRC (reflecting premiums received for reinsurance inward contracts) is adjusted to include a loss-component to reflect the expected onerous contract losses on Flood Re’s bound but not incepted (BBNI) contracts.

• Measurement of the AFRC (reflecting reinsurance outward premiums paid for reinsurance outward contracts) is adjusted to include a loss-recovery component to reflect the expected recovery of onerous contract losses where such contracts reinsure onerous direct contracts.

The impact on the Statement of Financial Position for the Defra group had Flood Re’s transition to IFRS 17 been reflected as at the 31 March 2024 is: an £11.449 million increase in financial assets; a £65.37 million increase in liabilities (comprising of a reduction in trade, other payables and contract liabilities of £83.253 million, a reduction in provisions of £325.653 million and the introduction of the re-insurance inward contract liability of £474.276 million); and a reduction in retained earnings in equity of £53.921 million.

Flood Re’s tax position has been consolidated on an actual tax basis, which is driven by changes arising from IFRS 17, but excludes any other impact of restatement. This has resulted in the Group recognising a corporation tax refund in 2023-24 of £3.9 million (2022-23: charge of £21 million). 

While IFRS 17 valuations for Flood Re’s liabilities (higher than the IFRS 4 values recognised in the Group) have driven these tax consequences, the Group considers that no deferred tax arises from this difference because it is not expected to reverse and is not a temporary difference within the scope of IAS 12.

The introduction of IFRS 17 has resulted in presentational and disclosure adjustments in Flood Re’s accounts the details of which can be found in Flood Re’s Annual Report and Accounts.

1.24 Changes to Accounting Policies

All accounting policies are unchanged compared to those in the 2022-23 departmental group financial statements.

1.25 Prior Period Adjustments

The prior year accounts have been restated to reflect changes to the opening positions following on from a review of how project spend has been classified in the EA, along with revised land and building asset revaluation balances in the EA. Also included is a restatement to reflect the impact of the implementation of IFRS 16 in 2022-23 on the SoCNE. Further detail can be found in Note 19.

1.26 Adoption of new and revised standards

As at the date of authorisation no new standards have become effective and been adopted within the departments Consolidated Accounts.

2 Statement of Operating Costs by Operating Segment

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. Senior management review 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 segments revenue is ten 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 2023-24, Defra received funding of £109 million from the EU, eight per cent of its income (2022-23 £240 million, 18 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 Common Agricultural Policy (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.

	2023-24 Gross Expenditure	2023-24 Gross Income	2023-24 Net Total	Restated 2022-23 Gross Expenditure	Restated 2022-23 Gross Income	Restated 2022-23 Net Total
	£000	£000	£000	£000	£000	£000
Director General Budget Area
Group Corporate Services including centrally held budgets (Note 1)	432,818	(119,628)	313,190	206,050	(12,864)	193,186
Environment, Rural and Marine including ALB’s (Note 2)	3,960,271	(1,020,172)	2,940,099	2,911,942	(912,819)	1,999,123
Food, Farming and Biosecurity including ALB’s (Note 3)	4,564,909	(249,752)	4,315,157	3,129,018	(389,583)	2,739,435
Other including International and Borders and Strategy and Change	499,287	1,068	500,355	229,532	(296)	229,236
Total	9,457,285	(1,388,484)	8,068,801	6,476,542	(1,315,562)	5,160,980

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, LI Ltd, RPA and VMD

3 Expenditure

3.1 Staff and other Costs

	2023-24 Core department and Agencies	2023-24 Defra group	Restated 2022-23 Core department and Agencies	Restated 2022-23 Defra group
Staff Costs	£000	£000	£000	£000
Wages and salaries	695,374	1,458,604	588,444	1,230,078
Social security costs	63,783	146,733	57,044	126,778
Other pension costs	142,821	190,573	129,588	169,443
Other Costs
Travel, subsistence and hospitality	29,033	54,801	20,499	37,236
Research and development expenditure	149,214	193,497	110,967	138,871
Veterinarian costs	47,023	47,023	48,630	48,630
Consumables	23,979	40,283	25,233	39,335
IT service costs	363,260	445,308	259,123	347,795
Vessels	7,207	7,207	6,916	6,916
Estate management	124,325	181,560	110,683	156,165
Consultancy	42,378	161,445	29,159	135,880
Hired and contracted services	31,705	189,634	61,799	228,518
Training	9,802	22,746	9,004	20,868
Publicity, marketing and promotion	2,250	21,194	1,073	18,048
Office services	52,309	54,135	43,542	44,283
Early retirement	34	119	49	333
Exchange rate (gains)/losses - realised	(821)	(803)	505	530
NAO auditors’ remuneration	2,413	3,092	508	1,079
Flood Re statutory audit fee	-	675	-	377
Other audit fees	17	275	1,995	2,140
Internal audit fees	2,589	3,382	2,427	3,427
Flood and coastal defence works	-	302,328	-	256,591
Operational maintenance	-	17,068	-	17,255
Fees and commissions	21,854	58,479	18,724	55,332
Reservoir operating agreements	-	67,770	-	58,013
Transport and plant costs	-	39,775	-	26,589
EU disallowance	(6,124)	(6,124)	1,771	1,771
Forestry Commission subsidy to Forestry England	16,147	16,147	20,427	20,427
Corporation tax paid by NDPBs	-	(3,533)	-	20,966
Flood Re reinsurance expenditure	-	74,744	-	72,769
International subscriptions	56,756	56,836	64,382	64,468
Credit losses	15,341	17,993	(1,195)	1,574
Expense related to short-term leases	606	3,161	3,197	8,603
Expense related to low-value asset leases (excluding short term leases)	1	713	-	14
Other	8,114	76,294	37,454	137,530
Total	1,901,390	3,943,134	1,651,948	3,498,632

For more detailed disclosures regarding staff costs, see the Staff Report.

The Core department figures for NAO auditors’ remuneration include cash fees for EA and NE which form part of the corporate services finance charge within their own ARAs.

The 2023-24 NAO’s auditor remuneration includes £286,000 relating to the 2022-23 audits of the Consumer Council for Water, Environment Agency, Livestock Information Ltd, Marine Management Organisation, Natural England, National Forestry Company and Office for Environmental Protection.

The 2022-23 NAO auditors’ remuneration includes £4,000 relating to the 2021-22 audit of OEP.

3.2 Non-cash items

	2023-24 Core department and Agencies	2023-24 Defra group	Restated 2022-23 Core department and Agencies	Restated 2022-23 Defra group
	£000	£000	£000	£000
Depreciation	36,470	376,687	35,811	131,218
Depreciation on Right of Use Assets	31,575	49,026	30,506	44,491
Amortisation	32,606	55,873	31,103	59,393
Profit on the disposal of PPE and financial investments	(193)	312	(52)	(598)
Loss on the disposal of PPE and financial investments	1,349	20,925	(2,214)	19,139
Impairment on non financial assets	68,369	122,968	(2,685)	10,393
Exchange rate (gains)/losses - unrealised	-	(11)	(43)	(43)
NAO auditors’ remuneration	1,320	1,320	1,211	1,211
Pensions – current service cost	-	94,434	-	197,470
Pensions – net interest charge	6,319	(16,880)	3,301	23,088
Other provisions provided for/(written back) as detailed in Note 15	613,084	847,247	(481,633)	(411,464)
Utilisation of capital provision	(482)	(482)	(485)	(485)
Unwinding of discount on provisions	32,829	32,672	6,087	6,087
Capital grant-in-kind	1,977	8,045	135	135
Notional recharges and other non-cash items	(53,787)	1	(43,697)	(5)
Total	771,436	1,592,137	(422,655)	80,030

The 2022-23 NAO auditors’ remuneration stated above includes £9,000 relating to the 2021-22 audit of VMD.

3.3 Grants and subsidies

	2023-24 Core department and Agencies	2023-24 Defra group	Re-presented 2022-23 Core department and Agencies	Re-presented 2022-23 Defra group
	£000	£000	£000	£000
Grants and subsidies: EU
Current grants - Basic Payment Scheme	(250)	(250)	(264)	(264)
Current grants - Rural Development Programme for England	(3,064)	(3,064)	135,019	135,019
Current grants - payments to other paying agencies	85,154	85,154	99,721	99,721
Other EU current grants	15,351	15,351	1,146	1,146
Unrealised (gains)/losses	453	453	(1,214)	(1,214)
Grants and subsidies: other
Capital Grants - Other	263,181	417,304	228,459	393,765
Capital Grants Countryside Stewardship	163,662	163,662	101,958	101,958
Capital Grants Environment Stewardship	409	409	-	-
Capital Grants Simpler Recycling Scheme	258,286	258,286	-	-
Current Grants - De-Linked Payments	809,486	809,486	-	-
Current grants - Grant-in-Aid to NDPBs	1,968,628	-	1,604,330	-
Current grants - Rural Development Programme for England	5,334	5,334	131,494	131,494
Current grants - BPS Exchequer funded	1,087,362	1,087,362	1,369,142	1,369,142
Current grants - Other RPA schemes	24,609	24,609	31,884	31,884
Current grants - Canal & Rivers Trust	52,623	52,623	52,623	52,623
Current grants - South West Water Customer Rebate Scheme	40,586	40,586	40,300	40,300
Current grants - TB Compensation Scheme	31,012	31,012	29,268	29,268
Current Grants Countryside Stewardship	395,721	395,721	169,466	169,466
Current Grants Environment Stewardship	108,944	108,944	-	-
Current Grants Sustainable Farming Incentive	32,091	32,091	12,490	12,490
Grants to national parks	48,766	48,766	53,166	53,166
Waste Infrastructure Grants to local authorities	83,592	83,592	87,459	87,459
Other grants to local authorities	107,217	136,498	98,414	106,558
Other current grants and subsidies	132,745	128,085	86,319	83,899
Total	5,711,898	3,922,014	4,331,180	2,897,880

There have been changes to the grant profiles this year, this is predominantly due to RPA scheme changes. To reflect this, we have included several new disclosure lines in the note above. These have also been re-presented for the prior year to provide a comparison where available.

4 Income – Analysis of Operating Income

4.1 Analysis of revenue from contracts with customers

	2023-24 Core department	2023-24 Rural Payments Agency	2023-24 Other Agencies	2023-24 Core department and Agencies	2023-24 Environment Agency	2023-24 Other Non-Departmental Public Bodies	2023-24 Defra group
	£000	£000	£000	£000	£000	£000	£000
Sales of goods and services
Scientific advice, analysis and research	-	-	28,683	28,683	-	1,535	30,218
Animal disease surveillance and diagnostics	-	-	8,782	8,782	-	-	8,782
Veterinary research and development	-	-	1,630	1,630	-	-	1,630
Scientific products	-	-	1,754	1,754	-	-	1,754
Provision of corporate services (outside Defra group)	-	-	613	613	-	-	613
TB Compensation salvage receipts	10,189	-	422	10,611	-	-	10,611
Sale of other goods	3,658	-	(289)	3,369	-	18,947	22,316
Other services (including Defra group)	7,262	2,683	4,205	14,150	7,458	(11,897)	9,711
Fees, levies and charges
Veterinary medicines authorisations	-	-	8,130	8,130	-	-	8,130
Veterinary medicine residues surveillance	-	-	4,373	4,373	-	-	4,373
Plant health inspections and seeds charges	-	-	12,598	12,598	-	-	12,598
Environmental protection charges	-	-	-	-	223,720	-	223,720
Abstraction charges	-	-	-	-	191,408	-	191,408
Flood risk levies	-	-	-	-	45,574	-	45,574
Flood Re Levy Income	-	-	-	-	-	135,000	135,000
Agriculture and horticulture levies	-	-	-	-	-	40,953	40,953
Sea Fish industry levies	-	-	-	-	-	7,495	7,495
Discretionary Advice	-	-	-	-	-	2,288	2,288
Other fees, levies and charges	-	-	3,059	3,059	-	1,965	5,024
EU income	-	-	(45)	(45)	-	-	(45)
Licences
Fishing licence duties	-	-	-	-	22,754	-	22,754
Navigation licence income	-	-	-	-	10,059	-	10,059
Other licences	7,060	-	-	7,060	-	3,681	10,741
Other Income
Capital grant income	(2,438)	1,509	-	(929)	23,257	(5,446)	16,882
Other grant income	-	-	-	-	-	3,006	3,006
Recoveries for secondments outside Defra group	2,412	-	86	2,498	-	1,716	4,214
APHA income from devolved administrations	-	-	42,990	42,990	-	-	42,990
Other Income	-	-	357	357	-	539	896
Total income from contracts with customers	28,143	4,192	117,348	149,683	524,230	199,782	873,695

	2022-23 Core department	2022-23 Rural Payments Agency	2022-23 Other Agencies	2022-23 Core department and Agencies	2022-23 Environment Agency	2022-23 Other Non-Departmental Public Bodies	2022-23 Defra group
	£000	£000	£000	£000	£000	£000	£000
Sales of goods and services
Scientific advice, analysis and research	-	-	28,675	28,675	-	1,683	30,358
Animal disease surveillance and diagnostics	-	-	9,017	9,017	-	-	9,017
Veterinary research and development	-	-	1,696	1,696	-	-	1,696
Scientific products	-	-	1,602	1,602	-	-	1,602
Provision of corporate services (outside Defra group)	-	-	214	214	-	-	214
TB Compensation salvage receipts	9,999	-	199	10,198	-	-	10,198
Sale of other goods	7,052	-	289	7,341	-	31,084	38,425
Other services (including Defra group)	2,059	418	4,194	6,671	4,914	(6,011)	5,574
Fees, levies and charges
Veterinary medicines authorisations	-	-	7,501	7,501	-	-	7,501
Veterinary medicine residues surveillance	-	-	4,142	4,142	-	-	4,142
Plant health inspections and seeds charges	-	-	12,545	12,545	-	-	12,545
Environmental protection charges	-	-	-	-	196,506	-	196,506
Abstraction charges	-	-	-	-	167,088	-	167,088
Flood risk levies	-	-	-	-	39,495	-	39,495
Flood Re Levy Income	-	-	-	-	-	135,000	135,000
Agriculture and horticulture levies	-	-	-	-	-	42,150	42,150
Sea Fish industry levies	-	-	-	-	-	7,153	7,153
Discretionary Advice	-	-	-	-	-	2,412	2,412
Other fees, levies and charges	-	-	2,445	2,445	-	1,440	3,885
EU income
Other EU income	-	-	1,518	1,518	-	-	1,518
Licences
Fishing licence duties	-	-	-	-	21,201	-	21,201
Navigation licence income	-	-	-	-	9,789	-	9,789
Other licences	7,060	-	-	7,060	-	3,389	10,449
Other Income
Capital grant income	-	2,824	-	2,824	28,709	(8,783)	22,750
Other grant income	-	-	-	-	-	749	749
Recoveries for secondments outside Defra group	1,328	-	-	1,328	-	1,494	2,822
APHA income from devolved administrations	-	-	43,366	43,366	-	-	43,366
Other Income	95	(55)	760	800	-	512	1,312
Total income from contracts with customers	27,593	3,187	118,163	148,943	467,702	212,272	828,917

Material income streams disclosed in accordance with IFRS 15 Contracts with Customers are determined as detailed in the table below:

Contract Type	Note 4 Headings	Entity Impacted	Categories of Performance Obligation	Basis of Recognition
Fees and Charges (for Environmental protection and water abstraction).	Environmental Protection Charges, Abstraction Charges.	EA	EA issues licences and permits and imposes levies.	The licence or permit revenue is recognised at the time of application and regulatory charge recognised at the point the permit commences.
Statutory Levy.	Flood Re Levy Income and Agriculture and Horticulture Levies.	Flood Re	Statute requires that the bodies charge levies.	Flood Re Levy is required by statute and has no associated performance obligation and is recognised on the 1 April each year with payment received quarterly.
		AHDB		AHDB levies are recognised over time as the levies fund services provided to levy payers throughout the year.
Flood Risk Levies.	Flood Risk Levies.	EA	Construction and Maintenance of new and existing flood defences.	Costs and revenues are matched over time.
Capital Works Expensed in Year Income.	Capital Grant Income.	EA	Construction and Maintenance of new and existing flood defences.	Income recognition is based on individual legally binding agreements and the completion of performance obligations.
Environmental Services.	Other Services.	NE	Receipts from developers for the purchase of nutrient pollution credits to mitigate for the development’s nutrient pollution.	Costs and revenue are recognised over time.
Environmental Services.	Other Goods.	NE	Receipts from developers for Great Crested Newt District Level Licensing. Revenue is for the creation and maintenance of ponds over a 25 year period.	Costs and revenue are recognised over time.
Scientific Project Income.	Scientific advice, analysis and research.	APHA	Production of a report (Performance obligations are contracted milestones within the process).	Costs and revenues are matched over time.
Scientific Project Income.	Scientific advice, analysis and research.	CEFAS	Production of a report (Performance obligations are contracted milestones within the process).	Project income is generally recognised at the completion of a contracted milestone on the basis that the contract will specify whether money spent to a determined date or deliverable can be recovered from the the customer prior to the completion of the project.
Customer Board Reports.	APHA Income from Devolved Administrations.	APHA	Production of a report for the Customer Boards of the Welsh Government and Scottish Government.	Costs and revenues are matched over time.

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:

	2023-24
	£000
Flood Risk Management Charges	100,863
Water Abstraction Charges (Note)	-
Environmental Protection Charges (Note)	-

Note: Water abstraction charges and environmental protection charges were zero at 31 March 2024 as EA have satisfied more performance obligations than they were able to recover in charges.

Flood risk management chiefly involves the construction and maintenance of new and existing flood defences.

4.2 Analysis of Other Operating Income

	2023-24 Core department and Agencies	2023-24 Defra group	Restated 2022-23 Core department and Agencies	Restated 2022-23 Defra group
	£000	£000	£000	£000
Goods and services
Veterinary research and development	804	804	755	755
Covent Garden Market income	-	-	2,030	2,030
Other services	90,638	33,262	67,857	33,670
Income payable to the consolidated fund	15,884	15,884	7,829	8,272
EU Income
Basic Payment Scheme	(71)	(71)	(327)	(327)
Income payable to other paying agencies	84,715	84,715	99,642	99,642
Structural fund / RDPE income	(3,064)	(3,064)	135,019	135,019
Current grant income - EU	5,968	16,189	(1,797)	3,471
Other EU Income	10,682	11,115	(10)	1,126
Other Income
Flood Re insurance income	-	192,973	-	97,040
Lease income	-	4	-	60
Sub Leasing income	-	56	1,876	1,892
Charity income	-	65,432	-	64,175
Lottery Grant Income	-	2,170	-	2,422
Other interest receivable	-	46,101	-	16,134
Current grant income - non EU	8,275	18,508	7,398	13,133
Capital grant income - non EU	12,503	9,251	88	5,358
Other income	2,527	21,460	2,773	2,773
Total other operating income	228,861	514,789		486,645

5 Property, Plant and Equipment

5.1.1 Non-Current – Defra group

	Land	Buildings Excluding Dwellings	Dwellings	Infrastructure Assets - Operational	Infrastructure Assets - Land	IT	Furniture and Fittings	Plant and Machinery	Vehicles	Assets Under Construction	Total
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Cost or valuation
At 1 April 2023 (restated)	89,660	609,912	17,624	23,378,437	237,311	62,105	117,474	201,706	85,788	583,469	25,383,486
Additions	6,049	7,145	-	126,760	30	1,050	(160)	9,008	4,374	208,058	362,314
Transfers	140	17,967	-	-	-	711	-	2,849	-	(20,219)	1,448
Disposals	(2,102)	(5,512)	(356)	-	(9,978)	(11,401)	(2,174)	(13,266)	(3,761)	(1,977)	(50,527)
Impairment	(6,700)	(11,889)	(601)	-	(34,313)	-	(90)	(185)	21	(23,221)	(76,978)
Reclassifications	928	(30,694)	(3,081)	6,037	22,017	(91)	18,499	1,340	-	(17,945)	(2,990)
Reclassified as held for sale	(246)	(2,875)	(49)	-	(251)	-	-	-	-	-	(3,421)
Revaluation	4,349	(231)	(3,575)	2,286,048	13,527	1,254	5,724	8,733	10,689	-	2,326,518
At 31 March 2024	92,078	583,823	9,962	25,797,282	228,343	53,628	139,273	210,185	97,111	728,165	27,939,850
Depreciation
At 1 April 2023 (restated)	-	147,392	9,803	13,772,353	-	51,797	69,459	120,309	61,643	-	14,232,756
Charges in year	-	28,516	420	304,173	142	3,484	11,373	15,576	10,238	-	373,922
Transfers	-	-	-	-	-	97	-	55	-	-	152
Disposals	-	(1,368)	(267)	-	(80)	(11,401)	(2,149)	(6,627)	(3,720)	-	(25,612)
Impairment	-	(294)	(74)	-	(333)	-	(6)	(171)	9	-	(869)
Reclassifications	-	(10,755)	(1)	923	4,084	(113)	5,851	(102)	-	-	(113)
Revaluation	-	(8,073)	(5,710)	1,803,590	(1,151)	966	2,428	216	4,598	-	1,796,864
At 31 March 2024	-	155,418	4,171	15,881,039	2,662	44,830	86,956	129,256	72,768	-	16,377,100
Net book value 31 March 2024	92,078	428,405	5,791	9,916,243	225,681	8,798	52,317	80,929	24,343	728,165	11,562,750
Net book value 31 March 2023	89,660	462,520	7,821	9,606,084	237,311	10,308	48,015	81,397	24,145	583,469	11,150,730
Assets financing
Owned	92,078	428,405	5,791	9,916,243	225,681	7,785	52,317	80,929	24,343	728,165	11,561,737
Finance leased	-	-	-	-	-	1,013	-	-	-	-	1,013
Net book value 31 March 2024	92,078	428,405	5,791	9,916,243	225,681	8,798	52,317	80,929	24,343	728,165	11,562,750
Of which:
Core department and agencies	32,375	297,263	-	-	-	4,651	16,822	38,213	531	177,607	567,462
NDPBs	59,703	131,142	5,791	9,916,243	225,681	4,147	35,495	42,716	23,812	550,558	10,995,288
Total	92,078	428,405	5,791	9,916,243	225,681	8,798	52,317	80,929	24,343	728,165	11,562,750

Plant and machinery includes vessels owned by Cefas with a net book value of £4.9 million (2022-23, £5.4 million). Infrastructure assets include flood defences owned by EA, including the Thames Barrier with a net book value of £979 million (2022–23, £1,483 million).

	Land	Buildings Excluding Dwellings	Dwellings	Infrastructure Assets - operational	Infrastructure Assets - land	IT	Furniture and Fittings	Plant and Machinery	Vehicles	Assets Under Construction	Restated Total
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Cost or valuation
At 1 April 2022	85,327	476,484	14,125	6,470,969	282,684	109,224	92,850	155,052	79,746	423,660	8,190,121
Reclassified to Right of Use asset	(1,827)	(5,513)	-	(54)	(1,790)	(30,454)	-	-	-	-	(39,638)
Adjusted opening balance 1 April 2022	83,500	470,971	14,125	6,470,915	280,894	78,770	92,850	155,052	79,746	423,660	8,150,483
Additions	10,500	4,960	-	65,118	-	1,120	7,625	14,609	3,240	210,226	317,398
Transfers	-	6,155	-	-	-	-	-	2,559	(4)	(8,904)	(194)
Disposals	(121)	(892)	-	(55,471)	(232)	(4,013)	(8,293)	(5,724)	(3,814)	2,334	(76,226)
Impairment	320	5,026	16	-	(1,979)	(16,382)	-	(4)	-	(8,078)	(21,081)
Reclassifications	1,464	80,168	2,285	2,599	(81,685)	(429)	15,795	19,988	(869)	(35,769)	3,547
Reclassified as held for sale	(415)	142	(75)	-	(634)	-	-	-	-	-	(982)
Revaluation	(5,588)	43,382	1,273	486,701	40,947	3,039	9,497	15,226	7,485	-	601,962
Impact of transition to DRC	-	-	-	16,408,575	-	-	-	-	-	-	16,408,575
At 31 March 2023	89,660	609,912	17,624	23,378,437	237,311	62,105	117,474	201,706	85,784	583,469	25,383,482
Depreciation
At 1 April 2022	-	104,834	7,490	3,467,292	-	73,704	57,909	100,248	53,189	-	3,864,666
Reclassified to Right of Use asset	-	(3,092)	-	(332)	-	(10,559)	-	-	-	-	(13,983)
Adjusted opening balance 1 April 2022	-	101,742	7,490	3,466,960	-	63,145	57,909	100,248	53,189	-	3,850,683
Charges in year	-	17,085	435	73,771	-	8,712	7,151	10,884	7,696	-	125,734
Transfers	-	-	-	-	-	-	-	-	(4)	-	(4)
Disposals	-	(391)	-	(37,617)	-	(3,610)	(7,253)	(5,569)	(3,472)	-	(57,912)
Impairment	-	789	-	-	-	(16,109)	(611)	(9)	-	-	(15,940)
Reclassifications	-	15,253	1,339	(24,284)	-	(2,538)	6,810	7,267	(4)	-	3,843
Revaluation	-	12,914	539	424,708	-	2,197	5,453	7,488	4,234	-	457,533
Impact of transition to DRC	-	-	-	9,868,815	-	-	-	-	-	-	9,868,815
At 31 March 2023	-	147,392	9,803	13,772,353	-	51,797	69,459	120,309	61,639	-	14,232,752
Net book value 31 March 2023	89,660	462,520	7,821	9,606,084	237,311	10,308	48,015	81,397	24,145	583,469	11,150,730
Net book value 31 March 2022	85,327	371,650	6,635	3,003,677	282,684	35,520	34,941	54,804	26,557	423,660	4,325,455
Assets financing
Owned	89,660	462,520	7,821	9,606,084	237,311	8,268	48,015	81,397	24,145	583,469	11,148,690
Finance leased	-	0	-	-	-	2,040	-	-	-	-	2,040
Net book value 31 March 2023	89,660	462,520	7,821	9,606,084	237,311	10,308	48,015	81,397	24,145	583,469	11,150,730
Of which:
Core department and agencies	32,584	307,146	-	-	-	5,371	14,282	33,871	494	146,968	540,716
NDPBs	57,076	155,374	7,821	9,606,084	237,311	4,937	33,733	47,526	23,651	436,501	10,610,014
Total	89,660	462,520	7,821	9,606,084	237,311	10,308	48,015	81,397	24,145	583,469	11,150,730

During 2022-23 EA conducted a revaluation of operational assets using the DRC method, the opening balances have not been restated and these remain as the values using the modified historic cost method as at 31 March 2022. The infrastructure assets have been represented between operational and land. The impact of the transition to DRC in 2022-23 is reflected in the revaluation and depreciation values within the Infrastructure assets (further details can be found in EA’s Annual Report and Accounts).

Impact of transition to Depreciated Replacement Cost (DRC)

The government’s financial reporting manual (FreM) requires that relatively specialised assets held for their service potential, including networked assets, to be accounted for at Depreciated Replacement Cost (DRC) to give the most appropriate valuation.

During 2022-23, the Environment Agency (EA) transitioned from valuing operational assets using the Modified Historic Cost (MHC) method to the Depreciated Replacement Cost method. In readiness for the transition to DRC, the EA has taken steps to significantly improve the reliability of source data on its asset base, especially in respect of its completeness. This led to the recognition of assets for which the EA has taken control and responsibility, but which were not previously valued under MHC as the EA neither purchased nor built them.

For 2022-23, the impact of transition to DRC under cost shows the adjustment from the gross book value as at the 31 March 2023, to the Modern Equivalent Asset Value (MEAV), i.e. the replacement cost of the asset portfolio based on modern equivalents. The impact of transition to DRC under depreciation shows the additional depreciation required to bring the MEAV down to the Depreciated Replacement Cost values as at the 31 March 2023. This ensures that the closing net book value of DRC assets reflects a replacement cost appropriately adjusted for the overall condition of the assets, which are part-way through their life.

As the transition to a DRC valuation was as at 31 March 2023, the opening balances are valued under MHC and are still subject to a qualified opinion based on the valuation approach not being in line with the financial reporting framework.

Operational assets includes a number of habitat creation schemes which remain valued using the Modified Historic Cost method, with a value of £43.2 million at 31 March 2024 (£64.0 million at 31 March 2023). Their primary purpose is to reduce the risk of flooding, but at the same time to enhance the natural habitat of the area and promote biodiversity. These are relatively recently constructed schemes and are not yet categorised as a separate asset type in the EA’s asset management system, however in most cases conventional operational assets, such as outfalls, sluices and embankments have also been built on the site.

The number of schemes that use natural solutions to managing flood risk is expected to increase in the future and alternative valuation approaches may be worthy of review at future valuations. 

Accounting convention:

The Environment Agency’s tangible non-current assets fall into four categories:

Asset category	Accounting conventions
Operational assets	Valued using the depreciated replacement cost method
Land and buildings	Valued on an existing use value basis
Other property, plant and equipment	Valued using the modified historic cost method
Assets under construction	Valued at historic cost before they are capitalised and transferred to one of the categories above.

The accounting policies for recognition, valuation and depreciation for each asset category is described below.

Operational assets

Operational assets are assets that directly enable the delivery of the primary outcomes of the EA. In-scope assets are specialised in nature and function for the delivery of these outcomes and, as such, are not likely to be available in the general marketplace. These assets include flood risk management assets such as control gates, flood gates, pumping stations and screens; water, land and biodiversity assets such as such as boreholes, gauging stations and weirs; and navigation assets such as locks.

Out of scope assets include assets that do not meet the following criteria:

• Assets that are not EA owned or maintained (assets which the EA does not own but is responsible for keeping in good working condition and from which it receives economic benefit). These assets are not controlled by the EA, so do not meet the accounting test of providing economic value to the EA.

• Assets where the MEAV is less than £5,000. This is the de-minimis criteria for inclusion in the valuation, even if the other criteria are met.

• Assets where the useful economic life is less than 1 year.

EA had historically valued operational assets using the MHC method as a proxy for the DRC method, which was found not to be compliant with the FReM and this led to a qualification of the accounts. In 2022-23, EA implemented a DRC method, for the valuation of operational assets, which determines the current cost of replacing an asset with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence and optimisation.

Operational asset categories

The net book value of operational assets of £9.9 billion can be split into categories as follows:

• Aids to Navigation: £425.7 million

• Buildings and compounds: £170.0 million

• Channel Crossings and channels: £1,284.6 million

• Defence: £2,185.7 million

• Instruments: £38.7 million

• Mechanical, Electrical, Instrumentation, Control and Automation: £165.3 million

• Other: £190.1 million

• Structures: £4,422.0 million

• Thames Barrier and associated gates: £978.6 million

• Total £9,860.7 million

Aids to Navigation

Assets that are used to aid navigation in the marine and fluvial environment. Included in this asset category are locks moorings, navigation booms and other navigational assets.

Buildings and Compounds

Assets that are used to provide shelter for equipment or storage. Included in this asset category are control buildings, pump houses, gauge station buildings and monitoring buildings.

Channel Crossings

Assets that allow access across a channel. Included in this asset category are bridges and utility service crossings.

Channels

Assets that convey water. Included in this asset category are simple and complex culverts.

Defences

Assets that provide flood defence or coastal protection functions. These include both man-made and natural defences. Natural defences may include man-made elements to make them more effective or protect them from erosion. Included in this asset category are embankments, walls, spillways, floodgates, quays and demountable defences.

Instruments

Assets used to measure water level and flow. Included in this asset category is instrumentation, CCTV systems, and flood warning systems.

Mechanical, Electrical, Instrumentation, Control and Automation (MEICA)

Included in this asset category are Motor Control Centre Controls, High Voltage Electrical Equipment, and Pump Assemblies.

Structures

Assets used to enable, restrict or affect the movement of water, people, fish, animals or materials. Included in this asset category are control gates, weirs, outfalls, debris screens, fish passes and water distribution pipelines.

Measurement principles

For each asset type there is a measurement principle which aligns to the key cost drivers within each individual cost model used to provide the MEAV for each individual asset. These differ across the 69 asset types and within the asset categories.

The measurement rules are:

• Control Gates: m2 (cross-sectional area)

• Embankments: m3 (length, assuming 2 metre crest and 1:3 slope)

• Culverts: m (length based on varying cross-sectional sizes)

• Walls: m2 (facing area)

• Outfalls m2 (cross sectional area)

• Weirs: m (length)

• Lock: m3 (chamber volume)

• Bridge: m2 (deck area)

• Debris Scheme: m2

• Water Distribution Pipelines: m (length)

Thames Barrier and associated gates

The Thames Barrier is a retractable barrier system built to protect the floodplain of most of Greater London from exceptionally high tides and storm surges on the North Sea. The associated gates function in the same way as the EA’s large tidal barriers and other complex defence structures.

As a bespoke asset with limited recent replacement cost information available, a specialised methodology was developed to value the Thames Barrier. The approach has been to triangulate between indexed historical costs, a materials and quantities estimate, and international benchmarks. The valuation placed most weight on the materials and quantities estimate because this is where there was best available data to produce a DRC value of the Thames Barrier.

The valuation was based on:

• A high-level breakdown of the assets and dimensions of assets that comprise the Thames Barrier and are in scope of a DRC valuation.

• The best available data for the cost of replacing these assets. Due to the bespoke nature of the assets the availability of recent cost data associated with replacing or refurbishing components of the barrier is relatively limited. The sources of cost data for the Thames Barrier include:

               * market rates

               * adjusted cost models e.g. for the gates and piers

               * lump sum estimates provided by the EA experts – e.g. for replacement of the Higher Voltage / Low Voltage power assets

• The barrier has been depreciated using the same methods as explained below for all other operational assets. The majority of the value is in the gates and the piers and these have been depreciated based on an assessment of actual condition of these assets and application of EA’s modelled deterioration curves for these assets and as also explained further in the section on civils deterioration curves.

A specific cost model was developed for the EA’s tidal barrier control gates which was also applied to value the associated gates and also adjusted for use in the Thames Barrier valuation.

Recognition and capitalisation policy

Operational assets are initially recognised in Assets Under Construction (AUC) at cost and are not depreciated. When the asset is fully operational, the cost is transferred to operational assets, it is depreciated and included in the valuation process until the time the asset is disposed of or decommissioned.

Capital expenditure is the money that we spend on acquiring, improving or renewing our assets. All direct construction costs are capitalised. Design costs that are directly attributable to an asset are also capitalised, including salaries when they are incurred as a result of staff spending time on capital projects and can be directly linked to bringing specific, separately identifiable assets into working condition or substantially enhancing the working life of an existing asset.

Revalue using DRC

The DRC method is a cost-based valuation approach applied for specialised and networked assets held for their service potential, where market comparators do not exist and / or would not be appropriate. It is the cost a company would need to spend today to replace the asset to deliver the same functionality, adjusted (depreciated) to reflect the level of physical, functional and economic deterioration of the current asset.

The key steps and assumptions are summarised below.

Define Modern Equivalent Asset (MEA)

As the EA’s assets tend to be bespoke assets which is necessary to deliver functional requirements, the MEA is based more on a like for like replacement than in other sectors. The EA has developed some MEA assumptions where assets can be more standardised, for buildings for example or because the valuation is based on using modern construction materials.

Create cost models

Developed cost models and in exceptional cases unit rates for the valuation. These models have been developed to reflect current design standards and modern materials, the source data and the processes for ‘cleansing’ of costs that do not align with DRC methodology arising from assumptions such as instant build, no financing and greenfield site.

Estimate MEAV

Every asset type then has a measurement rule which aligns to the key cost drivers within each individual cost model to calculate the MEAV for each asset in each asset type according to the attribute data for each asset (see descriptions for different categories including structures at the top of this note). Significant steps were taken during the valuation process to improve the level of actual attribute data available for the valuation. The valuation uses a mix of valuations driven by attribute data where the cost of an asset is significantly responsive to its dimensional extent (for example length / height) and, standardised measurements for the MEA design in other cases where there is limited sensitivity or potential for variance.

Where there remained gaps, assumptions were made based on statistical analysis of the known data points.

Depreciation

In-year depreciation

Depreciation is calculated to apportion the value of operational assets over the expected useful economic life. Depreciation is charged in the month of capitalisation but not in the month of disposal. In year depreciation was straight line over the asset useful life. Additional depreciation was applied to bring the MEAV down to the DRC value at 31 March 2024.

Application of depreciation adjustment to the closing DRC model

As described above, the aim of a DRC valuation is to provide a current cost of asset replacement after an adjustment (depreciation) for physical, functional, or economic obsolescence of the actual asset as compared against the hypothetical as-new modern equivalent asset. The most significant factor for the EA’s assets in terms of this adjustment is a physical deterioration associated with the assets being active over time.

To arrive at this adjustment, the DRC valuation applies one of three approaches (explained below) to arrive at a depreciation factor (a number between 0 and 1 by which the MEAV is multiplied to arrive at a DRC, with 0 being a fully depreciated asset and 1 being an as-new asset).

The approaches were developed according to the data available across the asset types to provide a best estimate.

• Using inspection data either on asset condition or, in the case of MEICA assets, reliability to determine a point on a depreciation curve which models how assessed condition and reliability are expected from an engineering point of view to deteriorate over time, and therefore allow the existing inspection and other asset management information to be used to estimate how far the asset is expected to be through its useful life.

• Applying straight line depreciation, with the depreciation factor calculated based on asset start date data and useful economic lives for the asset type. This approach is used as the basis of a best estimate where assets have not yet been included in the inspection regime so do not yet have sufficient data on asset condition to use the methods above.

Deterioration curve

This method uses data routinely collected on asset condition and post inspection actions to estimate deterioration curves to calculate the asset’s residual life. It has been applied to all civil assets where a suitable EA deterioration curve is available. For consistency within asset types the same depreciation method was used. The curves have been developed as a predictive tool for estimation of future asset condition and expected residual asset life, considering characteristics related to the:

• environment, whether the asset is located in a fluvial, tidal or coastal location

• asset age

• material type and construction

• past and intended (future) maintenance practices

Asset attribute data such as target condition, location and material type is used to select the relevant deterioration curve and the depreciation factor is calculated across this curve based on the actual recorded condition of the asset.

MEICA curve

For MEICA assets, this method uses data from the EA’s inspection regime to provide a depreciation factor. MEICA maintained flood and coastal risk management (FCRM) assets are routinely inspected for availability, i.e. will they operate and perform as intended when needed, and the outcomes are recorded for each element of the MEICA asset. These inspections assess:

• Likelihood of failure in the future (LOF): Unlikely, Possible, Likely, or Imminent.

• Time to repair if failure does occur (TTR): designated as Quick (2 days), Short (10 days), Medium (30 days), Long (70 days) or Very Long (180 days).

• Whether they fall below the target condition grade.

To use this data as the basis for a DRC valuation, two residual life percentage matrix tables were developed; one for assets not below target condition and one for assets that are.

Straight line with residual balance

Straight line depreciation with an estimated residual balance is used where assets have not yet been included in the inspection regime so do not yet have sufficient data on asset condition to use either deterioration curves or reliability data. The depreciation factor is calculated based on asset start date data with straight line depreciation calculated based on its’ useful economic life.

Summary of key valuation assumptions

The valuation is based on the best available attribute data available at the valuation date. This includes data needed to derive for each individual asset the MEAV and depreciation factor applied to derive the DRC for each asset. This included an exercise, during the valuation, to improve the level data available focusing on the asset types that are most material to the overall valuation. Where there remains data ‘gaps’ we have made assumptions. The EA has a further data improvement plan in place to drive continuous improvement in the valuation.

Useful economic life (UEL) breakdown

Asset group	Range in years
Aids to navigation	12 – 90
Beach structures	60
Buildings and compounds	40 – 60
Channels	100
Channel crossings	40 – 100
Defence	40 – 60
Instruments	10 – 20
MEICA	10 – 20
Structures	10 - 100

The UEL weighted average of the DRC portfolio is 25 years.

The key assumptions are:

Process	Key data input assumptions
Modern Equivalent Asset (MEA)	For 17 standardised asset types a MEA assumption relating to design and / or materials has been made. For example, for culverts it was assumed that small culverts are circular in design, medium culverts are square and large culverts are rectangular, and all are constructed from pre-cast concrete sectional units. For monitoring station buildings the MEA was a glass reinforced plastic (GRP) kiosk with a footprint of 4m by 4m. This is in line with RICS guidance on MEA assumptions. Other asset types were assumed to be designed to be replaced on a like for like basis.
Dimensional data (to use to apply the cost model to derive the MEAV)	During the valuation, improvements were made to the level of attribute data required as inputs into the valuation focused on assets most material to the valuation. In addition, for 21 asset types, in consultation with EA business experts, standardised measurements for at least one required dimension were adopted based on the MEA design for that asset type. For example, standardised widths were used for foot (2m), farm (4m), road (8m), rail (11m), aqueduct (7m) bridges. Where attribute data was not available (either a MEA assumed dimension or actual dimension for like for like replacement), statistical analysis was undertaken to derive an assumption and tested with internal experts to confirm they were reasonably representative of the overall portfolio of assets.
Depreciation factors – method 1 (civils based on condition data and EA deterioration curve)	The methodology relies on key data from Asset Information Management System, Operations and Maintenance (AIMS OM) to be able to apply the most appropriate deterioration curve. The assumptions the EA have made where there is incomplete data are:
	- Where there is no asset raw condition then the EA have used the asset’s actual condition grade if this is populated and if this is also blank, the EA have assumed the asset’s target condition grade
	- Where there is no target condition data the EA assume a target condition of 3 (out of a scale of 5) – this is the most common target condition for the EA’s assets
	- Where there is no protection type or it is classified as ‘surface water’ protection then the EA have assumed that the protection type is fluvial
	The EA also developed a set of rules to determine the appropriate material type drawing on data on material type of assets that is available at an asset element level in order to select the most appropriate curve for individual assets.
Depreciation factors – method 2 (MEICA assets using EA available data)	This method calculated a depreciation factor for each asset element comprising the asset, and a mean average single factor derived for assets with multiple elements to apply to the calculated MEAV for the asset.
	The assumptions where there was incomplete data were to assume the mid points for the data inputs required to generate the depreciation factor
	- Where element LOF is ‘blank’ the EA have assumed ‘Possible’
	- Where TTR is ‘blank’ the EA have assumed ‘Medium’
Depreciation factors – method 3 (using data on asset start dates and useful economic life (UEL))	Where an actual start date for an asset cannot currently be confirmed, the EA have applied a depreciation factor assuming the asset is at the mid-point of the UEL for the asset type. This equates to a depreciation factor of 0.51 which reflects the assumption of 2 per cent residual life when an asset is still in use but is beyond its UEL. Asset types where this methodology is used are generally maintained to a fair operational standard and as such it is reasonable to assume across the portfolio of assets, that these will be at the mid-point of their UEL.

Revaluation and Indexation

To ensure that the DRC model continues to output a reasonable replacement cost adjusted for asset condition, the models will be updated annually to reflect the latest source data on asset quantities and conditions, as well as an update for indexation using appropriate construction-related indices to retain this being a current cost.

Every five years, a more thorough refresh will be carried out to update costing rates and consider modern equivalents based on an updated professional assessment, alongside a fuller check of judgements on modern equivalents.

The building cost information service (BCIS) construction data index, which is updated monthly has been applied to all EA’s operational assets. A review of the most appropriate index is completed on an annual basis.

Accounting for revaluation

Any increase in asset values by category is recognised in the revaluation reserve. Any decrease in asset values is either recognised against the revaluation reserve, where a revaluation reserve surplus is available, or written off as an impairment where a revaluation reserve surplus is not available, by asset category.

Revaluation movement	£000’s
Revaluation - Indexation	£324,000
Revaluation - Dimensional variance	£191,000
Technical valuation adjustment	£0

Derecognition and impairment

Assets are derecognised when the EA has either sold or decommissioned the asset or transferred control and responsibility to a third party. 

Data limitations and Sensitivity analysis

The sensitivities reflected below show the impact of changes to assumptions that affect the valuation of operational assets, excluding the Thames Barrier and habitat creation.

There are limitations on the data included within the DRC valuation until the data cleanse project is completed.

Type	DRC £m	DRC (-) £m	DRC (+) £m	Potential DRC £m	Variance as %
Scenario 1: Alternative Inflation Index	9,814	-	147	9,961	1.5%
Scenario 2 Combined Depreciation sensitivity (Lower)	9,814	(264)	-	9,550	(2.7)%
Scenario 3 Combined Depreciation sensitivity (Upper)	9,814	-	294	10,108	3.0%
Scenario 4 Change the assumption (indirect cost uplifts) by -/+10%	9,814	(431)	431	9,383/10,245	(4.4)%

A description of the sensitivities is shown in the table below. Sensitivities 2 and 3 are the lower and upper values for a combined sensitivity relating to the three depreciation methods applied in the valuation.

Sensitivity	Assumption in valuation	Sensitivity
Inflation	Building Cost Information Service (BCIS) all construction costs index.	The sensitivity uses RPI which is a recognised general economic index.
	Inflation has been applied to cost data, so all costs are at March 2023 prices.
Depreciation Civils – Condition grade	For this depreciation method where there is no actual condition data recorded, the EA have assumed the asset is at its target condition grade. In some cases, for assets below required condition grade the target condition grade has been applied to calculate the depreciation factor.	Change the assumption (target condition grade) by plus or minus 10 per cent.
Depreciation Civils - Asset Start Date	For this depreciation method where the EA do not have an asset start date, it is assumed that the asset is at the midpoint of the asset’s useful economic life (UEL).	Change the assumption (depreciation factor) by plus or minus 10 per cent.
Depreciation MEICA assets	For this depreciation method where there is no actual data for Likelihood of Failure (LoF) the EA have assumed ‘Possible’ and where there is no actual data for Time to Repair (TTR) assumed ‘Medium’. These are the middle categories of the data used to calculate the depreciation factor.	Change the category of data used to calculate the depreciation factor to ‘Unlikely’ ‘Short’ and ‘Likely’ ’Long’.
Cost Models: Indirect cost uplift	The EA have assumed a range of indirect cost uplifts differentiating between very complex, complex, less complex and in house delivery arrangements.	Change the assumption (indirect cost uplifts) by plus or minus 10 per cent.

Thames Barrier sensitivity

The EA have adopted a specialist methodology for valuing the Thames Barrier. The approach is to triangulate between three estimates: indexed historical costs, a materials and quantities estimate, and international benchmarks. Across the various methods when assessed against an industry standard cost estimate maturity assessment criterion, the EA’s judgement is that the materials and quantities estimate provides the most accurate class of estimate to include in the valuation for the replacement cost of the Thames Barrier.

The assumptions and therefore the sensitivities run for the operational assets are not applicable across this methodology. Instead, the EA have provided a sensitivity based on the Association for the Advancement of Cost Engineering (AACE International) estimate maturity assessment criteria. This can be used to derive an expected level of accuracy range for the MEAV for the Thames Barrier, based on an expert judgement on the class of estimate for the materials and quantities approach. The DRC has then been calculated for the lower and upper limits based on the proportion of DRC / MEAV for the most likely valuation.  

5.2 Right of Use Assets

This table reflects Right of Use Assets recognised under IFRS16 reflecting the opening balances brought forward from 2022-23.

Land mainly relates to Natural England leases of heritage land.

Buildings mainly represent office space and depots used across the Defra group.

	2023-24 Land	2023-24 Buildings	2023-24 IT	2023-24 Plant and Machinery	2023-24 Vehicles	2023-24 Total
	£000	£000	£000	£000	£000	£000
Cost
At 1 April 2023	8,711	172,057	41,652	-	18,305	240,725
Additions	-	19,540	10,781	33	20,540	50,894
Derecognition	-	(15)	-	-	-	(15)
Transfers	(84)	84	-	-	-	-
Disposals	-	(2,485)	-	-	(906)	(3,391)
Impairment	(1,565)	(5,483)	-	-	-	(7,048)
Revaluation	664	6,046	-	-	-	6,710
Reclassification from PPE	-	-	347	-	-	347
At 31 March 2024	7,726	189,744	52,780	33	37,939	288,222
Depreciation
At 1 April 2023	22	29,417	22,230	-	5,136	56,805
Charges in year	461	27,238	12,787	1	8,539	49,026
Transfers	-	-	37	-	-	37
Disposals	-	(480)	-	-	(770)	(1,250)
Reclassification from PPE	-	-	245	-	-	245
At 31 March 2024	483	56,175	35,299	1	12,905	104,863
Carrying amount at 31 March 2024	7,243	133,569	17,481	32	25,034	183,359
Carrying amount at 31 March 2023	8,689	142,640	19,422	-	13,169	183,920

	2022-23 Land	2022-23 Buildings	2022-23 IT	2022-23 Vehicles	2022-23 Total
	£000	£000	£000	£000	£000
Cost
At 1 April 2022	-	-	-	-	-
Initial Recognition	7,101	152,701	451	10,002	170,255
Reclassification from PPE	2,160	7,024	30,454	-	39,638
Adjusted opening balance 1 April 2022	9,261	159,725	30,905	10,002	209,893
Additions	89	22,968	10,532	8,303	41,892
Derecognition	-	(7,641)	-	-	(7,641)
Disposals	-	(1,884)	215	-	(1,669)
Revaluation	(639)	(1,111)	-	-	(1,750)
At 31 March 2023	8,711	172,057	41,652	18,305	240,725
Depreciation
At 1 April 2022	-	-	-	-	-
Reclassification from PPE	-	3,424	10,559	-	13,983
Adjusted opening balance 1 April 2022	-	3,424	10,559	-	13,983
Charges in year	22	27,877	11,456	5,136	44,491
Disposals	-	(1,884)	215	-	(1,669)
At 31 March 2023	22	29,417	22,230	5,136	56,805
Carrying amount 31 March 2023	8,689	142,640	19,422	13,169	183,920

5.2.1 Quantitative disclosures around elements in the Statement of Comprehensive Net Expenditure

	2023-24 Core department and Agencies	2023-24 Defra group	2022-23 Core department and Agencies	2022-23 Defra group
	£000	£000	£000	£000
Sub-leasing income	-	(56)	(1,876)	(1,892)
Expense related to short-term leases	606	3,161	3,197	8,603
Expense related to low-value asset leases (excluding short term leases)	1	713	-	14
Total	607	3,818	1,321	6,725

5.2.2 Quantitative disclosures around cash outflow for leases

	2023-24 Core department and Agencies	2023-24 Defra group	2022-23 Core department and Agencies	2022-23 Defra group
	£000	£000	£000	£000
Total cash outflow for leases	38,154	59,139	26,005	41,095

5.3 Heritage Assets

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 National Nature Reserves (NNRs), 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.

Defra group

	2023-24 Operational	2023-24 Non-Operational	2023-24 Total	2022-23 Operational	2022-23 Non-Operational	2022-23 Total
	£000	£000	£000	£000	£000	£000
Valuation
At 1 April	196,603	107,129	303,732	175,886	92,746	268,632
Additions	13,044	(517)	12,527	6,882	8,961	15,843
Transfers	-	(665)	(665)	(390)	-	(390)
Disposals	(4,126)	26	(4,100)	(1,190)	(26)	(1,216)
Impairment	(1,500)	(239)	(1,739)	(478)	(577)	(1,055)
Revaluation	3,629	3,519	7,148	15,893	6,025	21,918
At 31 March	207,650	109,253	316,903	196,603	107,129	303,732
Depreciation
At 1 April	-	-	-	656	-	656
Charged in year	2,765	-	2,765	2,325	-	2,325
Disposals	(76)	-	(76)	(28)	-	(28)
Revaluation	(2,689)	-	(2,689)	(2,953)	-	(2,953)
At 31 March	-	-	-	-	-	-
Net book value at 31 March 2024	207,650	109,253	316,903	196,603	107,129	303,732
Net book value at 1 April 2023	196,603	107,129	303,732	175,230	92,746	267,976
Assets financing
Owned	207,650	109,253	316,903	196,603	107,129	303,732
Net book value at 31 March 2024	207,650	109,253	316,903	196,603	107,129	303,732
Of which:
NDPBs	207,650	109,253	316,903	196,603	107,129	303,732
Total	207,650	109,253	316,903	196,603	107,129	303,732

5.4 Cash Additions

Cash additions (adjusted for capital accruals) for property, plant and equipment, heritage assets and agricultural assets amount to £363 million (2022–23, £351 million (restated)) as per the Consolidated Statement of Cash Flows (SoCF). 

6     Intangible Assets

Defra group

	2023-24 Internally Developed Software	2023-24 Software Licences	2023-24 IT Assets Under Construction	2023-24 Total	Restated 2022-23 Internally Developed Software	Restated 2022-23 Software Licences	Restated 2022-23 IT Assets Under Construction	Restated 2022-23 Total
	£000	£000	£000	£000	£000	£000	£000	£000
Cost or valuation
At 1 April 2023	684,282	126,919	178,322	989,523	640,588	109,393	97,368	847,349
Additions	9,318	27,702	142,957	179,977	2,134	13,340	113,475	128,949
Disposals	(14,980)	(4,731)	-	(19,711)	(9,672)	(546)	-	(10,218)
Impairments	103	(1,384)	(36,147)	(37,428)	1,554	139	(3,255)	(1,562)
Transfers	23,506	(17,983)	(6,765)	(1,242)	21,301	-	(19,227)	2,074
Reclassifications	55,962	(1,202)	(51,733)	3,027	417	2,878	(6,841)	(3,546)
Reclassified as held for sale	-	-	-	-	-	-	(3,198)	(3,198)
Revaluation	28,609	2,031	-	30,640	27,960	1,715	-	29,675
At 31 March 2024	786,800	131,352	226,634	1,144,786	684,282	126,919	178,322	989,523
Amortisation
At 1 April 2023	495,076	72,429	-	567,505	441,720	62,170	-	503,890
Charged in year	48,163	7,710	-	55,873	48,953	10,440	-	59,393
Disposals	(13,364)	(4,710)	-	(18,074)	(8,862)	(544)	-	(9,406)
Impairments	110	-	-	110	2,321	140	-	2,461
Transfers	6,476	(6,476)	-	-	-	-	-	-
Reclassifications	(1)	(130)	-	(131)	(3,575)	(267)	-	(3,842)
Revaluation	19,404	1,425	-	20,829	14,519	490	-	15,009
At 31 March 2024	555,864	70,248	-	626,112	495,076	72,429	-	567,505
Net book value at 31 March 2024	230,936	61,104	226,634	518,674	189,206	54,490	178,322	422,018
Net book value at 1 April 2023	189,206	54,490	178,322	422,018	198,868	47,223	97,368	343,459
Assets financing
Owned	230,936	61,104	226,634	518,674	189,205	54,473	178,322	422,000
Finance leased	-	-	-	-	1	17	-	18
Net book value at 31 March 2024	230,936	61,104	226,634	518,674	189,206	54,490	178,322	422,018
Of which:
Core department and agencies	175,490	1,084	165,137	341,711	144,394	1,514	132,076	277,984
NDPBs	55,446	60,020	61,497	176,963	44,812	52,976	46,246	144,034
Total	230,936	61,104	226,634	518,674	189,206	54,490	178,322	422,018

The effective date of revaluations was 31 March 2024.

The net book value for internally developed software includes software assets held by RPA for the delivery of rural scheme payments. At 31 March 2024, these intangible assets have a net book value of £36 million with four years remaining amortised life ending 31 March 2028 to coincide with the agricultural transitional plan.

The difference between the revalued carrying amount and the carrying amount that would have arisen under the historic cost model is not material.

Cash additions (adjusted for capital accruals) shown in the SoCF amount to £167 million (2022–23, £129 million (restated)). 

7 Impairments

	Note	2023-24 Core department and Agencies	2023-24 Defra group	Restated 2022-23 Core department and Agencies	Restated 2022-23 Defra group
		£000	£000	£000	£000
PPE – including investment properties		29,579	78,255	(2,685)	6,301
Right of use assets		5,467	7,048	-	-
Intangibles		33,323	37,538	-	4,023
Investments		-	127	-	69
Total impairment charge for the year	3	68,369	122,968	(2,685)	10,393
of which:
Amount released from Revaluation Reserve to General Fund		-	-	(105)	(105)

The impairment table includes significant impairments as follows; EA £47.3 million (2022-23 £12.1 million (restated)), APHA £10.9 million (2022-23 (£5.3) million) and Core department £55.7 million (not material in 2022-23).

EA’s annual review resulted in an impairment of £44.8 million for property, plant and equipment and £2.5 million for intangible assets. The increase of impairment from 2022-23 to 2023-24 was driven by several factors, including: an unfavourable indexation impact of £24.0 million and an impairment of £7.5 million on assets under construction: £6.0 million impairment arose from corrections related to misapplied indexation on land assets; a further impairment of £4.2 million following the quinquennial review of land and buildings where assets were primarily valued downwards and additional adjustment was made to the valuation of riverside commercial land, which led to a £4.14 million impairment. These impairments are reported within the Environment, Rural and Marine Operating Segment (Note 2).

The Core department impairment of £55.7 million (2022-23: £0.3 million) relates to a reassessment of intangible assets which do not meet the capitalisation policy (£41.3 million). the impairment of the Incinerator project due to changes in the equipment design, resulting in significant delays and additional costs (£8.9 million), and rent paid exceeding actual market rent value under IFRS16 (£5.5 million). £34.7 million of this impairment has been reported in the Group Corporate Services including centrally held budgets operating segment, £11.4 million has been reported in Other including Internation and Borders and Strategy and Change operating segment and the remaining £9.5 million has been reported within the Environment, Rural and Maring including ALB’s operating segment.

APHA’s impairment of £10.9 million relates to land and buildings. This has been reported in the Food, Farming and Biosecurity operating segment (Note 2). 

8 Financial Commitments

8.1 Capital Commitments

Defra group

	2023-24	2022-23
	£000	£000
Contracted capital commitments at 31 March for which no provision has been made:
PPE	157,296	89,196
Intangible assets	2,422	-
Total	159,718	89,196
Of which:
Core department and agencies	66,433	33,958
NDPBs	93,285	55,238
Total	159,718	89,196

The increase in PPE capital commitments relates to build and science programme investments and site reconfiguration within the Core department, and further investment in flood defence schemes in EA.

8.2 Other Financial Commitments

The department’s commitments relating to the non-cancellable periods of contracts which are not leases or other service concession arrangements are as follows:

	2023-24 Core department and Agencies	2023-24 Defra group	Restated 2022-23 Core department and Agencies	Restated 2022-23 Defra group
	£000	£000	£000	£000
Not later than one year	1,962,520	2,181,735	996,842	1,199,023
Later than one year and not later than five years	3,664,806	4,093,226	2,080,382	2,477,105
Later than five years	802,217	806,917	794,666	815,059
Total	6,429,543	7,081,878	3,871,890	4,491,187

The RPA has significant commitments in relation to UK funded schemes payable to farmers, land managers, schools, local authorities, and other organisations. It is common for schemes, depending on their nature, to see a significant percentage of customers in receipt of a grant funding agreement either not proceeding to claim, or legitimately electing to claim less than the maximum agreement value. No adjustment has been made for this factor and therefore, the figures in the table above include the maximum possible scheme expenditure that the RPA is committed to at 31 March 2024. Payment rates in grant agreements have been adjusted by published increases in payment rates since inception of the agreements through to 31 March 2024 to disclose commitments at their current values. The total disclosed in RPA’s accounts is £4.502 billion (2022-23, £1.936 billion), of which £1.468 billion is within one year, £2.933 billion later than one year and not later than five years and £0.101 billion later than five years. A full breakdown by scheme and detailed assumptions and methodology is included in the RPA accounts, including an assessment of the commitments based on the six month notice period included in the terms and conditions of the Countryside Stewardship, Farming Investment Fund, Sustainable Farming Incentive and Environmental Stewardship schemes.

The Core department has agreements with local authorities on 23 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 £1,108 million (2022–23 £1,252 million). All projects are now in receipt of grant and no further agreements are planned.

The department has a commitment to provide grant funding to the Canal & River Trust until 31 March 2027. The commitment at 31 March is £158 million (2022-23 £210 million), of which £52 million (2022-23 £53 million) is not later than one year.

£304 million (2022-23 £229 million) relating to service contracts for information technology.

£131 million relating to ISS Facilities Management, this contract replaces the previous Mitie Facilities Management Contract (2022-23 £41 million).

£3 million (2022-23 £7 million) relates to the Fisheries and Seafood Scheme (FASS) grants, administered by the MMO. The FASS offer of funding letter lists a number of conditions the award of the funding is contingent upon but as long as the claimant meets all the conditions, Defra is committed to pay the grant. There is no clause which would enable Defra to terminate the agreement outside of the claimant failing to meet the grant conditions.

£8 million (2022-23 £8 million) relates to three schemes to support and encourage the planting of new trees to meet government targets. Newly planted trees require ongoing maintenance in their early years in order to survive so each grant represents a multi-year commitment by Defra to provide funding.

£83 million (2022-23 £63 million) relates to farming research and development grants, Farming Innovation Programme (FIP) and Pathways.

The Core department is committed to £15 million (2022-23 £29 million) to a service agreement between FERA and Defra for science services that they provide. The contract finishes in March 2025 and is currently going through a re-procurement exercise for future contractual years, with agreement expected in August or September 2024.

£18 million (2022-23 £60 million) with regard to the Steria Shared Services Connected Limited (SSCL) contract. Defra entered into a seven-year contract with SSCL in November 2013 for the provision of shared services across HR, Payroll and Finance. The contract was subsequently extended in 2019 to utilise the full three-year optional extension period available. The contract ended on 31 October 2023. The contract is under review with the potential to extend for a maximum of three years but as the position is not fully concluded the amounts and the periods cannot be quantified.

£2 million (2022-23 £3 million) relates to Government Property Estates Agent Management - forecast annual core property management service commitment based on the estimated cost of service for 2023-24 for the remaining 17 months of the contractual service post 1 April 2024.

£2 million relates to Memorandum of Agreement (MoA) for Central Support to Waste Infrastructure Delivery Programme. The MoA commenced on 1 April 2024 and will end on 31 March 2027. Through the MoA, Local Partnerships (LP) support Defra in areas including project and commercial support, assessing contract variations, input into audits, judicial or potential judicial reviews and Freedom of Information or Environmental Information Regulation responses, providing knowledge transfer, monitoring projects, and providing management information.

The EA also recognises commitments for approved applications for grant payments relating to flood and coastal erosion risk management capital schemes, which have incorporated into the table above. In 2023-24 these totalled £597.4 million (2022-23, £577.6 million (restated)).

9 Financial Instruments and Risk

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.

	2023-24 Core department and Agencies	2023-24 Defra group	2022-23 Core department and Agencies	2022-23 Defra group
	£000	£000	£000	£000
Financial Assets
Financial assets measured at amortised cost
Loans and investments	429	5,499	474	5,275
Hazel II Loan Notes and Priority Shares	20,507	20,507	-	-
Short Term Deposits	-	564,900	-	267,800
Financial assets measured at fair value through other comprehensive expenditure (FVOCE)
Flood Re HM Treasury Gilts	-	343,642	-	498,065
Big Nature Impact Fund	30,000	30,000	-	-
ECO Business Fund	27,956	27,956	32,544	32,544
LDN Fund	2,349	2,349	6,023	6,023
Total financial assets other than cash – non-current	81,241	994,853	39,041	809,707
Financial assets measured at fair value through profit or loss (FVPL)
Derivative instruments classified as held for trading	1,335	1,335	90	90
Total financial assets other than cash - current	1,335	1,335	90	90
Cash and cash equivalents	208,974	498,713	192,536	471,776
Total	291,550	1,494,901	231,667	1,281,573
Financial Liabilities
Financial liabilities measured at amortised cost
EA reservoir agreements	-	(461,201)	-	(448,042)
Financial liabilities measured at fair value through profit and loss (FVPL)
Derivative instruments classified as held for trading	(706)	(706)	(4,847)	(4,847)
Total	(706)	(461,907)	(4,847)	(452,889)

Other receivables and other payables are disclosed in Notes 11 and 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 UK Treasury Gilts and the short term deposits held by Flood Re and AHDB, with a duration of greater than three months are classified as other financial assets in the receivables note, therefore, these are shown separately from cash and cash equivalents within Note 11.

During the year, the department disposed of its 25 per cent shareholding in Fera Science Limited in exchange for a 25 per cent shareholding in Hazel II Topco Limited, interest-bearing priority shares in Hazel II Topco Limited, and interest-bearing loan notes in Hazel II Midco I Limited. The priority shares and loan notes are measured at amortised costs and are included in the ‘loans and investments’ total in the table above. The 25 per cent shareholding in Hazel II Topco Limited is accounted for as an Investment in Associate, which is outside the scope of IFRS 9 and is therefore excluded from the table above.

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 and, generally, their fair value is not materially different from their carrying value.

Flood Re recognises the fair value of the debt instruments portfolio, which as at 31 March 2024 comprised of £56.8 million UK HM Treasury gilts and £286.9 million UK HM Treasury bills, at fair value using the unadjusted quoted prices in active markets for identical instruments. Short term deposits invested with the UK Debt Management Office (DMO), which vary in maturity between one day and a maximum of six months, are disclosed at the carrying amount as an approximate fair value at the reporting date.

The EA’s reservoir agreements whose fair value would be approximately £3.2 billion (2022-23, £3.4 billion) using current HM Treasury rates. The difference between fair value and carrying value is due to the prevailing discount rate (around 1 per cent being the rate applicable to RPI-linked cash flows stated in current cost) being significantly lower than the Effective Interest Rate (EIR) set at initial recognition of the instrument, as well as inherent differences between amortised cost accounting and a snapshot of fair value.

 Details of the financial liability for Environment Agency Reservoir Operating Agreements reported on the statement of financial position

Counterparty	Liability at 31 March 2023	Finance charge 2023-24	Amounts paid 2023-24	Liability at 31 March 2024	Due within 1 year	Due later than 1 year
	£000’s	£000’s	£000’s	£000’s	£000’s	£000’s
Northumbrian Water	(354,000)	(35,400)	24,600	(364,800)	(23,200)	(341,600)
Severn Trent Water	(94,000)	(4,800)	2,400	(96,400)	(2,400)	(94,000)
Total	(448,000)	(40,200)	27,000	(461,200)	(25,600)	(435,600)

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. Net Increases in the liability (i.e. the extent the finance charge exceeds the cash payments) have been approved by HM Treasury as being non-recoverable from charge payers. The payments for a return on investment in the reservoir assets, indexed upwardly annually based on the RPI, are payable in perpetuity in line with the agreements negotiated on privatisation and were made to enable privatisation to occur.

Historically, EA used the current RPI as an estimate for the future RPI, to estimate the future cash flows relating to the agreements. In 2022-23, EA considered the levels of inflation in the UK were not indicative of the expected future levels of inflation. EA opted instead to use the Office for Budget Responsibility (OBR) five-year forecast rates of RPI and assumed the rate at the end of five years will be representative of RPI beyond this point in time. This change in accounting estimate is being applied prospectively and not retrospectively, in line with accounting standards. If the RPI assumption is changed for every year in the future by plus or minus one per cent then the value of the liability (and the cost) increases or decreases by £4.2 million (2022-23, £4.0 million). Further details can be found in EA’s accounts.

The RPA has financial guarantee contracts mainly in the form of non-cash guarantees totalling £0.314 billion as at 31 March 2024. (£0.352 billion, 31 March 2023). Please see RPA accounts for more details.

Significant Estimates and Judgements (Financial Assets)

 Business model assessment

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 (i.e. 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.

 Expected credit losses

Receivables, other than receivables 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 the 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. There has not been a material change in the expected credit losses for any charge scheme.

Flood Re holds balances in short term deposits and in UK HM Treasury Gilts and Bills investments and applies the low credit risk simplification, and at each reporting date evaluates the credit risk, including using credit rating of the instrument issuer. The UK HM Treasury gilts portfolio is rated as AA. Flood Re has concluded that the provision for expected credit losses on balances held as cash deposits with a UK financial institution, short term deposits with the UK DMO and debt instruments was not material to the financial statements.

 9.1 Categories of Financial Instruments

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.

 9.2 Exposure to Risk

 9.2.1 Credit Risk

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 EA holds security for permit holders in permitting deposits, as described in Note 1.14, to mitigate the risk of the EA not being able to recover lost income following an environmental incident. Security can be provided by permit holders as cash (see Note 10) or as bond agreements. Bond agreements are triparty bond agreements between the permit holder, the EA and the banking organisation. Under the bond agreements, the EA can only call on the banks to provide cash in the event of an environmental incident. The bonds are financial guarantees under IFRS9 but unless and until they crystallise, they do not meet the recognition criteria because they are contingent on uncertain future events. On the event of an environmental incident and call of the bond, the cash received would be recognised as a liability and released to income once the required actions had been completed in line with IFRS15. The value of bond agreements in the EA’s favour as at the 31 March 2024 was £654.0 million (2022-23, £606.5 million).

The EA is required by statute to check that waste importers and exporters have sufficient financial guarantees in place when it processes relevant applications for consent. This guarantee is designed to remediate any non-compliance with delivery and processing or due to waste being illegal. The year end value of the guarantees which could be called upon is immaterial and as with other guarantees disclosed above, these do not meet the criteria for recognition and the possibility of conversion is extremely remote; no calls have been made in recent years to convert the guarantees.

The department is not exposed to material credit risk.

 9.2.2 Liquidity Risk

There is no significant exposure to liquidity risk, as the department’s net resource outturn is financed through resources voted annually by Parliament.

 9.2.3 Market Risk – Foreign Currency Risk

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 RDPE scheme expenditure (including Scotland, Wales and Northern Ireland).

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 transacted 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:

	31 March 2024 Assets	31 March 2024 Liabilities	31 March 2023 Assets	31 March 2023 Liabilities
	£000	£000	£000	£000
Euro	218,175	157	234,979	23,496

The following table details RPA’s, and therefore the department’s, sensitivity to a ten per cent increase and decrease in sterling against the euro.

 Impact of Movement in Euro/Sterling rate

	Sterling appreciates by 10%	Sterling appreciates by 10%	Sterling depreciates by 10%	Sterling depreciates by 10%
	31 March 2024	31 March 2023	31 March 2024	31 March 2023
	£000	£000	£000	£000
(Increase)/decrease in Net operating cost	(21,753)	(21,146)	21,753	21,146
Derivative instruments
(Increase)/decrease in Net operating cost	21,804	22,337	(21,804)	(22,337)

 9.2.4 Market Risk – Inflation

The EA is exposed to the risk of changes in the rate of inflation. The RPI has fluctuated significantly over the life of these financial liabilities. This is a macro-economic risk that the EA cannot manage in any way. However, the EA is able to recover the cost of reservoir operating agreement payments through its charges on water abstraction. HM Treasury have approved the increase in the liability that will not result in a payment, as being non-recoverable.

 9.2.5 Market Risk – Investments

As at 31 March 2024, the Defra Group had £86.3 million in investments (2022-23, £61.3 million), including £30.0 million invested in the Big Nature Impact Fund, £28.0 million in the Eco-Business Fund, £20.5 million investment in Hazel II Topco Limited and it’s 100 per cent owned subsidiary Hazel II Midco I Limited, £2.3 million in the Land Degradation Neutrality (LDN) Fund and £4.2 million invested in by RBG Kew in the Cazenove Investment Portfolio.

 9.3 Flood Re Exposure to Insurance Contract Risk

The risks described below are attributable to Flood Re, which is consolidated into the departmental accounting boundary.

 9.3.1 Credit Risk

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, outwards 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 equivalent collateralisation. Flood Re’s Credit Risk Appetite Statements set out the maximum single counterparty exposure aligned to their credit ratings. These risk appetites seek to balance reinsurance Counterparty credit risk with pricing and placement risks.

 Insurance Risk

 Premium risk

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 and to manage a transition to a market with risk-reflective pricing over a 25-year period. 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.

Flood Re 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 was set at £180 million a year. From 1 April 2022, for the following three years, this was decreased to £135 million.

 Reserve risk

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.

 Sensitivity

Flood Re uses scenario analysis to illustrate the potential financial impact of assumptions varying from expectations where there is little or no historical data and in turn this is used to inform the risk adjustment. (Further details can be found in Flood Re’s Annual Report and Accounts, Note 4.1).

 Catastrophe risk

Flood Re’s most significant insurance risk exposure is to losses arising from infrequent, high severity catastrophe flood events. Flood Re relies on probabilisitic catastrophe risk modelling to assess their claims potential.

The year ending 31 March 2024 was more active for catastrophe flood events than the prior year. Storm Babet caused significant flooding in October 2023 and was followed in January 2024 by Storm Henk which caused further flooding, although of lower severity.

The table below shows the probable maximum loss, on a prospective basis, for different levels of severity of catastrophe loss years. The estimates allow for new business as well as run-off of existing liabilities for the portfolio as at 31 March 2024. Between Year End 2023 and Year End 2024, there has been no change in Flood Re’s view of flood risk. Therefore, the movement between the dates only reflects the change in Flood Re’s exposure.

	2024 Estimated net claims £000	2023 Estimated net claims £000
1 in 50 year or 2% probability	120,292	118,236
1 in 200 year or 0.5% probability	131,926	127,679
1 in 250 year or 0.4% probability	133,144	129,566

 Risk Mitigation

Flood Re purchases reinsurance as part of its overall risk mitigation programme. Reinsurance ceded is placed on both a proportional and non-proportional basis and 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 liability limit for the year ended 31 March 2024 was £2.1 billion (2023: £1.9 billion). Each financial year the Liability Limit is adjusted for the change in the Consumer Price Index (CPI) in the prior calendar year. 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 outwards reinsurance purchased protect the full Liability Limit. Furthermore, Flood Re protects itself from an annual accounting loss above £100 million in any one accounting period. To provide for both of these requirements Flood Re has purchased an extensive reinsurance programme.

 9.3.2 Market Concentration Risk

Flood Re defines market concentration risk as the risk of a financial loss arising from a lack of diversification in the investment portfolio or from a large exposure to any single issuer or sector.

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).

The market risk of gilt investments is recognised through Other Comprehensive Income (OCI) and comprises a net unrealised gain in 2023-24 of £0.77 million (2022-23, an unrealised loss of £0.167 million). The book value of gilt investments is calculated on an amortised cost basis, using the effective interest rate methodology, whereby interest unwinds over the period from inception to maturity, and is recognised as an interest charge in the SoCNE.

 9.3.3 Capital Adequacy

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.

 9.4 Thames Tideway Tunnel Indemnity Agreement Insurance Contract Risk

As part of the government support package for the Thames Tideway Tunnel project, Defra has provided an indemnity (Supplemental Compensation Agreement) to the Infrastructure Provider (IP) on commercial terms to cover liability claims that exceed the IP’s commercially arranged insurance limits or where insurance is unavailable or subsequently becomes unavailable. The contract only covers risks that are insurable in the market (though at a higher level); non-insurable risks are borne by the IP as they would be under commercial insurance (for example, the cost of construction delays resulting from a major insurance event).

In certain specified circumstances whilst the project is being built, Defra would be liable for claims above £2.26 billion per event for damage to construction works, and above £750 million per event for third party death, injury or damage. At the outset of the project, Defra estimated that government’s total exposure under this indemnity in the event of its ‘reasonable worst case’ scenario (a major catastrophic event) could be as high as £1.5 billion.

This indemnity agreement meets the definition of an insurance contract according to IFRS 4.

At the financial year-end, no claims have been made under this insurance contract and the likelihood of a future claim has been assessed as remote (less than one per cent). The only cashflows that are expected to occur under this contract are the premiums payable to Defra by the IP, which are surrendered to the Consolidated Fund. Consequently, Defra does not recognise an insurance liability for this contract.

The insurance risk relating to the project is actively managed through Defra’s governance structures and governance products. This includes a liaison committee which oversees the project’s progress, including representatives from Defra, Thames Water Utilities Ltd, and the IP.

The construction phase of the project is due to complete in 2025, after which the insurance risk is expected to reduce further.

10 Cash and Cash Equivalents

	2023-24 Core department and Agencies	2023-24 Defra group	2022-23 Core department and Agencies	2022-23 Defra group
	£000	£000	£000	£000
Balance at 1 April	192,536	471,776	387,391	640,284
Net change in cash balance	16,438	26,937	(194,855)	(168,508)
Balance at 31 March	208,974	498,713	192,536	471,776
The following balances at 31 March are held at:
Government Banking Services	208,974	271,155	192,536	243,560
Demand accounts - GBS	-	136,405	-	119,639
Demand accounts - Escrow	-	19,887	-	17,586
Commercial bank accounts and cash in hand	-	67,234	-	72,486
Short term investments	-	4,032	-	18,505
Balance at 31 March	208,974	498,713	192,536	471,776

For further information see the Net Cash Requirement section of the Financial Analysis section.

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. Demand accounts include amounts that the EA hold in cash and cash equivalents in Government Banking Service (GBS) and escrow accounts as security for permitting deposits (Note 1.14).

11 Trade Receivables, Financial and Other Assets

	2023-24 Core department and Agencies	2023-24 Defra group	2022-23 Core department and Agencies	2022-23 Defra group
	£000	£000	£000	£000
Amounts falling due within one year:
Trade receivables	66,314	82,364	51,844	74,689
Deposits and advances	1,947	2,101	2,197	2,331
Flood Re reinsurance receivables	-	188,379	-	71,419
Other receivables	11,268	21,617	9,694	14,453
VAT	37,260	82,057	20,710	62,063
Prepayments and accrued income	237,031	277,704	222,337	218,935
Accrued income relating to EU funding	217,163	219,279	212,772	215,483
Contract assets	4,062	4,107	3,032	3,034
Less expected credit loss for receivables and contract assets	(16,674)	(23,021)	(1,526)	(7,074)
Trade and other receivables	558,371	854,587	521,060	655,333
Current loans	27	27	27	27
Current part of derivative financial instrument asset	1,335	1,335	90	90
Short Term Deposits	-	564,900	-	267,800
Flood Re UK treasury Gilts	-	312,608	-	473,076
Financial assets	1,362	878,870	117	740,993
Amounts falling due after one year:
Trade receivables	77	77	51	51
Deposits and advances	5	5	-	-
Other receivables	4,576	4,584	5,829	5,829
Prepayments and accrued income	14	3,447	21	752
Receivables due after more than one year	4,672	8,113	5,901	6,632
Big Nature Impact fund	30,000	30,000	-	-
Eco Business fund	27,956	27,956	32,544	32,544
LDN fund	2,349	2,349	6,023	6,023
Hazel II Loan Notes and Priority Shares	20,507	20,507	-	-
Flood Re UK treasury Gilts	-	31,034	-	24,989
Other financial assets	402	5,472	447	5,248
Non-current financial assets	81,214	117,318	39,014	68,804
Total receivables, financial and other assets	645,619	1,858,888	566,092	1,471,762

For short term deposits with a maturity greater than 3 months at inception, additions are £568 million, (£21 million AHDB and £547 million Flood Re) (2022-23, £1,014 million, (£20 million AHDB and £994 million Flood Re), repayments and redemptions are £271 million (£23 million AHDB and £248 million Flood Re) (2022-23, £1,392 million Flood Re) and interest capitalised is £Nil (2022-23, £Nil).  

 12 Trade Payables, Financial and Other Liabilities

	2023-24 Core department and Agencies	2023-24 Defra group	2022-23 Core department and Agencies	2022-23 Defra group
	£000	£000	£000	£000
Amounts falling due within one year:
VAT	5,645	6,853	(298)	783
Other taxation and social security	15,841	32,230	13,480	27,512
Flood Re reinsurance payables	-	45,591	-	29,698
Promissory notes	53,059	53,059	68,688	68,688
Trade payables	93,920	119,350	66,399	86,066
Other Payables: EU	9,254	9,254	5,025	5,025
Other payables	18,040	39,682	40,610	51,441
Accruals and deferred income	1,602,489	1,928,853	420,599	740,623
Current part of finance leases	-	-	46	46
Amounts issued from the Consolidated Fund for supply but not spent at year end	193,678	193,678	192,277	192,277
Consolidated Fund Extra Receipts due to be paid to the Consolidated Fund
Received	15,296	15,296	259	259
Receivable	38,072	38,072	11,970	11,970
Contract liabilities	5,038	178,730	5,271	188,705
Trade and other payables	2,050,332	2,660,648	824,326	1,403,093
Current part of derivative financial instrument liability	706	706	4,847	4,847
Current part of Environment Agency reservoir agreements	-	25,600	-	24,300
Financial liabilities	706	26,306	4,847	29,147
Amounts falling due after more than one year:
Other payables, accruals and deferred income	-	8,875	-	8,442
Permitting deposits	-	161,888	-	137,225
Finance leases	-	-	(21)	(21)
Contract liabilities	192	192	133	133
Other Payables	192	170,955	112	145,779
Environment Agency reservoir agreements	-	435,601	-	423,742
Financial liabilities	-	435,601	-	423,742
Total payables	2,051,230	3,293,510	829,285	2,001,761

Included within promissory notes payable is an amount of £16.0 million (2022-23, £25.5 million) which is expected to be encashed within 1 year and £37.1million (2022-23, £43.2 million) which is expected to be encashed after 1 year based on non-legally binding encashment schedules. During 2023-24, two new promissory notes were laid with the Bank of England, relating to: Big Nature Impact Fund (£30 million) and the Global Biodiversity Framework Fund (£15 million). In addition, the BioCarbon Fund in Indonesia and Zambia promissory note 2014-15 was cancelled and reissued by the Department for Energy, Security and Net Zero. Two other promissory notes were fully utilised in 2023-24.

The increase in the Core department and agencies and the Defra group accruals and deferred income relates to the estimated outstanding payments of £808.2 million for the delinked payments scheme for 2024, which was introduced in the current year in RPA.

Permitting deposits are amounts held by the EA as security for permits issued for landfill sites, dredging lagoons, mining waste and hazardous waste facilities. Further explanation of the permitting deposits and accounting policy is included in Note 1.14 and Note 10.

 13 Lease liabilities

Maturity analysis of leases liabilities are shown in the table below.

	2023-24 Core department and Agencies	2023-24 Defra group	2022-23 Core department and Agencies	2022-23 Defra group
	£000	£000	£000	£000
Land and buildings
Not later than one year	15,389	25,477	21,784	31,935
Later than one year and not later than five years	47,809	71,675	49,069	75,044
Later than five years	35,964	47,904	36,252	45,570
Total	99,162	145,056	107,105	152,549
Less interest element	(9,141)	(14,754)	-	-
Present value of obligations	90,021	130,302	107,105	152,549
Other
Not later than one year	12,277	21,104	10,924	17,194
Later than one year and not later than five years	11,292	21,679	9,154	13,931
Total	23,569	42,783	20,078	31,125
Less interest element	(1,395)	(3,292)	-	-
Present value of obligations	22,174	39,491	20,078	31,125
Total present value of obligations	112,195	169,793	127,183	183,674
Current	26,471	49,510	32,708	49,129
Non-current	85,724	120,283	94,475	134,545

 14 Contract Assets and Liabilities

 14.1 Contract balances

	2023-24 Core department and Agencies	2023-24 Defra group	2022-23 Core department and Agencies	2022-23 Defra group
	£000	£000	£000	£000
Receivables which are included in trade and Other Receivables	558,981	858,593	523,929	658,931
Contract Assets	4,062	4,107	3,032	3,034
Contract Liabilities	(5,230)	(178,922)	(5,404)	(188,838)

14.2 Significant changes in the contract assets and the contract liabilities balances during the period

	2023-24 Contract Assets	2023-24 Contract Assets	2022-23 Contract Liabilities	2022-23 Contract Liabilities
	Core department and Agencies	Defra group	Core department and Agencies	Defra group
	£000	£000	£000	£000
Contract Assets/Liabilities at 1 April 2023	3,115	3,117	(5,404)	(188,838)
Increases/Decreases due to cash received/paid	(2,464)	(2,464)	(3,237)	(19,367)
Transfers from contract assets/liabilities to receivables/payables	3,411	3,454	3,411	29,283
Contract Assets/Liabilities at 31 March 2024	4,062	4,107	(5,230)	(178,922)

 Contract balances note

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 (for example, when the receivable is recognised).

 Contract assets (capitalised costs) reporting

Costs to obtain a contract or fulfil a contract should be capitalised under IFRS 15. During 2023-24, this has not been relevant to Defra.

 15 Provisions for Liabilities and Charges

 15.1 Provisions for Liabilities and Charges (Excluding Pension Liabilities)

	CAP Disallowance	IR35	De-Linked Payments	Flood Re Insurance	Metal Mines	FMD Sites	Core Estates Provisions	Other Provisions	Total
	£000	£000	£000	£000	£000	£000	£000	£000	£000
Defra group
Balance at 1 April 2022	59,369	4,683	-	103,849	556,476	294,262	16,998	18,119	1,053,756
Provided in the year	34,132	-	-	43,815	62,476	7,627	7,411	28,070	183,531
Provisions not required written back	(13,602)	(335)	-	-	-	(175)	(5,699)	(1,667)	(21,478)
Provisions utilised in year	(10,600)	(4,348)	-	(34,145)	(7,150)	(2,061)	-	(4,008)	(62,312)
Changes in discount rate	-	-	-	-	(391,177)	(182,281)	-	(50)	(573,508)
Unwinding of discount	-	-	-	-	3,928	2,159	-	-	6,087
Balance at 31 March 2023	69,299	-	-	113,519	224,553	119,531	18,710	40,464	586,076
Provided in the year	-	24,564	792,643	235,405	10,499	5,807	3,936	11,129	1,083,983
Provisions not required written back	(58,596)	-	-	-	(9,224)	(1)	(3,327)	(533)	(71,681)
Provisions utilised in year	(10,703)	-	-	(23,270)	(6,863)	(2,375)	(74)	(1,733)	(45,018)
Changes in discount rate	-	-	(15,434)	-	(93,301)	(43,238)	(1,034)	(288)	(153,295)
Unwinding of discount	-	-	21,458	-	7,061	3,808	502	(157)	32,672
Transfers	-	-	-	-	-	-	-	(2)	(2)
Balance at 31 March 2024	-	24,564	798,667	325,654	132,725	83,532	18,713	48,880	1,432,735

 15.2 Analysis of Provision Balances

	2023-24 IR35	2023-24 De-Linked Payments	2023-24 Flood Re Insurance	2023-24 Metal Mines	2023-24 FMD Sites	2023-24 Core Estates Provisions	2023-24 Other Provisions	2023-24 Total
	£000		£000	£000	£000	£000	£000	£000
Defra group
Not later than one year	-	-	261,869	3,488	2,383	7,162	2,811	277,713
Later than one year and not later than five years	24,564	798,667	63,785	13,185	9,008	10,012	41,158	960,379
Later than five years	-	-	-	116,052	72,141	1,539	4,911	194,643
Total	24,564	798,667	325,654	132,725	83,532	18,713	48,880	1,432,735
Of which:
Core department and agencies	24,564	798,667	-	132,725	83,532	18,713	1,758	1,059,959
NDPBs	-	-	325,654	-	-	-	47,122	372,776
Total	24,564	798,667	325,654	132,725	83,532	18,713	48,880	1,432,735

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 15.6 and 15.7, 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.

	2023-24 %
Short term (0 to 5 years)	4.26
Medium term (6 to 10 years)	4.03
Long term (greater than 11 -40 years)	4.72
Very Long term (greater than 40 years)	4.40

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.

 15.3 Disallowance Provisions

Failure of Defra (through RPA) to comply the Commission’s regulations for payments funded through the European Union funded Common Agricultural Policy (CAP) could result in the application of financial corrections. Any amounts disallowed depended 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 was imposed by the Commission this was a deduction from the claim for reimbursement for which Defra was liable for.

Following the UK’s exit from the European Union the value of the liabilities that were expected to impact future accounting periods and therefore, disclosed as provisions has been diminishing. During 2023-24, the provision has been wound down to a nil balance, pending any potential further audits that may take place.

 15.4 RPA De-linked Payments

Delinked payments will replace BPS in England in 2024 and will reduce in value each year until these payments finish. These payments are known as progressive reductions. The full value of delinked payments has been recognised during the 2023-24 financial year, in line with the recognition point of the BPS 2023 expenditure, as eligibility for delinked payments is linked to the submission of valid BPS claims.

De-linked payments are subject to progressive reductions year on year. Progressive reduction rates for 2024 have been published because of this, there is considerable certainty over the value of delinked payments for that year. Therefore, the value of delinked payments for 2024 has been recognised as a scheme accrual in Note 12.

At 31 March 2024, the value of delinked payments for 2025 onwards was subject to greater uncertainty and has therefore, been recognised as a provision. The provision for de-linked payments relates to payments expected to be made to customers during the 2025-26 to 2027-28 financial years. The provision is measured at present value using discount rates issued by HM Treasury. The short-term general provision rate of 4.26 per cent notified in the 2023 Public Expenditure (PES) paper has been applied to discount the expected cash payments in future years. It has also been assumed that the progressive rate reductions would follow the consistent pattern in published rates for earlier years, equating to the progressive reduction rates continuing to increase by 15 per cent year on year, until a full 100 per cent reduction is reached, or until the final year of de-linked payments in 2027-28. Sensitivity analysis relating to these assumptions can be found in RPA’s annual report and accounts. Note that on 30 October 2024, progressive reduction rates for 2025 were announced. See Note 22 for details of this non-adjusting event after the reporting period.

For 2024, the total value of de-linked payments recognised was £1.6 billion, of which £808.2 million was recognised as an accrual (Note 12) and the remaining £798.7 million for the financial years 2024 to 2027.

 15.5 Flood Re Insurance Provision

Flood Re’s 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 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.

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 claims.

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 (through the liability adequacy test). Using reinsurance inward contracts 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 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 2024 is £325.7 million (2023 £113.5 million).

 15.6 Abandoned Metal Mines Provision

Under the Water Resources Act 1991 (as amended by the Environment Act 1995) mine owners / operators cannot be held liable for permitting water pollution from mines abandoned before 2000. Around 1,500 kilometres of English rivers continue to be polluted by metals being released from metal mines abandoned before 2000 and government has committed to help address this historical legacy.

Defra has established a number of measures (treatment schemes and diffuse interventions) designed to mitigate the impacts of contaminated groundwater discharging from abandoned metal mines and to limit inputs of metals from diffuse sources (such as mining waste spoil heaps) at certain sites. Defra manages the construction and operation of these facilities, through the Water and Abandoned Metal Mines (WAMM) Programme, a partnership between the Environment Agency, the Coal Authority and Defra.

For each treatment scheme, Defra has a constructive obligation to remediate water from the mine from the point at which it has announced its intention to operate the site and planning consent has been obtained for its construction. Following each obligating event, Defra recognises a provision equal to the present value of the best estimate of the expenditure that will be required to settle the obligation.

In January 2023, Parliament approved a new legally binding target to halve the length of rivers polluted by abandoned metal mines by 2038. Defra has determined that these legally binding targets do not meet the definition of a provision. The targets will create a constructive obligation on Defra at the point that Defra has announced its intention to operate the site and planning consent has been obtained for construction. At 31 March 2024, no new treatment schemes had been confirmed in relation to the new target and therefore at the balance sheet date Defra had no obligation beyond the facilities already in operation or under construction.

Due to long term factors, significant inherent uncertainty exists regarding both the amount of expenditure and the time frame required to settle the obligation. These include the emergence of new technologies; possible future environmental standards and regulations; the impacts of adverse weather and climate change; price inflation of construction and operating costs; location of schemes and related land costs; the number of future schemes required, and the length of time they will be required to operate.

Defra uses an evidenced cost base, with estimated future operating costs provided by the Coal Authority based on their experience of running similar schemes for coal mines. Estimated time frames are based on scientific and geological research, which indicates that water treatment obligations could continue in perpetuity. In calculating the provision at each year-end, Defra uses a rolling 100 year time frame as a proxy for perpetuity. Defra is satisfied that this method results in a provision value that is not materially different from the value that would be obtained using a perpetual liability basis.

The present value of the expenditure required to settle the obligation is calculated using discount rates advised by HM Treasury in December each year. Discount rates can change significantly, which can cause year-on-year volatility in the provision value. The undiscounted value of the liability at the 2023-24 year-end is £351 million (2022-23, £355 million). After discounting, the value of the provision is £133 million (2022-23, £224.5 million). The HM Treasury nominal discount and inflation rates remain beyond the department’s control. There is a rebuttable presumption that departments will use the published HM Treasury inflation rates, obtained from OBR CPI forecasts, when inflating provision cash flows, and Defra has no reason to rebut this presumption.

The sensitivity of the metal mine provision value to changes in the key underlying assumptions is analysed in the following table.

Change in assumption	Effect on provision (in £)	Effect on provision (in % terms)
0.5% increase in Treasury Discount Rate	Decrease of £18.4m	Decrease of 13.8%
0.5% decrease in Treasury Discount Rate	Increase of £23.8m	Increase of 18.0%
0.5% increase in Treasury Inflation Rate	Increase of £0.7m	Increase of 0.5%
0.5% decrease in Treasury Inflation Rate	Decrease of £0.7m	Decrease of 0.5%
10% increase in underlying costs	Increase of £13.3m	Increase of 10.0%
10% decrease in underlying costs	Decrease of £13.3m	Decrease of 10.0%
10 year increase in timeframe of the provisions	Increase of £3.1m	Increase of 2.3%
10 year decrease in timeframe of the provisions	Decrease of £3.9m	Decrease of 2.9%

The analysis above demonstrates that changes in discount rates are likely to be the most significant cause of volatility in the provision value. The factors impacting the volatility of the provision and the underlying running and asset replacement costs continue to be monitored annually in consultation with the Coal Authority.

15.7 FMD Burial Sites Provision

Following the Foot and Mouth Disease (FMD) outbreak in 2001, government publicly committed to preventing and remediating environmental damage at several FMD animal burial sites across the UK. Consequently, Defra has a constructive obligation to actively manage these sites to prevent the discharge of leachate through groundwater pollution. Defra recognises a provision equal to the present value of the best estimate of the expenditure that will be required to settle this obligation.

Due to long term factors, significant inherent uncertainty exists regarding both the amount of expenditure and the time frame required to settle the obligation. The provision time frame has been estimated at 100 years from the burial date, with 77 years remaining at the balance sheet date. Conceptual reports were completed in March 2020, for each site, which showed the level of contamination is decreasing and Defra plans to review this every 5 years.

Defra uses an evidenced cost base, with estimated future operating costs based on analysis of past expenditure and future expectations in consultation with suppliers.

The present value of the expenditure required to settle the obligation is calculated using discount rates advised by HM Treasury on 4 December 2023. Discount rates can change significantly each year, which can cause year-on-year volatility in the provision value. The undiscounted value of the liability at the 2023-24 year-end is £184.6 million (2022-23: £174 million). After discounting, the value of the provision is £83.5 million (2022-23: £119.5 million). The HM Treasury nominal discount and inflation rates remain beyond the department’s control. There is a rebuttable presumption that departments will use the published HM Treasury inflation rates, obtained from OBR CPI forecasts, when inflating provision cash flows, and Defra has no reason to rebut this presumption.

The sensitivity of the FMD provision value to changes in the key underlying assumptions is analysed in the following table.

Change in assumption	Effect on provision (in £)	Effect on provision (in % terms)
0.5% increase in Treasury Discount Rate (see Note 15.2)	Decrease of £10.1m	Decrease of 12.1%
0.5% decrease in Treasury Discount Rate	Increase of £12.5m	Increase of 15.0%
0.5% increase in Treasury Inflation Rate	Increase of £0.4m	Increase of 0.5%
0.5% decrease in Treasury Inflation Rate	Decrease of £0.4m	Decrease of 0.5%
10% increase in underlying costs	Increase of £8.4m	Increase of 10.0%
10% decrease in underlying costs	Decrease of £8.4m	Decrease of 10.0%
10 year increase in timeframe of the provisions	Increase of £3.6m	Increase of 4.3%
10 year decrease in timeframe of the provisions	Decrease of £4.5m	Decrease of 5.4%

The analysis above demonstrates that changes in discount rates are likely to be the most significant cause of volatility in the provision value. The factors impacting the volatility of the provision and the underlying running and asset replacement costs continue to be monitored annually

16 Pension Liabilities

 16.1 Pension Schemes Managed by the Department

The department contributes to the PCSPS and CSOPS, known as Alpha, but does not manage the scheme. Details are reported in the Staff and Remuneration Report - 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:

Schemes Disclosed by the Core department	Net (Liability)/Asset £000	Schemes Disclosed in the NDPB Accounts	Net (Liability)/Asset £000
EA Pension Liability (Closed Scheme) (funded and unfunded)	(118,700)	Home Grown Cereals Authority Pension Scheme (funded)	(188)
Nature Conservancy Council Pension (by-analogy)	(7,194)	EA Active Pension Scheme (funded)	797,054
Former Countryside Agency Pension Schemes (Rural Community Council and Ex-Chairmen Schemes) (by-analogy)	(2,178)	NE Pension Scheme (by-analogy)	(107)
Horticultural Research International Pension Scheme (by-analogy).	(16,457)	Sea Fish Industry Authority (unfunded)	(2,434)
		Meat and Livestock Commission Pension Scheme (funded).	(2,300)
Sub Total	(144,529)		792,025
Total			647,496

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.

16.1.1 EA Pension Liability (Closed Scheme)

The EA Closed Fund (the Fund) is vested in EA by Regulation 2(1) of the LGPS 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 2022.

At the last actuarial valuation date, the weighted average duration of the defined benefit obligation was 9.6 years.

The estimated sponsor’s contributions for the year to 31 March 2025 will be approximately £41 million.

16.1.2 EA Active Pension Scheme

The EA operates a defined benefit pension scheme for current and former 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 (EAPF) website (www.eapf.org.uk).

The EAPF has three employers, EA, Natural Resources Wales (NRW) and Shared Services Connected Limited (SSCL). NRW and SSCL are closed to new entrants and pay fixed contributions of a fixed sum and fixed percentage of pay respectively. The EA guarantees the SSCL contributions and so their position is modelled within the EA for valuation and contribution setting.

The Active Fund Funding Strategy Statement Policies, Publications, Resources, EAPF sets out the funding strategy and objectives of the scheme.

Actuarial Assumptions

All calculations have been made by a qualified independent actuary and are based on the most recent actuarial valuation of the Active Fund at 31 March 2022. The assumptions underlying the calculation at 31 March 2024 are only used for accounting purposes as required under IAS 19.

The total pension charge for the EA, under IAS 19 financial reporting, was £93.9 million for the financial year 2023-24 (2022-23, £184.5 million). The pension charge was assessed using the projected unit method of valuation to calculate the service costs.

The EA’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 each year to meet the equivalent employer contribution of 19 per cent. This contribution rate is payable annually through from 2023 to 2026.

The latest triennial actuarial valuation of the EAPF was at 31 March 2022. The assets taken at market value at that date (£4.5 billion) were sufficient to cover 103 per cent (2019, 106 per cent) of the value of liabilities in respect of past service benefits which had accrued to members.

When the LGPS was reformed in 2014, transitional protections were applied to certain older members within ten years of normal retirement age. The benefits accrued from 1 April 2014 by these members are subject to an underpin which means that they cannot be lower than what they would have received under the previous benefit structure.

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 2018-19, an initial liability was recognised within the IAS19 report of £28.3 million. In 2019-20, 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 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 2019-20 IAS19 valuation with no further adjustment made since as there are no new details on the potential remedy relating to this case.

There are two further court cases which may impact on the benefits of the scheme (Walker and O’Brien). Our current understanding is that these are unlikely to be significant judgements in terms of the impact on the pension obligations. As a result, and until further guidance is released, no allowance for potential remedies to these judgements, or changes to the existing benefits structure have been made.

The estimated employers’ contributions for the year to 31 March 2025 will be approximately £84.4 million.

Pension surplus and interpretation of IFRIC 14

As was the case in 2022-23, the EA’s IAS 19 report received for 2023-24 showed a surplus (asset) of £0.8 billion (2022-23 - £0.5 billion surplus).

Last year, the EA considered whether the asset should be recognised in full or capped at an asset ceiling as per IFRIC 14, and if there were any additional liabilities to raise based on the Minimum Funding Requirement.

The EA noted that in forming this view they reviewed the Pensions Act and sought professional advice which noted that this legislation is not relevant to the LGPS scheme because it only applies to occupational pension schemes established under trust.

The EA’s judgement was that while the EA lacks a unilateral right to a refund of surplus via a scheme exit because of its status as a Scheduled body, that economic benefit is available through potential reductions in future employer contributions based on the current snapshot of funding conditions. (The EA note that rate-setting is done with a view to both solvency and short-term stability, and that analysis of current funding conditions was performed for the purposes of analysing the asset ceiling rather than being binding on future rate-setting decisions).

In analysing the extent of economic benefit available through this route the EA considered, as required by IFRIC 14, the difference between service cost and future contributions for future service. Due to the ongoing and Scheduled nature of the scheme the EA analysed the effect of this difference in perpetuity. Again, as instructed in IFRIC 14, where available (future contribution rates) the EA analysed these factors using the funding regime basis, through a hypothetical re-basing of the primary contribution rate based on advice from their actuaries. Otherwise, the EA have relied on IAS 19 assumptions for consistency with the DBO accounting.

Based on this analysis the EA concluded that the economic benefit available through the future rate setting regime is at least sufficient to cover the existing IAS 19 surplus, and they therefore concluded that it was appropriate for the EA to recognise the full value of the net IAS 19 surplus. Were more prudent alternative assumptions to be adopted (e.g. higher future rates of contribution relevant to the Minimum Funding Requirement) the asset ceiling would be decreased, leading to a maximum effect of a full constraint of the surplus to £nil and the full amount of the surplus passing through Other Comprehensive Expenditure.

The EA consider that all of the above remains relevant and applicable for 2023-24.

Further details can be found in the Environment Agency Annual Report and Accounts.

16.1.3        Meat and Livestock Commission (MLC) Pension Scheme

Defined Benefits Scheme

The AHDB is the principal employer in a contributory pension scheme providing defined benefits to legacy MLC employees and ex-employees. This scheme is closed to new entrants and, with effect from 31 March 2022, was also closed to all the future accrual of 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 annual valuations using the projected unit method.

For the purposes of the IAS 19 accounts, the employer’s contributions to the scheme in 2024-25 are estimated to be £0.7 million, including recovery plan contributions but excluding payments for expenses.

The Scheme Trustees and AHDB are required to agree a “Technical Provisions” valuation at least once every three years. The latest valuation was completed as at 31 March 2021.

At 31 March 2024, 60 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 past transfers to allow for GMP equalisation. In 2021-22 the scheme actuary included an additional liability of £0.1 million for this purpose and accounted for it as a past service cost.

Defined Contribution Scheme

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.

16.2 Changes in the Fair Value of Plan Assets, Defined Benefit Obligation and Net Liability

As at 31 March 2024

	Total Core department and Agencies Assets	Total Core department and Agencies Obligations	Total Core department and Agencies Net (liability) /asset		Total Department Assets	Total Department Obligations	Total Department Adjustments	Total Department Net (liability) /asset
	£000	£000	£000		£000	£000	£000	£000
Fair value of employer assets	266,400	-	266,400		4,305,478	-	-	4,305,478
Present value of funded liabilities	-	(378,500)	(378,500)		-	(3,906,805)	-	(3,906,805)
Present value of unfunded liabilities	-	(62,828)	(62,828)		-	(65,593)	-	(65,593)
Less irrecoverable surplus	-	-	-		-	-	(9,823)	(9,823)
Opening Position as at 31 March 2023	266,400	(441,328)	(174,928)		4,305,478	(3,972,398)	(9,823)	323,257
Service cost
Current service cost	-	-	-		-	(93,202)	-	(93,202)
Past service cost (including curtailments)	-	-	-		-	(793)	-	(793)
Other expenses	-	-	-		(439)	-		(439)
Total service cost	-	-	-		(439)	(93,995)	-	(94,434)
Net interest
Interest income on plan assets	11,000	(92)	10,908		202,977	(96)		202,881
Interest cost on defined benefit obligation	-	(17,227)	(17,227)		-	(185,553)		(185,553)
Impact of asset ceiling on net Interest	-	-	-		-	-	(448)	(448)
Total net interest	11,000	(17,319)	(6,319)		202,977	(185,649)	(448)	16,880
Total defined benefit cost recognised in profit or (loss)	11,000	(17,319)	(6,319)		202,538	(279,644)	(448)	(77,554)
Cashflows
Plan participants’ contributions	-	-	-		34,251	(34,251)	-	-
Employer contributions	42,500	-	42,500		139,582	229	-	139,811
Contributions in respect of unfunded benefits	5,400	-	5,400		5,400	-	-	5,400
Benefits paid	(42,200)	44,174	1,974		(153,935)	155,919	-	1,984
Unfunded benefits paid	(5,400)	5,400	-		(6,307)	6,307	-	-
Expenses	(800)	-	(800)		(800)	-	-	(800)
Expected closing position	276,900	(409,073)	(132,173)		4,526,207	(4,123,838)	(10,271)	392,098
Remeasurements
Change in demographic assumptions	-	3,300	3,300		-	28,538	-	28,538
Change in financial assumptions	-	20,234	20,234		-	245,293	-	245,293
Other experience	-	(17,990)	(17,990)		-	(117,706)	-	(117,706)
Return on assets excluding amounts included in net interest	(17,900)	-	(17,900)		98,321	-	-	98,321
Changes in asset ceiling	-	-	-		-	-	952	952
Total remeasurements recognised in Other Comprehensive Income (OCI)	(17,900)	5,544	(12,356)		98,321	156,125	952	255,398
Fair value of employer assets	259,000	-	259,000		4,624,528	-	-	4,624,528
Present value of funded liabilities	-	(347,300)	(347,300)		-	(3,908,943)	-	(3,908,943)
Present value of unfunded liabilities	-	(56,229)	(56,229)		-	(58,770)	-	(58,770)
Less irrecoverable surplus	-	-	-		-	-	(9,319)	(9,319)
Closing position as at 31 March 2024	259,000	(403,529)	(144,529)		4,624,528	(3,967,713)	(9,319)	647,496

As at 31 March 2023

	Total Core department and Agencies Assets	Total Core department and Agencies Obligations	Total Core department and Agencies Net (liability) /asset		Total Department Assets	Total Department Obligations	Total Department Adjustments	Total Department Net (liability) /asset
	£000	£000	£000		£000	£000	£000	£000
Fair value of employer assets	328,100	-	328,100		4,735,758	-		4,735,758
Present value of funded liabilities	-	(480,400)	(480,400)		-	(5,535,282)		(5,535,282)
Present value of unfunded liabilities	-	(84,856)	(84,856)		-	(88,419)		(88,419)
Less irrecoverable surplus	-	-	-		-	-	(4,783)	(4,783)
Opening Position as at 31 March 2022	328,100	(565,256)	(237,156)		4,735,758	(5,623,701)	(4,783)	(892,726)
Service cost
Current service cost	-	-	-		-	(184,530)	-	(184,530)
Past service cost (including curtailments)	-	-	-		-	(123)	-	(123)
Effect of settlements	-	-	-		-	(12,395)	-	(12,395)
Other expenses	-	-	-		(422)	-	-	(422)
Total service cost	-	-	-		(422)	(197,048)	-	(197,470)
Net interest
Interest income on plan assets	5,100	-	5,100		125,778	-	-	125,778
Interest cost on defined benefit obligation	-	(8,401)	(8,401)		-	(148,532)	(200)	(148,732)
Impact of asset ceiling on net interest	-	-	-		-	-	(134)	(134)
Total net interest	5,100	(8,401)	(3,301)		125,778	(148,532)	(334)	(23,088)
Total defined benefit cost recognised in profit or (loss)	5,100	(8,401)	(3,301)		125,356	(345,580)	(334)	(220,558)
Cashflows
Plan participants’ contributions	-	-	-		28,497	(28,459)	-	38
Employer contributions	43,600	-	43,600		104,724	1,157	-	105,881
Contributions in respect of unfunded benefits	5,600	-	5,600		5,600	(38)	-	5,562
Benefits paid	(42,600)	44,491	1,891		(139,427)	141,332	-	1,905
Unfunded benefits paid	(5,600)	5,600	-		(6,610)	6,610	-	-
Expenses	(800)	-	(800)		(800)	-	-	(800)
Expected closing position	333,400	(523,566)	(190,166)		4,853,098	(5,848,679)	(5,117)	(1,000,698)
Remeasurements
Change in demographic assumptions	-	5,800	5,800		-	(21,287)	-	(21,287)
Change in financial assumptions	-	97,404	97,404		-	2,180,389	-	2,180,389
Other experience	-	(20,966)	(20,966)		(41,133)	(337,712)	-	(378,845)
Return on assets excluding amounts included in net interest	(67,000)	-	(67,000)		(457,259)	-	-	(457,259)
Changes in asset ceiling	-	-	-		(49,228)	54,891	(4,706)	957
Total remeasurements recognised in Other Comprehensive Income (OCI)	(67,000)	82,238	15,238		(547,620)	1,876,281	(4,706)	1,323,955
Fair value of employer assets	266,400	-	266,400		4,305,478	-	-	4,305,478
Present value of funded liabilities	-	(378,500)	(378,500)		-	(3,906,805)	-	(3,906,805)
Present value of unfunded liabilities	-	(62,828)	(62,828)		-	(65,593)	-	(65,593)
Less irrecoverable surplus	-	-	-		-	-	(9,823)	(9,823)
Closing position as at 31 March 2023	266,400	(441,328)	(174,928)		4,305,478	(3,972,398)	(9,823)	323,257

16.3 Changes in the Fair Value of Plan Assets, Defined Benefit Obligation and Net Liability – By Scheme

As at 31 March 2024

	Environment Agency Closed Scheme (within Core department) Assets	Environment Agency Closed Scheme (within Core department) Obligations	Environment Agency Closed Scheme (within Core department) Net (liability) /asset	Environment Agency Active Scheme (within NDPB) Assets	Environment Agency Active Scheme (within NDPB) Obligations	Environment Agency Active Scheme (within NDPB) Net (liability) /asset
	£000	£000	£000	£000	£000	£000
Fair value of employer assets	266,400	-	266,400	3,869,498	-	3,869,498
Present value of funded liabilities	-	(378,500)	(378,500)	-	(3,366,148)	(3,366,148)
Present value of unfunded liabilities	-	(34,900)	(34,900)	-	-	-
Opening Position as at 31 March 2023	266,400	(413,400)	(147,000)	3,869,498	(3,366,148)	503,350
Service cost
Current service cost	-	-	-	-	(93,202)	(93,202)
Past service cost (including curtailments)	-	-	-	-	(793)	(793)
Total service cost	-	-	-	-	(93,995)	(93,995)
Net interest
Interest income on plan assets	11,000	-	11,000	183,942	-	183,942
Interest cost on defined benefit obligation	-	(16,200)	(16,200)	-	(160,521)	(160,521)
Total net interest	11,000	(16,200)	(5,200)	183,942	(160,521)	23,421
Total defined benefit cost recognised in profit or (loss)	11,000	(16,200)	(5,200)	183,942	(254,516)	(70,574)
Cashflows
Plan participants’ contributions	-	-	-	34,251	(34,251)	-
Employer contributions	42,500	-	42,500	96,147	-	96,147
Contributions in respect of unfunded benefits	5,400	-	5,400	-	-	-
Benefits paid	(42,200)	42,200	-	(101,435)	101,435	-
Unfunded benefits paid	(5,400)	5,400	-	-	-	-
Expenses	(800)	-	(800)	-	-	-
Expected closing position	276,900	(382,000)	(105,100)	4,082,403	(3,553,480)	528,923
Remeasurements
Change in demographic assumptions	-	3,300	3,300	-	21,797	21,797
Change in financial assumptions	-	17,800	17,800	-	225,831	225,831
Other experience	-	(16,800)	(16,800)	-	(100,319)	(100,319)
Return on assets excluding amounts included in net interest	(17,900)	-	(17,900)	120,822	-	120,822
Total remeasurements recognised in Other Comprehensive Income (OCI)	(17,900)	4,300	(13,600)	120,822	147,309	268,131
Fair value of employer assets	259,000	-	259,000	4,203,225	-	4,203,225
Present value of funded liabilities	-	(347,300)	(347,300)	-	(3,406,171)	(3,406,171)
Present value of unfunded liabilities	-	(30,400)	(30,400)	-	-	-
Closing position as at 31 March 2024	259,000	(377,700)	(118,700)	4,203,225	(3,406,171)	797,054

	MLC (within NDPB) Assets	MLC (within NDPB) Obligations	MLC (within NDPB) Adjustments	MLC (within NDPB) Net (liability) /asset	Other (all other schemes) Assets	Other (all other schemes) Obligations	Other (all other schemes) Adjustments	Other (all other schemes) Net (liability) /asset
	£000	£000	£000	£000	£000	£000	£000	£000
Fair value of employer assets	150,100	-	-	150,100	19,480	-	-	19,480
Present value of funded liabilities	-	(145,700)	-	(145,700)	-	(16,457)	-	(16,457)
Present value of unfunded liabilities	-	-	-	-	-	(30,693)	-	(30,693)
Less irrecoverable surplus	-	-	(6,800)	(6,800)	-	-	(3,023)	(3,023)
Opening Position as at 31 March 2023	150,100	(145,700)	(6,800)	(2,400)	19,480	(47,150)	(3,023)	(30,693)
Service cost
Other expenses	(400)	-		(400)	(39)	-	-	(39)
Total service cost	(400)	-	-	(400)	(39)	-	-	(39)
Net interest
Interest income on plan assets	7,100	-	-	7,100	935	(96)	-	839
Interest cost on defined benefit obligation	-	(6,900)	-	(6,900)	-	(1,932)	-	(1,932)
Impact of asset ceiling on net Interest	-	-	(300)	(300)	-	-	(148)	(148)
Total net interest	7,100	(6,900)	(300)	(100)	935	(2,028)	(148)	(1,241)
Total defined benefit cost recognised in profit or (loss)	6,700	(6,900)	(300)	(500)	896	(2,028)	(148)	(1,280)
Cashflows
Employer contributions	700	-	-	700	235	229	-	464
Contributions in respect of unfunded benefits	-	-	-	-	-	-	-	-
Benefits paid	(10,300)	10,300	-	-	-	1,984	-	1,984
Unfunded benefits paid	-	-	-	-	(907)	907	-	-
Expenses	-	-	-	-	-	-	-	-
Expected closing position	147,200	(142,300)	(7,100)	(2,200)	19,704	(46,058)	(3,171)	(29,525)
Remeasurements
Change in demographic assumptions	-	3,100	-	3,100	-	341	-	341
Change in financial assumptions	-	(700)	-	(700)	-	2,362	-	2,362
Other experience	-	500	-	500	-	(1,087)	-	(1,087)
Return on assets excluding amounts included in net interest	(3,300)	-	-	(3,300)	(1,301)	-	-	(1,301)
Changes in asset ceiling	-	-	300	300	-	-	652	652
Total remeasurements recognised in Other Comprehensive Income (OCI)	(3,300)	2,900	300	(100)	(1,301)	1,616	652	967
Fair value of employer assets	143,900	-	-	143,900	18,403	-	-	18,403
Present value of funded liabilities	-	(139,400)	-	(139,400)	-	(16,072)	-	(16,072)
Present value of unfunded liabilities	-	-	-	-	-	(28,370)	-	(28,370)
Less irrecoverable surplus	-	-	(6,800)	(6,800)	-	-	(2,519)	(2,519)
Closing position as at 31 March 2024	143,900	(139,400)	(6,800)	(2,300)	18,403	(44,442)	(2,519)	(28,558)

As at 31 March 2023

	Environment Agency Closed Scheme (within Core department) Assets	Environment Agency Closed Scheme (within Core department) Obligations	Environment Agency Closed Scheme (within Core department) Net (liability) /asset		Environment Agency Active Scheme (within NDPB) Assets	Environment Agency Active Scheme (within NDPB) Obligations	Environment Agency Active Scheme (within NDPB) Net (liability) /asset
	£000	£000	£000		£000	£000	£000
Fair value of employer assets	328,100	-	328,100		4,133,315	-	4,133,315
Present value of funded liabilities	-	(480,400)	(480,400)		-	(4,788,039)	(4,788,039)
Present value of unfunded liabilities	-	(45,200)	(45,200)		-	-	-
Opening Position as at 31 March 2022	328,100	(525,600)	(197,500)		4,133,315	(4,788,039)	(654,724)
Service cost
Current service cost	-	-	-		-	(184,364)	(184,364)
Past service cost (including curtailments)	-	-	-		-	(123)	(123)
Total service cost	-	-	-		-	(184,487)	(184,487)
Net interest
Interest income on plan assets	5,100	-	5,100		113,640	-	113,640
Interest cost on defined benefit obligation	-	(7,800)	(7,800)		-	(133,333)	(133,333)
Total net interest	5,100	(7,800)	(2,700)		113,640	(133,333)	(19,693)
Total defined benefit cost recognised in profit or (loss)	5,100	(7,800)	(2,700)		113,640	(317,820)	(204,180)
Cashflows
Plan participants’ contributions	-	-	-		28,459	(28,459)	-
Employer contributions	43,600	-	43,600		59,868	-	59,868
Contributions in respect of unfunded benefits	5,600	-	5,600		-	-	-
Benefits paid	(42,600)	42,600	-		(84,495)	84,495	-
Unfunded benefits paid	(5,600)	5,600	-		-	-	-
Expenses	(800)	-	(800)		-	-	-
Expected closing position	333,400	(485,200)	(151,800)		4,250,787	(5,049,823)	(799,036)
Remeasurements
Change in demographic assumptions	-	5,800	5,800		-	(27,030)	(27,030)
Change in financial assumptions	-	84,500	84,500		-	2,017,684	2,017,684
Other experience	-	(18,500)	(18,500)		(41,133)	(306,979)	(348,112)
Return on assets excluding amounts included in net interest	(67,000)	-	(67,000)		(340,156)	-	(340,156)
Total remeasurements recognised in Other Comprehensive Income (OCI)	(67,000)	71,800	4,800		(381,289)	1,683,675	1,302,386
Fair value of employer assets	266,400	-	266,400		3,869,498	-	3,869,498
Present value of funded liabilities	-	(378,500)	(378,500)		-	(3,366,148)	(3,366,148)
Present value of unfunded liabilities	-	(34,900)	(34,900)		-	-	-
Closing position as at 31 March 2023	266,400	(413,400)	(147,000)		3,869,498	(3,366,148)	503,350

	MLC (within NDPB) Assets	MLC (within NDPB) Obligations	MLC (within NDPB) Adjustments	MLC (within NDPB) Net (liability) /asset	Other (all other schemes) Assets	Other (all other schemes) Obligations	Other (all other schemes) Adjustments	Other (all other schemes) Net (liability) /asset
	£000	£000	£000	£000	£000	£000	£000	£000
Fair value of employer assets	196,500	-	-	196,500		77,843	-	-	77,843
Present value of funded liabilities	-	(196,500)	-	(196,500)		-	(70,343)	-	(70,343)
Present value of unfunded liabilities	-	-	-	-		-	(43,219)	-	(43,219)
Less irrecoverable surplus	-	-	-	-		-	-	(4,783)	(4,783)
Opening Position as at 31 March 2022	196,500	(196,500)	-	-		77,843	(113,562)	(4,783)	(40,502)
Service cost
Current service cost	-	-	-	-		-	(166)	-	(166)
Effect of settlements	-	-	-	-		-	(12,395)	-	(12,395)
Other expenses	(400)	-	-	(400)		(22)	-	-	(22)
Total service cost	(400)	-	-	(400)		(22)	(12,561)	-	(12,583)
Net interest
Interest income on plan assets	5,400	-	-	5,400		1,638	-	-	1,638
Interest cost on defined benefit obligation	-	(5,200)	(200)	(5,400)		-	(2,199)	-	(2,199)
Impact of asset ceiling on net interest	-	-	-	-		-	-	(134)	(134)
Total net interest	5,400	(5,200)	(200)	-		1,638	(2,199)	(134)	(695)
Total defined benefit cost recognised in profit or (loss)	5,000	(5,200)	(200)	(400)		1,616	(14,760)	(134)	(13,278)
Cashflows
Plan participants’ contributions	-	-	-	-		38	-	-	38
Employer contributions	700	-	-	700		556	1,157	-	1,713
Contributions in respect of unfunded benefits	-	-	-	-		-	(38)	-	(38)
Benefits paid	(10,900)	10,900	-	-		(1,432)	3,337	-	1,905
Unfunded benefits paid	-	-	-	-		(1,010)	1,010	-	-
Expected closing position	191,300	(190,800)	(200)	300		77,611	(122,856)	(4,917)	(50,162)
Remeasurements
Change in demographic assumptions	-	-	-	-		-	(57)	-	(57)
Change in financial assumptions	-	44,700	-	44,700		-	33,505	-	33,505
Other experience	-	(5,200)	-	(5,200)		-	(7,033)	-	(7,033)
Return on assets excluding amounts included in net interest	(41,200)	-	-	(41,200)		(8,903)	-	-	(8,903)
Changes in asset ceiling	-	5,600	(6,600)	(1,000)		(49,228)	49,291	1,894	1,957
Total remeasurements recognised in Other Comprehensive Income (OCI)	(41,200)	45,100	(6,600)	(2,700)		(58,131)	75,706	1,894	19,469
Fair value of employer assets	150,100	-	-	150,100		19,480	-	-	19,480
Present value of funded liabilities	-	(145,700)	-	(145,700)		-	(16,457)	-	(16,457)
Present value of unfunded liabilities	-	-	-	-		-	(30,693)	-	(30,693)
Less irrecoverable surplus	-	-	(6,800)	(6,800)		-	-	(3,023)	(3,023)
Closing position as at 31 March 2023	150,100	(145,700)	(6,800)	(2,400)		19,480	(47,150)	(3,023)	(30,693)

16.4 History of Experience Gains and Losses – Material Schemes

Year Ended :	EA Closed Scheme (funded) 31-03-24	EA Closed Scheme (funded) 31-03-23	EA Closed Scheme (funded) 31-03-22	EA Closed Scheme (funded) 31-03-21	EA Closed Scheme (funded) 31-03-20
	£000	£000	£000	£000	£000
Fair value of employer assets	259,000	266,400	328,100	305,500	301,100
Present value of defined benefit obligation	(377,700)	(413,400)	(525,600)	(547,800)	(586,100)
(Deficit)/surplus	(118,700)	(147,000)	(197,500)	(242,300)	(285,000)
Experience gains/(losses) on assets	(17,900)	(67,000)	16,800	(2,400)	(3,300)
Experience gains/(losses) on liabilities	(16,800)	(18,500)	(4,400)	11,000	39,500
Actuarial gains/(losses) on employer assets	(17,900)	(67,000)	16,800	(2,400)	(3,300)
Actuarial gains/(losses) on obligation	4,300	71,800	(22,800)	(7,300)	21,600
Actuarial gains/(losses) recognised in SoCTE	(13,600)	4,800	(6,000)	(9,700)	18,300

Year Ended :	EA Active Scheme (funded) 31-03-24	EA Active Scheme (funded) 31-03-23	EA Active Scheme (funded) 31-03-22	EA Active Scheme (funded) 31-03-21	EA Active Scheme (funded) 31-03-20
	£000	£000	£000	£000	£000
Fair value of employer assets	4,203,225	3,869,498	4,133,315	3,893,900	3,247,426
Present value of defined benefit obligation	(3,406,171)	(3,366,148)	(4,788,039)	(4,954,156)	(3,380,705)
(Deficit)/surplus	797,054	503,350	(654,724)	(1,060,256)	(133,279)
Experience gains/(losses) on assets	120,822	(381,289)	160,927	522,734	(107,859)
Experience gains/(losses) on liabilities	(100,319)	(306,979)	(10,587)	24,499	204,011
Actuarial gains/(losses) on employer assets	120,822	(381,289)	160,927	522,734	(107,859)
Actuarial gains/(losses) on obligation	147,309	1,683,675	419,770	(1,438,729)	726,112
Actuarial gains/(losses) recognised in SoCTE	268,131	1,302,386	580,697	(915,995)	618,253

Year Ended :	31-03-24	31-03-23	31-03-22	31-03-21	31-03-20
	£000	£000	£000	£000	£000
Fair value of employer assets	143,900	150,100	196,500	210,900	203,200
Present value of defined benefit obligation	(139,400)	(145,700)	(196,500)	(218,100)	(208,800)
(Deficit)/surplus	4,500	4,400	-	(7,200)	(5,600)
Experience gains/(losses) on assets	(3,300)	(41,200)	(8,500)	15,100	(7,800)
Experience gains/(losses) on liabilities	500	(5,200)	(900)	3,700	2,000
Actuarial gains/(losses) on employer assets	(3,300)	(41,200)	(8,500)	15,100	(7,800)
Effect of limit of asset ceiling	300	(1,000)	(5,600)	-	-
Actuarial gains/(losses) on obligation	2,900	39,500	21,900	(16,000)	10,200
Actuarial gains/(losses) recognised in SoCTE	(100)	(2,700)	7,800	(900)	2,400

16.5 Fair Value of Assets in the Fund – Material Schemes

The assets in the scheme were:

	EA Closed Scheme	EA Active Scheme	MLC Pension Scheme
As at 31 March 2024	£000	£000	£000
Equities	-	1,767,339	6,500
Bonds	233,700	1,541,073	44,200
Liability Driven Investment	-	-	6,500
Property	-	704,889	-
Cash	25,300	189,924	400
Insurance policy	-	-	86,300
Total 31 March 2024	259,000	4,203,225	143,900
Percentage of closing fair value	%	%	%
Equity	-	42	5
Bonds	90	37	30
Liability Driven Investment	-	-	5
Property	-	17	-
Cash and insurance policy	10	4	60
Total	100	100	100
As at 31 March 2023	£000	£000	£000
Equities	-	1,530,399	16,500
Bonds	239,600	1,487,671	32,900
Liability Driven Investment	-	-	7,600
Property	-	721,486	-
Cash	26,800	129,942	400
Insurance policy	-	-	92,700
Total 31 March 2023	266,400	3,869,498	150,100
Percentage of closing fair value	%	%	%
Equity	-	40	11
Bonds	90	38	22
Liability Driven Investment	-	-	5
Property	-	19	-
Cash and insurance policy	10	3	62
Total	100	100	100

The majority of equity holdings relate to assets held in pooled investment vehicles. Valuations for unit holdings in these vehicles are not based on quoted prices in active markets and are informed by the most recent investment manager returns related to the Funds in which Defra group is invested.

16.6 Financial Assumptions – Material Schemes

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.

	EA Closed Scheme	EA Active Scheme	MLC Pension Scheme
	% pa	% pa	% pa
As at 31 March 2024
Inflation/pension increase rate (CPI)	2.6	2.8	2.9
Salary increase rate	-	3.3	-
Discount rate	5.1	4.9	4.9
As at 31 March 2023
Inflation/pension increase rate (CPI)	2.4	3.0	2.9
Salary increase rate	-	3.5	-
Discount rate	4.2	4.8	4.9

 16.7 Mortality Assumptions – Material Schemes

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:

	EA Closed Scheme Male	EA Closed Scheme Female	EA Active Scheme Male	EA Active Scheme Female	MLC Pension Scheme Male	MLC Pension Scheme Female
Average future life expectancies at age 65
Current pensioners (years)	20.0	23.2	21.6	24.1	21.0	23.6
Future pensioners (years)	19.9	23.9	22.6	25.8	22.1	24.9

 16.8 Sensitivity Analysis - Material Schemes

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:

Change in assumptions at year ended 31 March 2024	Approximate % Increase in Employer Liability	Approximate Monetary Amount
	%	£000
0.5% decrease in real discount rate	3	11,700
1 year increase in member life expectancy	3	11,300
0.5% increase in pension increase rate	3	11,700

The sensitivities regarding the principal assumptions used to measure the EA Active scheme liabilities are set out below:

Change in assumptions at year ended 31 March 2024	Approximate % Increase in Employer Liability	Approximate Monetary Amount
	%	£000
0.1% decrease in real discount rate	2	72,016
1 year increase in member life expectancy	4	136,247
0.1% increase in salary increase rate	-	3,756
0.1% increase in pension increase rate	2	69,566

The sensitivities regarding the principal assumptions used to measure the MLC Pension scheme liabilities are set out below:

Change in assumptions at year ended 31 March 2024	Approximate % Increase in Employer Liability	Approximate Monetary Amount
	%	£000
0.5% decrease in real discount rate	5	7,600
0.5% increase in RPI	3	4,500
Post-retirement mortality assumption - 1 year age rating	3	4,900

17 Contingent Liabilities and Contingent Assets

 17.1 Contingent Liabilities                                              

 17.1.1 Quantifiable

The department has the following quantifiable contingent liabilities as at 31 March 2024. Unless otherwise stated liabilities relate to the Core department.

• The Woodland Carbon Guarantee is a £50 million scheme that aims to help accelerate woodland planting rates and develop the domestic market for woodland carbon for the permanent removal of carbon dioxide from the atmosphere. It provides the option to sell captured carbon in the form of verified carbon credits, called Woodland Carbon Units, to the government for a guaranteed price every five or ten years up to 2055-56. If preferred, credits can be sold on the open market rather than to the government. The Forestry Commission’s liabilities under the Woodland Carbon Guarantee are contingent on others deciding to exercise their rights to sell the Woodland Carbon Units to the government. The limit of this liability under the Guarantee at 31 March 2024 is £10.4 million.

• Small potential liabilities against the Defra group are estimated at no more than £0.7 million (2022-23, £1.9 million).

 17.1.2 Unquantifiable

The department has the following contingent liabilities which are unquantifiable due to their variable nature. Unless otherwise stated liabilities relate to the Core department.

In January 2024, the High Court, in LJ Fairburn & Son Ltd & Ors v Secretary of State for Environment Food and Rural Affairs, upheld a challenge by way of judicial review against Defra’s compensation policy in respect of birds culled for avian influenza control. The issue in the challenge was: by reference to what point in time should compensation be calculated, the point of culling or the (earlier) point of condemnation (the latter being more favourable to the claimants). The High Court determined that it should be at the point of condemnation and therefore that Defra’s policy was unlawful. The Secretary of State has appealed the decision to the Court of Appeal, which heard the appeal on 7-8 November 2024. Defra expect the Court of Appeal’s decision to be handed down in the coming months.

The total compensation paid in 2022-23 for Avian Influenza was £39 million. Should the Secretary of State’s appeal not succeed, the Department may be legally obligated to retrospectively revise the compensation awarded. The timing and amount of any outflow associated with this scenario cannot be reasonably estimated at this time since:

• inspection records showing numbers of compensable birds at the point of condemnation are not commonly available, since in keeping with the current design of the compensation scheme, inspections have typically taken place shortly prior to culling, not at the relevant earlier time;

• the extent of evidence available from alternative sources is limited, and will differ as between livestock keepers, with the small number and the nature of current claimants not supporting any statistical extrapolation; and

• a number of other important variables remain uncertain and are subject to the detail of any adverse judgment, including the applicability of the court’s ruling to other disease control legislation, and limits that may apply to retrospective revisions to compensation.

Defra has contingent liabilities relating to retained rights to former staff affected by Transfer of Undertaking Protection of Employment (TUPE) Regulations.

Potential liability under Authorised Guarantee Agreements. The contingent liability covers the potential costs associated with Defra guaranteeing the performance of incoming tenants, where Defra was the outgoing tenant for pre-1995 leases.

The department is currently involved in a number of ongoing legal cases.

EA have a potential liability in respect of damage to an existing weir when EA works took place nearby. The claimants have indicated their claim would be in the region of £3 million. The EA disagrees with that valuation. The uncertainty and difference between these positions mean a reliable value cannot be attributed.

EA have a further potential liability which relates to an ongoing maintenance contract for coastal works, with the contractor claiming for additional costs incurred due to winter storms. The claimants have indicated their claim would be in region of £3.5 million. The EA disagrees with that valuation. The uncertainty and difference between these positions mean a reliable value cannot be attributed.

 17.2 Contingent Assets

• The department is entitled to a future share of enhancement in value on a number of properties and land previously sold (clawback). This could result in future receipts which are contingent on events outside of the department’s control and could arise based on a number of trigger points, planning thresholds and increased values.

• The Defra group has other potential small assets, with an estimated value of £0.9 million (2022–23, £0.9 million).

• In April 2024, HM Revenue and Customs amended the IR35 legislation to allow departments to offset tax already paid by contractors against any IR35 liability they have. The legislation will apply from 6 April 2024 for deemed direct payments made on or after 6 April 2017.

 18 Related Party Transactions

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 20. Public corporations are outside the accounting boundary and are shown in Note 21. 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 Hazel II Topco Limited. This investment 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 Hazel II Topco Limited 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 payments within the Farming and Countryside Programme, as detailed below, the standard terms and conditions for these schemes apply.

Rt. Hon. Mark Spencer (Minister of State) has received £9,857 in BPS payments for a farm in which he is a partner for the period during which he has been a Defra board member.

Rt. Hon. Lord Benyon (Minister of State) received £77,066 in BPS, Countryside Grants and Woodland improvement Grants for a family trust, a trust corporation and farms.

Heather Hancock (Non-Executive Director, from 4 September 2023) is a partner in a family business which received £17,916 in BPS, Countryside Stewardship and Woodland Grants for the period she has been a Defra board member.

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.

19 Prior Period Adjustments

The tables below summarise the impact on the key financial statements of the Prior Period Adjustments made in relation to the following:

• IFRS 16 implementation.

All the revaluation adjustments relating to IFRS16 were completed in 2022-23 and disclosed appropriately in the SOCTE and Right of use asset note in the 2022-23 ARA, however the impact to the SoCNE was not disclosed. This has been corrected in the 2023-24 ARA, with the update of the prior year figures on the ‘revaluation of right of use assets’ line within the SoCNE.

• Environment Agency project accounting.

The prior year accounts have been restated to reflect changes to opening positions following on from a review of how project spend has been classified in the EA.

During 2022-23 and 2023-24, the EA performed an in-depth review of project accounting, firstly covering capital works expensed in year (CWEIY) spend and later capital additions to assets under construction (AUC).

For CWEIY spend, this was initially driven by a change in the agreement with HM Treasury regarding what could be classified as CWEIY, effective from 1 April 2022. This change meant that CWEIY expenditure had to be capital, as per the International Accounting Standard (IAS) 16 on property, plant and equipment. This significantly reduced the amount of project spend that fell under CWEIY, as previously repairs and maintenance costs could be included.

Later, the review work moved onto the valuation of AUC, as part of the EA’s efforts to resolve the issues that lead to the audit limitation of scope (that was in place for 2021-22 and 2022-23). Again, costs included within AUC have been reviewed to ensure that they meet the definition of capital as per the accounting standards and that, once completed, the EA will maintain the assets that have been created.

These reviews have generated prior period adjustments, and the 2023-24 financial statements show the restated positions for 2022-23 and the impact on the SoFP as at 1 April 2022.

These adjustments have predominantly been attributable to the following:

• Costs previously classified as CWEIY, where the spend was correctly assessed as capital but was incurred creating assets the EA ultimately maintained and so should have been included within AUC.

• Costs previously classified as CWEIY, where the spend was not capital in nature and so should have been accounted for as resource expenditure.

• Costs previously included within AUC, where the spend was correctly assessed as capital but was incurred creating assets the EA ultimately would not maintain and so should have been included within CWEIY.

• Costs previously included within AUC, where the spend was not capital in nature and so should have been accounted for as resource expenditure.

• Costs that had remained within AUC but where the assets were already live, and so should have been transferred to operational assets. This also required an adjustment to the revaluation reserve in 2022-23 to reflect that these assets had been included within the DRC valuation.

• Environment Agency land and buildings valuation.

During 2023-24, EA improved the data on land the EA holds and, as part of this, reviewed the valuation techniques applied.

In some cases, parcels of land owned by the EA had been significantly valued upwards by external, third-party valuers, based on what the land might be sold for on the open market. However, this was using market rates for prime land parcels for development.

On review by EA specialist surveyors, with expert knowledge of the land the EA owns, it was noted that some of these pieces of land did not have development potential and therefore had been valued incorrectly. It has been determined that these assets should be revised downwards, utilising the revaluation reserve previously created when the assets had been revalued above their purchase cost.

Other notes to the accounts have also been adjusted and where applicable the 2022-23 comparators are marked as restated.

Consolidated Statement of Financial Position

 Restated as at 31 March 2023

	As previously reported as at 31 March 2023 Core department and Agencies	As previously reported as at 31 March 2023 Defra group	Adjustment project	Adjustment land and buildings	Restated as at 31 March 2023 Core department and Agencies	Restated as at 31 March 2023 Defra group
	£000	£000	£000		£000	£000
Non-current assets
Property, plant and equipment	540,716	11,407,928	(149,798)	(107,400)	540,716	11,150,730
Right of use assets	115,468	183,920	-	-	115,468	183,920
Investment properties	613	13,941	-	-	613	13,941
Heritage assets	-	303,732	-	-	-	303,732
Agricultural assets	-	141	-	-	-	141
Intangible assets	277,984	442.107	(20,089)	-	277,984	422,018
Financial assets	39,014	68,804	-	-	39,014	68,804
Investment in Associate	7,769	17,514	-	-	7,769	17,514
Net pension assets	-	503,350	-	-	-	503,350
Receivables and contract assets falling due after more than one year	5,901	6,632	-	-	5,901	6,632
Total non-current assets	987,465	12,948,069	(169,887)	(107,400)	987,465	12,670,782
Current assets
Assets classified as held for sale	-	13,403	-	-	-	13,403
Inventories	5,095	6,794	-	-	5,095	6,794
Financial assets	117	740,993	-	-	117	740,993
Trade, other receivables and contract assets	521,060	655,333	-	-	521,060	655,333
Cash and cash equivalents	192,536	471,776	-	-	192,536	471,776
Total current assets	718,808	1,888,299	-	-	718,808	1,888,299
Total assets	1,706,273	14,836,368	(169,887)	(107,400)	1,706,273	14,559,081
Current liabilities
Trade, other payables and contract liabilities	(824,326)	(1,403,093)	-	-	(824,326)	(1,403,093)
Lease Liability	(32,708)	(49,129)	-	-	(32,708)	(49,129)
Provisions	(81,010)	(159,119)	-	-	(81,010)	(159,119)
Net pension liability	(47,577)	(47,581)	-	-	(47,577)	(47,581)
Financial liabilities	(4,847)	(29,147)	-	-	(4,847)	(29,147)
Total current liabilities	(990,468)	(1,688,069)	-	-	(990,468)	(1,688,069)
Non-current assets plus/less net current assets/liabilities	715,805	13,148,299	(169,887)	(107,400)	715,805	12,871,012
Non-current liabilities
Provisions	(352,732)	(426,957)	-	-	(352,732)	(426,957)
Lease Liability	(94,475)	(134,545)	-	-	(94,475)	(134,545)
Net pension liability	(127,351)	(132,512)	-	-	(127,351)	(132,512)
Other payables and contract liabilities	(112)	(142,949)	(2,830)	-	(112)	(145,779)
Financial liabilities	-	(423,742)	-	-	-	(423,742)
Total non-current liabilities	(574,670)	(1,260,705)	(2,830)	-	(574,670)	(1,263,535)
Assets less liabilities	141,135	11,887,594	(172,717)	(107,400)	141,135	11,607,477
Taxpayers’ equity and other reserves
General Fund	(30,281)	2,083,878	19,363	-	(30,281)	2,103,241
Revaluation reserve	171,416	9,456,082	(192,080)	(107,400)	171,416	9,156,602
Charitable funds - restricted funds	-	132,222	-	-	-	132,222
Charitable funds - unrestricted funds	-	215,412	-	-	-	215,412
Total equity	141,135	11,887,594	(172,717)	(107,400)	141,135	11,607,477

 Consolidated Statement of Financial Position

 Restated as at 31 March 2022

	As previously reported as at 31 March 2022 Core department and Agencies	As previously reported as at 31 March 2022 Defra group	Adjustment project	Adjustment land and buildings	Restated as at 31 March 2022 Core department and Agencies	Restated as at 31 March 2022 Defra group
	£000	£000	£000		£000	£000
Non-current assets
Property, plant and equipment	472,322	4,335,191	69,264	(79,000)	472,322	4,325,455
Right of use assets	3,585	3,585	-	-	3,585	3,585
Investment properties	632	11,513	-	-	632	11,513
Heritage assets	-	267,976	-	-	-	267,976
Agricultural assets	-	141	-	-	-	141
Intangible assets	220,910	373,090	(29,631)	-	220,910	343,459
Financial assets	39,058	39,831	-	-	39,058	39,831
Investment in Associate	7,769	7,769	-	-	7,769	7,769
Receivables and contract assets falling due after more than one year	751	3,790	-	-	751	3,790
Total non-current assets	745,027	5,042,886	39,633	(79,000)	745,027	5,003,519
Current assets
Assets classified as held for sale	-	9,223	-	-	-	9,223
Inventories	5,396	6,772	-	-	5,396	6,772
Financial assets	54	660,631	-	-	54	660,631
Trade, other receivables and contract assets	391,386	553,838	-	-	391,386	553,838
Cash and cash equivalents	387,391	640,284	-	-	387,391	640,284
Total current assets	784,227	1,870,748	-	-	784,227	1,870,748
Total assets	1,529,254	6,913,634	39,633	(79,000)	1,529,254	6,874,267
Current liabilities
Trade, other payables and contract liabilities	(1,024,472)	(1,654,434)	-	-	(1,024,472)	(1,654,434)
Provisions	(73,986)	(160,847)	-	-	(73,986)	(160,847)
Net pension liability	(45,789)	(45,805)	-	-	(45,789)	(45,805)
Financial liabilities	(3,370)	(24,470)	-	-	(3,370)	(24,470)
Total current liabilities	(1,147,617)	(1,885,556)	-	-	(1,147,617)	(1,885,556)
Non-current assets plus/less net current assets/liabilities	381,637	5,028,078	39,633	(79,000)	381,637	4,988,711
Non-current liabilities
Provisions	(859,699)	(892,909)	-	-	(859,699)	(892,909)
Net pension liability	(191,367)	(846,921)	-	-	(191,367)	(846,921)
Other payables and contract liabilities	(25,656)	(30,590)	(2,830)	-	(25,656)	(33,420)
Financial liabilities	-	(412,346)	-	-	-	(412,346)
Total non-current liabilities	(1,076,722)	(2,182,766)	(2,830)	-	(1,076,722)	(2,185,596)
Assets less liabilities	(695,085)	2,845,312	36,803	(79,000)	(695,085)	2,803,115
Taxpayers’ equity and other reserves
General Fund	(841,689)	(91,995)	36,803	-	(841,689)	(55,192)
Revaluation reserve	146,604	2,649,371	-	(79,000)	146,604	2,570,371
Charitable funds - restricted funds	-	102,687	-	-	-	102,687
Charitable funds - unrestricted funds	-	185,249	-	-	-	185,249
Total equity	(695,085)	2,845,312	36,803	(79,000)	(695,085)	2,803,115

 Consolidated Statement of Comprehensive Net Expenditure

 Restated for the year ended 31 March 2023

	As previously reported 2022-23 Core department and Agencies	As previously reported 2022-23 Defra group	Adjustment Core department and agencies	Adjustment Defra group	Restated 2022-23 Core department and Agencies	Restated 2022-23 Defra group
	£000	£000	£000		£000	£000
Revenue from contracts with customers	(148,943)	(828,917)	-	-	(148,943)	(828,917)
Other operating income	(323,133)	(480,284)	-	(6,361)	(323,133)	(486,645)
Total income	(472,076)	(1,309,201)	-	(6,361)	(472,076)	(1,315,562)
Staff expenditure	775,076	1,511,501	-	14,798	775,076	1,526,299
Other expenditure	876,872	1,965,053	-	7,280	876,872	1,972,333
Non-cash items	(422,655)	78,307	-	1,723	(422,655)	80,030
Grants and subsidies	4,331,180	2,897,880	-	-	4,331,180	2,897,880
Total operating expenditure	5,560,473	6,452,741	-	23,801	5,560,473	6,476,542
Net operating expenditure	5,088,397	5,143,540	-	17,440	5,088,397	5,160,980
Net expenditure for the year	5,088,397	5,143,540	-	17,440	5,088,397	5,160,980
Other Comprehensive Net Expenditure
Items that will not be reclassified to net operating expenditure
Net (gain)/loss on:
Revaluation of PPE	(33,103)	(6,907,243)	-	220,480	(33,103)	(6,686,763)
of which:
Environment Agency projects	-	-	-	192,080	-	-
Environment Agency land and buildings	-	-	-	28,400	-	-
Revaluation of right of use assets	-	-	5,428	1,750	5,428	1,750
Charitable funds revaluation	-	(23,288)	-	-	-	(23,288)
Revaluation of intangibles	(8,661)	(14,666)	-	-	(8,661)	(14,666)
Pension actuarial movements	(15,238)	(1,323,955)	-	-	(15,238)	(1,323,955)
Items that may be reclassified subsequently to net operating costs
Net (gain)/loss on:
Revaluation of investments	-	184	-	-	-	184
Total comprehensive net expenditure for the year	5,031,395	(3,125,428)	5,428	239,670	5,036,823	(2,885,758)

The Defra group adjustments column all relates to EA Projects prior period adjustments except for the revaluation of PPE line where the split between Projects and Land and Buildings is shown within the note. The revaluation of right of use assets line corrects the group disclosure for 2022-23 and does not relate to the EA prior period adjustments.

 Consolidated Statement of Cash Flows

 Restated for the year ended 31 March 2023

	As previously reported 2022-23 Core department and Agencies	As previously reported 2022-23 Defra group	Adjustments Core department and agencies	Adjustments Defra group	Restated 2022-23 Core department and Agencies	Restated 2022-23 Defra group
	£000	£000	£000		£000	£000
Cash flows from operating activities
Net operating expenditure	(5,088,397)	(5,143,540)	(17,440)	-	(5,088,397)	(5,160,980)
Adjust for non-cash transactions	(418,531)	79,570	1,723	-	(418,531)	81,293
(Increase)/decrease in trade and other receivables excluding derivatives	(134,824)	(107,376)	-	-	(134,824)	(107,376)
Less movements in receivables relating to items not passing through the SoCNE	4,202	4,202	-	-	4,202	4,202
Adjustments for derivative financial instruments	1,402	1,402	-	-	1,402	1,402
(Increase) / decrease in inventories	301	(22)	-	-	301	(22)
Increase / (decrease) in trade payables and other liabilities excluding derivatives	(225,690)	(124,386)	-	-	(225,690)	(124,386)
Less movements in payables relating to items not passing through the SoCNE	210,294	229,614	-	-	210,294	229,614
IFRS16 Implementation adjustment	-	(2,288)	-	-	-	(2,288)
Use of provisions / pension liabilities	(69,897)	(170,098)	-	-	(69,897)	(170,098)
Net cash outflow from operating activities	(5,721,140)	(5,232,922)	(15,717)	-	(5,721,140)	(5,248,639)
Cash flows from investing activities
Purchase of PPE, heritage and agricultural assets	(81,495)	(377,819)	26,391	-	(81,495)	(351,428)
Purchase of intangible assets	(78,777)	(118,275)	(10,674)	-	(78,777)	(128,949)
Purchase / repayment of financial assets	12	(131,243)	-	-	12	(131,243)
Proceeds of disposal of PPE, heritage and agricultural assets	52	1,773	-	-	52	1,773
Proceeds of disposal of financial assets	-	18,000	-	-	-	18,000
Repayments from other bodies	44	(1)	-	-	44	(1)
Net cash outflow from investing activities	(160,164)	(607,565)	15,717	-	(160,164)	(591,848)
Cash flows from financing activities
From Consolidated Fund (supply): current year	5,720,000	5,720,000	-	-	5,720,000	5,720,000
Capital element in respect of service concession arrangements and finance leases and non balance sheet PFI contracts	(241)	(313)	-	-	(241)	(313)
Payment of lease liabilities	(24,823)	(38,749)	-	-	(24,823)	(38,749)
Funding (to) / from other bodies	24	(5)	-	-	24	(5)
Net financing	5,694,960	5,680,933	-	-	5,694,960	5,680,933
Net increase/(decrease) in cash and cash equivalents in the period before adjustment for receipts and payments to the Consolidated Fund	(186,344)	(159,554)	-	-	(186,344)	(159,554)
Receipts due to the Consolidated Fund which are outside the scope of the department’s activities	(4,202)	(4,202)	-	-	(4,202)	(4,202)
Payments of amounts due to the Consolidated Fund	(4,309)	(4,752)	-	-	(4,309)	(4,752)
Net increase/(decrease) in cash and cash equivalents in the period after adjustment for receipts and payments to the consolidated fund	(194,855)	(168,508)	-	-	(194,855)	(168,508)
Cash and cash equivalents at the beginning of the period	387,391	640,284	-	-	387,391	640,284
Cash and cash equivalents at the end of the period	192,536	471,776	-	-	192,536	471,776

 Consolidated Statement of changes in Taxpayers’ Equity

 Restated for the year ended 31 March 2023 - General Fund

	As previously reported 2022-23 General Fund	Adjustments General Fund / projects	Adjustments General Fund / land and buildings	Restated 2022-23 General Fund
	£000	£000	£000	£000
Balance as at 1 April 2022	(91,995)	36,803	-	(55,192)
IFRS 16 Initial Recognition	5,762	-	-	5,762
Adjusted opening balance 1 April 2022	(86,233)	36,803	-	(49,430)
Net parliamentary funding - drawn down	5,720,000	-	-	5,720,000
Net parliamentary funding - deemed	387,391	-	-	387,391
Funding to/from other bodies	(5)	-	-	(5)
Supply (payable) adjustment	(192,277)	-	-	(192,277)
CFER Income Payable to the Consolidated Fund	(8,272)	-	-	(8,272)
Net operating costs for the year	(5,179,923)	(17,440)	-	(5,197,363)
Non-cash adjustments				-
Non cash charges-auditors’ remuneration	1,211	-	-	1,211
Notional recharges and other non cash items	(5)	-	-	(5)
Movement in reserves
Recognised in other comprehensive expenditure:
Pension actuarial movements	1,323,955	-	-	1,323,955
Contributions in respect of unfunded benefits	4,800	-	-	4,800
Transfers between reserves	113,237	-	-	113,237
Transfer to General Fund - net asset transfer	(1)	-	-	(1)
Balance at 31 March 2023	2,083,878	19,363	-	2,103,241

 Consolidated Statement of changes in Taxpayers’ Equity

Restated for the year ended 31 March 2023 - Revaluation Reserve

	As previously reported 2022-23 Revaluation Reserve	Adjustments Revaluation Reserve / projects	Adjustments Revaluation Reserve / land and buildings	Restated 2022-23 Revaluation Reserve
	£000	£000		£000
Balance as at 1 April 2022	2,649,371	-	(79,000)	2,570,371
IFRS 16 Initial Recognition	-	-	-	-
Adjusted opening balance 1 April 2022	2,649,371	-	(79,000)	2,570,371
Movement in reserves
Recognised in other comprehensive expenditure:
Revaluation of PPE	6,907,243	(192,080)	(28,400)	6,686,763
Revaluation of intangibles	14,666	-	-	14,666
Revaluation of Right of use assets	(1,750)	-	-	(1,750)
Revaluation of investments	(184)	-	-	(184)
Transfers between reserves	(113,264)	-	-	(113,264)
Balance at 31 March 2023	9,456,082	(192,080)	(107,400)	9,156,602

20 Entities Within the Departmental Boundary

The entities within the departmental boundary during 2023-24 comprise supply financed agencies and those entities listed in the designation and amendment orders presented to Parliament.

 Executive Agencies

Animal and Plant Health Agency	APHA Weybridge, Woodham Lane Addlestone, Surrey. KT15 3NB
Centre for Environment, Fisheries and Aquaculture Science	Lowestoft Laboratory, Pakefield Road, Lowestoft, Suffolk. NR33 0HT
Rural Payments Agency	Northgate House, 21-23 Valpy Street, Reading. RG1 1AF
Veterinary Medicines Directorate	Woodham Lane, New Haw, Addlestone, Surrey. KT15 3LS

The executive agencies’ Annual Reports and Accounts (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.

The 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.

The Forestry Commission

620 Bristol Business Park, Coldharbour Lane, Bristol. BS16 1EJ

 Executive NDPBs

Consumer Council for Water	23 Stephenson Street, Birmingham, B2 4BH
Environment Agency	Horizon House, Deanery Road, Bristol. BS1 5AH
Joint Nature Conservation Committee	Quay House, 2 East Station Road, Fletton Quays, Peterborough. PE2 8YY
Marine Management Organisation	Lancaster House, Hampshire Court, Newcastle upon Tyne. NE4 7YH
Natural England	Foss House, Kings Pool, 1-2 Peasholme Green, York. YO1 7PX
Board of Trustees of the Royal Botanic Gardens, Kew (included RBG Kew Enterprises)	Richmond, London. TW9 3AE
Flood Re Limited	75 King William Street, London. EC4N 7BE
Office for Environmental Protection	Worcestershire County Hall, Spetchley Road, Worcester. WR5 2NP
Livestock Information Ltd (from 1 November 2023)	Curwen Road, Workington. CA14 2DD

Levy Funded Bodies

Agriculture and Horticulture Development Board (includes Sutton Bridge Experimental Unit Limited and Livestock Information Limited (until 31 October 2023))	Middlemarch Business Park, Siskin Parkway East, Coventry. CV3 4PE
Sea Fish Industry Authority	18 Logie Mill, Logie Green Road, Edinburgh, EH7 4HS

Non-profit Institution within the Public Sector, specifically Central Government

National Forest Company (includes Forest Experience Limited and National Forest Enterprises Limited)

Enterprise Glade, Bath Yard, Moira, Swadlincote, Derbyshire, DE12 6BA

Executive NDPBs, levy funded bodies, National Forest Company and Flood Re’s ARA are published separately.

Advisory NDPBs (Defra Funded)

Advisory Committee on Releases to the Environment	ACRE Secretariat, 2nd Floor, Seacole Building, Marsham Street, London. SW1P 4DF
Independent Agricultural Appeals Panel	Appeals Team, Rural Payments Agency, Sterling House, Dix’s Field, Exeter, Devon. EX1 1QA
Science Advisory Council	2 Marsham Street, Seacole Block (NW Quarter), London. SW1P 4DF
Veterinary Products Committee	Woodham Lane, New Haw, Addlestone, Surrey. KT15 3LS

 Tribunal NDPBs (Defra Funded)

Plant Varieties and Seeds Tribunal (dormant)

Plant Variety Rights Office (APHA), Eastbrook, Shaftesbury Road, Cambridge. CB2 8DR

The advisory and tribunal NDPBs do not produce a separate ARA as they are accounted for as part of the Core department accounts.

21 Entities Outside the Departmental Boundary

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:

Public Corporations

• Covent Garden Market Authority
• Forestry England (formerly Forest Enterprise England)
• Canal & River Trust
• British Wool

 Other Bodies

• National Parks Authorities (x9)
• Water Services Regulation Authority (Ofwat)
• Broads Authority

 22 Events After the Reporting Period

Defra’s financial statements are laid before the House of Commons by HM Treasury. IAS10, 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.

There have been no adjusting events after the reporting period and one non-adjusting event.

As part of the budget on 30 October 2024, progressive reduction rates for the 2025 year of delinked payments were announced. The announcement does not impact the amounts recognised in these financial statements for the year ended 31 March 2024 (see Note 15). However, as the announced progressive reduction rates were significantly higher than those estimated by Defra management as at 31 March 2024, the value of delinked payments which Defra expects to pay in 2025 has been reduced. Accordingly, the carrying value of the provision as at 30 October 2024 has been reduced by £366 million.

Although the budget announcement fixed progression rates for 2025, no such announcement was made in respect of progressive reduction rates for 2026 and 2027. As such, these obligations continue to be recognised as a provision, and their value is subject to uncertainties depending on future announcements.

Annexes

These annexes do not form part of the financial statements and have not been subject to audit.

Annex 1: Core Tables 2023-24

These tables provide an analysis of departmental expenditure, split between resource consumption and capital investment, covering the period from 2019-20 to 2024-25.

These tables follow the layout of the Part II Table of the 2023-24 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 Departmental Expenditure Limit (DEL) and Annually Managed Expenditure (AME) elements separately for control purposes. 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, mainly for the farming budget, 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.

Table 1 – Defra’s Resource and Capital Budget

Resource Budget (Programme and Administration) DEL

Food and Farming

The large increase from 2020-21 onwards relates to direct payments for farmers following the UK’s departure from the EU. These payments were previously funded from the European Commission (the Commission). The slight decrease from 2021-22 reflects internal transfers of budget from direct aid to environmental measures. The 2024-25 increase is due to a transfer of Farm Support budget out of 2023-24 capital DEL into 2024-25 resource DEL to reflect a more up to date resource / capital split.

Improve the Environment and Rural Services

The increases from 2022-23 onwards reflect funding provided in the Spending Review (SR) 2021 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 Act. The large increase in 2024-25 reflects a further increase in funding for Official Development Assistance and increased budget for the Collection and Packaging Reforms programme, mainly relating to grants to Local Authorities for Simpler Recycling.

Animal and Plant Health

The increases from 2020-21 onwards reflect additional budget for preparation to exit the EU and continuing investment following the UK’s departure from the EU. The increase in 2022-23 is primarily due to costs relating to the Avian Influenza outbreak. The 2023-24 outturn remains high in comparison to prior year figures due to the Biosecurity, Borders and Trade Programme (BBTP). This programme incorporates 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.

Marine and Fisheries

The increase in 2020-21 primarily reflects additional budget for preparation to exit and transition from the EU and continuing investment following the UK’s departure from the EU. The 2020-21 increase also reflects the department’s response to COVID-19 for the marine and fisheries sectors. The profile from 2021-22 onwards largely reflects the profile of the UK Seafood Fund, which aims to improve the long-term sustainability of the UK fisheries sector, with the investment split between resource and capital DEL.

Departmental Operating Costs

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 increase in 2023-24 primarily reflects increased expenditure relating to various digital projects and programmes.

Improve the Environment and Rural Services (ALB) (Net)

The spending pattern largely reflects the agreed spending profile for the Environment Agency (EA) across the SR periods. The higher outturn in 2021-22 reflects higher depreciation and impairment charges due to some fixed asset adjustments at the EA. The increase in 2023-24 primarily reflects an increase in EA’s depreciation costs, due to a change in the method of valuing their operational assets.

Protect the Country from Floods (ALB) (Net)

The spending pattern largely reflects the agreed spending profile for the EA across the SR periods. The increase in 2020-21 is mainly due to the extra funding announced in the 2020 Budget to support flood defence asset repairs. The increase in 2022-23 is largely due to EA expenditure previously classified as capital now being treated as resource expenditure to better align the budgeting treatment of project expenditure with accounting standards. The large increase in 2023-24 is mainly due to an increase in EA’s depreciation costs, as described above, and also the ongoing impact of the capital to resource reclassification. The decrease in 2024-25 is due to the fact that the capital to resource reclassification of EA project expenditure is yet to be reflected in the 2024-25 budget and EA are also yet to secure increased depreciation budget following the change to how their operational assets are valued.

Marine and Fisheries (ALB) (Net)

The increase from 2020-21 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 Budget AME

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.

Food and Farming

The changing profile in this area is primarily due to the Common Agricultural Policy (CAP) Disallowance provision^{[footnote 13]} 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 large credit in 2020-21 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 2023-24 increase relates to area based direct payments for farmers, which are being phased out between 2021 and 2028 and replaced by new schemes. From 2024, the residual payments will be delinked from land area and farmers will receive the delinked payment annually by virtue of having claimed this year and will not need to submit further applications or evidence. The 2023-24 increase reflects this commitment to make these payments up to 2027-28. The large drop in 2024-25 ties in with the delinked payments and represents the AME provision unwinding to resource DEL as payments are made.

Improve the Environment and Rural Services

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 provision represents the ongoing future liabilities relating to remediating mine water pollution arising from abandoned metal mines.

Departmental Operating Costs

The fluctuations in trends mainly reflect movements in the provision for the Foot and Mouth Disease (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.

Improve the Environment and Rural services (ALB) (Net)

The fluctuations in trends mainly reflect the movements in the EA pension fund.

Protect the Country from Floods (ALB) (Net)

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 2019-20 to 2023-24 outturn primarily reflects the surplus position for Flood Re’s final accounts in those years. The budget for 2024-25 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 and accounting entries for the EA reservoir operating agreement.

Marine and Fisheries (ALB) (Net)

The increase in 2022-23 is due to increased pension liabilities at the Sea Fish Industry Authority upon settlement of one of their pension schemes.

Capital Budget DEL

Food and Farming

The increase from 2021-22 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 in 2024-25 is due to an increase in the ring-fenced Farm Support payments and a £200 million reprofiling of capital DEL budget from 2023-24 into 2024-25 resource DEL, making 2023-24 capital DEL comparatively lower.

Improve the Environment and Rural Services

The increase from 2022-23 onwards relates to additional funding in SR21 for NCF and biodiversity. This supports ambitious tree planting and peat restoration goals. The additional increase in 2023-24 relates to the Consistent Collection arm of the Collection and Packaging Reforms programme.

Animal and Plant Health

The increase in 2021-22 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 increase in 2024-25 is mainly driven by an increase in the capital budget in SR21 for the BBTP, which has also been reprofiled due to delays, and some research and development (R&D) budgets, including Weybridge, which were previously held in the centre under the departmental operating costs Estimate line.

Marine and Fisheries

The increase in 2023-24 relates to increased capital funding for marine programmes to improve the long-term sustainability of the UK fisheries sector over the SR period, with the investment split between resource and capital DEL.

Departmental Operating Costs

The increases in 2020-21 and 2021-22 are primarily due to R&D funding to support SCAH and the Critical Works programme at Weybridge and Defra, and also funding to support EU exit transition. The increase in 2023-24 is mainly due to the Extended Producer Responsibility and Northern Ireland Trade projects. The increase in 2024-25 reflects the profile of the ringfenced Science R&D budget, an element of which is yet to be allocated out across the Defra group.

Improve the Environment and Rural Services (ALB) (Net)

The increase in 2021-22 relates to increased expenditure for National Nature Reserves. The increase in 2022-23 is due to increased expenditure by Natural England (NE) on capital investment and R&D. The further increase in 2023-24 includes capital grants payments made by NE across various schemes, increased R&D expenditure by NE and increased capital funding for Royal Botanic Gardens Kew, primarily for the decarbonisation of the Jodrell laboratories.

Protect the Country from Floods (ALB) (Net)

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. As mentioned above, a reclassification of expenditure from capital DEL to resource DEL within EA occurred in 2023-24; the 2024-25 increase reflects the fact that an equivalent transfer for 2024-25 is yet to be made.

Capital Budget AME

Departmental Operating Costs

The 2024-25 budget mainly reflects 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.

Food and Farming (ALB) (Net)

The increase in budget in 2024-25 is required for potential reclassification of R&D expenditure from resource to capital in the Agriculture and Horticulture Development Board.

Improve the Environment and Rural Services (ALB) (Net)

The 2023-24 outturn reflects a charge for the creation of dilapidation provisions for EA owned property following the implementation of IFRS16.

Protect the Country from Floods (ALB) (Net)

The figures for 2019-20 onwards relate to capital additions in Flood Re. Flood Re adopted IFRS 16 leases in 2019-20. The increase in 2022-23 reflects the recognition of intangible assets relating to the implementation of an insourced management system and software. The 2023-24 outturn reflects a charge for the creation of dilapidation provisions for EA owned property following the implementation of IFRS16.

Table 1 – Defra’s Resource and Capital Budget

	2019-20 Outturn	2020-21 Outturn	2021-22 Outturn	2022-23 Outturn	2023-24 Outturn	2024-25 Plans
	£000	£000	£000	£000	£000	£000
Resource DEL
Food and farming	293,905	2,417,013	1,965,221	1,924,129	1,892,465	2,038,466
Improve the environment and rural services	516,484	511,983	550,274	615,373	699,803	815,635
Protect the country from floods	1,356	3,052	3,314	1,551	2,440	-
Animal and plant health	204,401	262,613	330,272	424,965	385,916	340,583
Marine and fisheries	53,258	82,456	60,877	73,672	78,118	65,574
Departmental operating costs	487,113	525,548	535,745	546,919	714,048	538,654
Improve the environment and rural services (ALB) (net)	278,774	296,160	362,628	417,346	517,804	348,767
Protect the country from floods (ALB) (net)	386,740	496,847	447,890	596,562	947,671	454,041
Marine and fisheries (ALB) (net)	23,088	25,718	32,712	32,382	36,785	31,152
Total Resource DEL	2,245,119	4,621,390	4,288,933	4,632,899	5,275,050	4,632,872
Resource AME
Food and farming	628,704	(530,714)	(59,847)	8,791	1,540,502	(773,119)
Improve the environment and rural services	14,146	(3,936)	333,502	(332,893)	(83,615)	(215)
Animal and plant health	(573)	(236)	(6,627)	(6,741)	1,153	3
Marine and fisheries	(2,440)	(1)	232	(246)	(138)	6
Departmental operating costs	50,623	24,599	108,294	(178,244)	(16,380)	45,986
Food and farming (ALB) (net)	2,332	(343)	(930)	7,320	7,908	5,401
Improve the environment and rural services (ALB) (net)	9,829	(27,381)	74,826	27,393	(34,214)	42,270
Protect the country from floods (ALB) (net)	(6,063)	(76,104)	(15,586)	12,368	(31)	156,148
Marine and fisheries (ALB) (net)	1,825	2,067	(1,123)	12,565	1,138	65
Total Resource AME	698,383	(612,049)	432,741	(449,687)	1,416,323	(523,455)
Total Resource Budget	2,943,502	4,009,341	4,721,674	4,183,212	6,691,373	4,109,417
Of which:
Depreciation - DEL	209,170	203,009	247,203	238,941	537,407	405,267
Depreciation - AME	5,683	37,531	(1,599)	1,672	66,901	16,527
Depreciation (Note 1)	214,853	240,540	245,604	240,613	604,308	421,794
Capital DEL
Food and farming	9,324	23,799	152,225	274,376	279,899	690,547
Improve the environment and rural services	63,646	57,489	105,575	134,080	541,359	336,690
Protect the country from floods	716	2,580	7,067	2,940	61	500
Animal and plant health	17,919	11,439	35,502	27,333	33,382	129,959
Marine and fisheries	9,079	11,845	18,207	21,792	47,260	3,265
Departmental operating costs	50,564	86,619	131,512	159,839	234,997	516,003
Improve the environment and rural services (ALB) (net)	35,246	61,527	112,401	145,774	223,592	137,585
Protect the country from floods (ALB) (net)	537,632	634,531	769,630	696,965	623,335	944,364
Marine and fisheries (ALB) (net)	2,279	879	1,759	497	230	508
Total Capital DEL	726,405	890,708	1,333,878	1,463,596	1,984,115	2,759,421
Capital AME
Departmental operating costs	-	-	-	9	479	41,990
Food and farming (ALB) (net)	423	1,438	271	1,805	(560)	14,096
Improve the environment and rural services (ALB) (net)	-	-	-	-	6,330	-
Protect the country from floods (ALB) (net)	2,556	2,060	2,359	7,214	6,553	20
Marine and fisheries (ALB) (net)	113	102	25	56	414	591
Total Capital AME	3,092	3,600	2,655	9,084	13,216	56,697
Total Capital Budget	729,497	894,308	1,336,533	1,472,680	1,997,331	2,816,118
Total departmental spending (Note 2)	3,458,146	4,663,109	5,812,603	5,415,279	8,084,396	6,503,741
Of which:
Total DEL	2,762,354	5,309,089	5,375,608	5,857,554	6,721,758	6,987,026
Total AME	695,792	(645,980)	436,995	(442,275)	1,362,638	(483,285)

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.

These tables now reflect the Machinery of Government changes included in the 2023-24 Supplementary Estimates. The figures for 2019-20 to 2022-23 are therefore different to those published in the 2022–23 ARA and the prior period figures in the Accounts section of the 2023–24 ARA.

The 2024-25 plans figures are based on provisional allocations and are subject to change, following further business planning decisions.

Table 2 – Defra’s Administration Costs

	2019-20 Outturn	2020-21 Outturn	2021-22 Outturn	2022-23 Outturn	2023-24 Outturn	2024-25 Plans
Resource DEL
Food and farming	68,358	72,957	79,195	81,385	83,321	87,166
Improve the environment and rural services	89,893	97,499	108,423	107,133	141,931	119,452
Protect the country from floods	1,237	1,954	2,450	1,695	2,350	-
Animal and plant health	29,314	42,877	59,117	71,451	74,410	69,046
Marine and fisheries	17,381	17,303	21,886	22,863	23,895	24,566
Departmental operating costs	361,688	350,685	397,420	403,074	540,954	509,577
Improve the environment and rural services (ALB) (net)	69,004	64,635	82,444	122,513	85,779	95,586
Protect the country from floods (ALB) (net)	69,072	82,348	79,161	123,072	93,721	52,979
Marine and fisheries (ALB) (net)	2,149	2,047	2,198	5,578	5,416	3,558
Total administration budget	708,096	732,305	832,294	938,764	1,051,777	961,930

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 2023-24 onwards reflect additional budget in the SR21 for digital funding, BBTP and property rationalisation and places for growth.

Annex 2: Disaggregated Information on Arm’s Length Bodies

This information is not subject to audit.

The Public Expenditure System (PES) publication, Guidance on the preparation of annual reports and accounts for 2023-24, (Section 16, Reporting of Information on arm’s-length bodies), requires additional reporting to improve the transparency of reporting at group level. This Annex is prepared in compliance with these requirements.

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 (Permanently Employed Staff)	Total Operating Expenditure (Permanently Employed Staff)	Net Expenditure for the Year (including financing) (Permanently Employed Staff)	Number of employees (Permanently Employed Staff)	Staff costs (Permanently Employed Staff)	Number of employees (Other Staff)	Staff costs (Other Staff)
	£000	£000	£000	£000	£000	£000	£000
Core department	72,868	1,887,589	1,814,721	6,153	412,254	960	125,978
APHA	72,749	386,576	313,827	2,775	145,487	293	17,125
CEFAS	18,353	79,764	61,411	610	35,367	-	-
FC	14,316	174,758	160,442	814	47,534	165	3,375
RPA	105,262	3,829,651	3,724,389	2,614	109,240	15	1,134
VMD	14,023	24,849	10,826	160	11,245	11	1,248
AHDB	43,988	40,953	(3,035)	348	18,943	1	30
CCW	503	7,607	7,104	85	4,452	21	581
EA	541,567	2,172,075	1,630,508	12,093	710,272	977	25,393
Flood Re	367,874	330,521	(37,353)	69	8,559	-	-
JNCC	2,173	24,984	22,811	282	14,988	8	24
MMO	5,062	49,533	44,471	488	26,397	28	2,387
NFC	3,948	7,059	3,111	31	1,892	8	406
NE	28,480	302,166	273,686	2,944	148,299	90	2,332
OEP	-	8,570	8,570	56	5,677	16	530
RBG Kew	87,571	109,472	21,901	1,131	53,251	20	3,297
SFIA	9,747	10,885	1,138	75	4,439	12	438
LI Ltd	-	10,273	10,273	35	1,208	-	-

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 (These provide guidance for government bodies on the formal disclosures required to ensure alignment with the Financial Reporting Manual (FReM) and PES, as issued by HM Treasury).

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.

Annex 3: Commentary on Sustainable Performance

Background

The environmental data and associated financial costs presented in the following annex are consistent with the requirements of HM Treasury’s Public Sector Annual Reports: Sustainability Reporting Guidance 2023-24.

The information contained within this annex has not been subject to audit and does not form part of the auditors’ opinion on the accounts.

Introduction

This annex sets out Defra’s performance against sustainability objectives for its properties and operations.

This report focuses on the most significant operational impacts as measured against the Greening Government Commitments (GGC) targets. These targets are for reductions in Greenhouse Gas (GHG) emissions, waste produced, water use, climate change adaptation, ICT, nature recovery and for increasing procurement of more sustainable goods and services.

The targets, to be met by the end of March 2025 and measured from a 2017-18 baseline, include:

• Reduce GHG from the whole estate and business-related transport by 50 per cent.

• Reduce direct GHG from buildings by 15 per cent.

• Reduce the amount of waste to landfill to below 5 per cent.

• Increase the amount of recycled waste to above 70 per cent.

• Reduce total waste by 15 per cent.

• Reduce water consumption by 8 per cent.

• Reduce the GHG from domestic flights by 30 per cent.

• Reduce paper use by 50 per cent.

• Upgrade all fleet vehicles to zero emissions (by end 2027).

• Remove single use plastics from offices.

Performance against these targets is defined using the following terms:

Exceeded target: our performance is better than that to which we committed.

Target met: we have achieved the target.

On target: we are on track to meet the target by the due date.

Below target: our performance is worse than that to which we committed.

Increase from baseline: our performance is worse than it was in the baseline year.

Assurance and Data

The information in the Sustainability Data tables present the GHG, energy consumption, water use, and waste figures as reported as part of the GGC and reports performance for 1 January 2023 to 31 December 2023. 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^{[footnote 14]}

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:

Core department

Non-ministerial departments:

• Forestry Commission (Forestry England) (FE)
• The Water Services Regulation Authority (Ofwat)

Executive agencies:

• Animal and Plant Health Agency
• Centre for Environment, Fisheries and Aquaculture Science
• Rural Payments Agency
• Veterinary Medicines Directorate

Executive non-departmental public bodies:

• Agriculture and Horticulture Development Board
• Royal Botanic Gardens Kew (RBG Kew)
• Consumer Council for Water
• Environment Agency (EA)
• Joint Nature Conservation Committee
• Marine Management Organisation
• Natural England
• Sea Fish Industry Authority
• Office for Environmental Protection

Others:

• Lake District National Park Authority
• Forest Research
• Other Defra group bodies and other government departments (Under the major occupier rule, Defra reports the environmental impact of other government departments which occupy its buildings. Also included are some of Defra group bodies which do not meet the threshold for GGC reporting but are of insufficient materiality to remove from the departmental dataset.)

Whilst this report represents the collective achievements of all Defra group organisations participating in the GGCs, it is not possible to capture every performance aspect for each individual organisation. Therefore, we recommend this report is read in conjunction with the individual reports of those organisations listed above to gain a complete picture.

Governance

Progress against the GGC targets is reported to the Group Chief Sustainability Officer on a quarterly basis.

Quality assurance is managed through the Sustainability Centre of Expertise which is 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.

Greening Government Commitments

In October 2021, the government launched its latest set of GGC targets. They are designed to help the government achieve its net zero goal and contribute to policy objectives such as the aims of the Environmental Improvement Plan.

Full detail on the new GGC targets can be found at GOV.UK.

The targets have a baseline year of 2017-18 and we began collecting data for the targets in 2021-22. We have expanded the scope of our GGC reporting to include more organisations across the Defra group.

Any data for years in-between 2017-18 and 2021-22 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 performance against these targets is continually monitored as part of our on-going assessment of our progress to support sustainable development goals. We are also developing some additional performance indicators that will further add to our insight.

Targets and Performance - Table 1

	Current Achievements	Target April 2025	Current Performance	Supporting of UN Sustainable Development Goals
Total GHG Reduction 2023 (Note) vs. Baseline	25% reduction	50% reduction	Below target	Climate Action
Direct GHG from buildings 2023 (Note) vs. Baseline	15% reduction	15% reduction	On target	Climate Action
Landfill Waste Reduction 2023 (Note)	7% sent to Landfill	Less than 5% sent to landfill	Below target	Responsible Consumption and Reduction
Recycling Waste 2023 (Note)	66% recycled	More than 70% recycled	Below target	Responsible Consumption and Reduction
Total Waste Reduction 2023 (Note) vs Baseline	4% reduction	15% reduction	Below target	Responsible Consumption and Reduction
Water Reduction 2023 (Note) vs. Baseline	8% reduction	8% reduction	On target	Clean Water and Sanitation and Responsible Consumption and Reduction
Domestic Flights emissions Reduction 2023 (Note) vs. Baseline	43% reduction	30% reduction	Exceeded target	Climate Action
Paper Use Reduction 2023 (Note) vs. Baseline	78% reduction	50% reduction	Exceeded target	Responsible Consumption and Reduction
Conversion of Fleet and Hired Vehicles to Ultra Low Emissions (ULEV)	25% converted to ULEV	25% by End 2022	Target met	Climate Action
Conversion of Fleet and Hired Vehicles to Zero Emission	25% converted to zero emission	100% by end 2027	On target	Climate Action
Report on policies in place to compensate for emissions	Currently the department is prioritising carbon reduction and has no offsetting policies	Report on policies in place to compensate for emissions	Target Met	Climate Action
Travel policies to prioritise low carbon options	Target met	Travel policies to prioritise low carbon options	Target met	Climate Action
Remove consumer single use plastic from office estate	1,769,411 individual items of single use plastic.	Remove consumer single use plastic from office estate	Below target	Responsible Consumption and Reduction
Measure and report on food waste	74 tonnes to anaerobic digestion in 2022-23	Report by end 2022	Target met	Responsible Consumption and Reduction
Implement waste reuse schemes	Defra’s Information and Communication Technology (ICT) kit is refurbished and reused. Furniture follows a reuse or charity before recycling hierarchy.	Implement waste reuse schemes	On target	Responsible Consumption and Reduction
Ensure all water consumption is measured	Water use is metered in Defra group	Ensure all water consumption is measured	Target met	Clean Water and Sanitation and Responsible Consumption and Reduction
Encourage efficient use of water	Low flow taps and waterless urinals in offices. Boom and drip pipe irrigation in FE operations	Show what is being done	On target	Responsible Consumption and Reduction

Note: Reporting period from Q4 22-23 to Q3 23-24. (1 January 2023 to 31 December 2023)

 Greenhouse gas emissions

Key parts of our decarbonising strategy include switching to electric vehicles, swapping our gas and oil-fired boilers for electric heat pumps in our buildings and improvements to energy efficiency and building management systems. Some of these installations are being carried out in partnership with the Government Property Agency.

These initiatives are running behind programme. There has been a shortage of electric vehicles to buy in the market due to a prolonged issue with the supply of semiconductors used in their manufacture. The move to heat pumps is also taking longer to deliver than planned. More of our properties than we anticipated will require upgrades to their electricity supply before these heat pumps can be installed. In addition, as with other planned sustainability investments, COVID-19 led to delays early in the GGC reporting period which we have not been able to recover. Although GHG emissions reduced significantly due to reduced travel and office use during COVID-19 restrictions we are now seeing them increase as office use and business travel resumes.

These factors have contributed to a slowing down of the rate at which we have been able to reduce greenhouse gas emissions. In addition, the size of the Defra group’s workforce (and associated work) has grown by almost 40 per cent over the GGC reporting period to date.

Nonetheless we are still on track to meet our direct emissions target.

 Waste

Our total waste figures have reduced by 4 per cent against a target of a 15 per cent reduction.

One of the areas where we have seen increases in our total waste are the sites that are open to the public, such as forests, national parks and nature reserves, which are expanding and have seen increased numbers of visitors. The percentage of our waste that is going to landfill and is recycled has improved to 7 per cent and 66 per cent respectively. These improvements have been achieved through working with our waste contractors to improve segregation and setting higher targets of recycling within our new waste contracts.

We have worked through historical data to identify the amount of waste that has been removed from rivers as part of our operational maintenance, which hadn’t been reported previously. Therefore, we have updated the baseline data and subsequent years prior to a new national contract that we now have in place. We are continually looking to improve our data collection and take the opportunity when contracts come up for renewal to build this in.

We have reduced the amount of information communication technology (ICT) waste by extending the life of the assets through refurbishing and resetting used ICT. When they no longer meet the baseline specification, then they are sold on behalf of Defra or donated to charity.

Similarly, we have worked with our furniture supplier to ensure that they offer furniture that we no longer require to other offices, local schools, charities and finally it is then taken away for recycling. This ensures the maximum amount of our existing office furniture is reused or recycled.

 Water

We are achieving an 8 per cent reduction in water use. We are exploring new ways to manage our water usage, for example, Royal Botanical Gardens, Kew (RBG Kew) are currently developing an irrigation strategy which addresses water use efficiency and maximises rainwater harvesting opportunities. Although this may not lead to a reduction in overall water usage, it aims to reduce RGB Kew reliance on mains water consumption and provide a greater resilience to the changing climate.

 Environmental Management System

A certified ISO14001 Environmental Management System (EMS) covering over 100 sites operates across the Defra group. 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 properties. 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. The EMS is supported by Environmental; Waste and Energy policies and our Director of group Property is signatory to these policies.

 Transparency Reporting

We also publish a transparency statement as part of our commitment . As well as the quantitative measures, this covers sustainable procurement, climate change adaptation, nature recovery, green ICT and sustainable construction, which are set out below.

 Sustainable Procurement

Addressing sustainability in commercial activity is a core part of our approach, this is reflected in our Procurement Policy and processes. 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.

 Sustainable Construction

Building construction projects on Defra’s estate take account of sustainability in several ways.

Firstly, we look to design buildings to an ‘excellent’ BREEAM (Building Research Establishment Environmental Assessment Method) standard, this is a method that demonstrates the design team has considered and evolved the structure and its components to be as environmentally sustainable as is viable, using the latest range of products and practices from within the construction sector.

Secondly, building energy loads are considered alongside options for the building to generate its own local or site-based energy from renewable energy systems.

Lastly, we look at how the construction work can demonstrate ‘Social Value’, for example through use of locally sourced materials, labour, and traders.

The Science Capability in Animal Health (SCAH) Programme is one of government’s major programmes to secure the future of the Weybridge Science Campus through systematic redevelopment of the site. An outline masterplan for the scheme has been developed, with the aim of restoring clarity and order to the site, creating a science campus of excellence and enhancing capabilities, while improving efficiency and environmental performance across the site. Construction is expected to take place over a period of 15 years without impeding current science activities on site and minimising any negative impact on the local community. We have built into the outline masterplan significant sustainability commitments relating to energy efficiency, renewables, nature recovery (biodiversity net gain), resource and water conservation and flood protection.

 Climate Adaptation

We are taking steps to understand and plan for the risk of climate change to our estate and operations across Defra group in line with GGC targets.

Defra group Property (DgP) and Environment Agency (EA) Estates are currently undertaking site-based climate vulnerability assessments using a bespoke tool developed for the purpose by the EA. This screening exercise will identify where the Defra group Estate is at higher risk from climate impacts and help us ensure we can maintain business operations during chronic or acute climate events.

This year, we have launched bespoke Carbon Literacy Training which is available to all staff. The training seeks to educate our staff on measures they can adopt both as part of their work, and within their personal lives, to mitigate and adapt to climate change.

 Nature Recovery

We are responsible for a large and diverse portfolio of land; from the grounds of our offices and depots to nationally significant protected sites. In 2022, we began a collaborative project across Defra group to better understand the distribution and habitat classification of our natural assets to improve and enhance nature in line with national targets. This work will support the requirements of our GGC to develop and deliver a nature recovery plan, and that of the Defra group Sustainability Strategy to develop a group-wide evidence base of our land assets.

Work to date to inform the natural asset evidence base has involved extensive consultation across Defra group to determine data held, and stakeholder requirements for a cross-group natural asset register to inform decision making for nature recovery and enhancement. We have engaged with other large land holding departments to share learning and align our approaches to nature conservation across the wider government estate. This has led to Defra leading on a cross-government nature strategy that was initiated in 2023 creating a best practice approach to nature recovery. We are looking at how to develop a natural asset register, presented within an accessible geospatial mapping format. The natural capital evidence base will inform the subsequent development of the Nature Recovery Plan, bringing together data to inform decision making. It will enable the setting of quantifiable targets for nature recovery aligned to Environment Improvement Plan commitments.

Recognising opportunities for nature enhancement within Defra group assets (offices, depots), we are working to develop relevant biodiversity KPIs against which progress can be measured and reported. There are several grounds maintenance and land management regimes at our 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 or areas.

 Green ICT

Defra (through the Chief Digital and Information Officer) are the Senior Responsible Owner and Policy owner for digital sustainability, or green ICT, across government. Our vision for sustainability in Digital, Data, Technology and Security (DDTS) is to show leadership and expertise as a “Centre of Excellence” in sustainability.

We have authored and adopted the Greening Government ICT and Digital Services Strategy. Additionally, we have a Departmental Sustainable ICT Strategy and Policy which we apply to all our Digital, Data, Technology and, Security projects. This strategy contains globally leading targets for digital sustainability, facilitating of digital sustainability. This means our DDTS projects deliver sustainability improvements, supports the GGCs and wider sustainability commitments, supporting the path to Net Zero.

Targets included within this strategy include;

• Carbon emissions for Defra Group ICT
• Power consumption for Defra Group ICT
• ICT electronic waste returns: broken into volume of refurbished, donated, sold or recycled devices.

More information can be found in the Greening Government ICT and Digital Services annual reports .

Our Digital Sustainability team leads engagements with key stakeholder groups:

• the Sustainable Technology Advice and Reporting (STAR) group, which comprises representatives from across government. The purpose of the group is to collate and share data for annual sustainability reporting, as well as sharing or receiving knowledge on tools, techniques, and best practice on sustainable technology and sustainable procurement.

• the Government Digital Sustainability Alliance (GDSA), a collaborative working group that brings together Defra, current and prospective government suppliers, and their supply chain. The main purpose of GDSA is promoting and progressing knowledge, and capabilities to deliver sustainable digital data and technology across UK government and their suppliers.

• Cross Government Digital Sustainability Steering Group, formed in March 2024, the group includes representatives from most government departments. The aim of the group is to aid the delivery of Digital Sustainability best practice by working collaboratively across government.

 Further Information

Quarterly updates on Defra group’s performance towards the GGC can be found online .

This report should be read in conjunction with the Annual Report and Accounts Sustainability Reports produced by each of the Defra group public bodies.

 Sustainability Data

ENERGY			2017-18	2021-22	2022-23	2023-24 (Note)
Non financial indicators (kWh)	Energy consumption	Total energy consumption	203,297,967	193,921,369	199,251,811	202,080,541
		Total electricity	100,028,361	82,576,760	103,285,282	105,925,517
		Electricity: standard	49,183,249	4,781,589	8,650,541	8,994,468
		Electricity: green	48,364,769	76,188,564	89,854,709	94,834,989
		Electricity: Purchased CHP	-	-	-	-
		Gas	81,030,642	92,658,714	84,540,626	84,159,733
		Oil	18,122,019	14,816,340	7,683,240	8,117,105
		Biomass	1,773,783	1,540,157	1,710,767	1,616,032
		CHP (heat and electricity)	2,306,324	1,620,964	1,173,662	1,302,055
		Self-generated renewables	1,564,879	1,645,569	4,815,633	2,096,059
		LPG	535,152	440,182	556,274	364,295
		Other	417,150	229,289	266,359	587,853
		Electricity costs			21,771	28,808
Financial Indicators	Energy Costs	Gas costs	Included in other energy costs		5,592	4,620
(£000)		Oil costs			1,013	599
		Other energy costs	13,530	19,179	469	1,026

WASTE		2017-18	2021-22	2022-23	2023-24 (Note)
Non financial indicators (‘000 kgs)	Total waste	10,666	8,466	9,605	10,280
	Hazardous waste	272	29	54	22
	IT waste recycled and unrecyclable	30	3	38	-
	Recycled	6,780	4,796	5,734	6,810
	Composted	248	227	198	202
	Incinerated with energy recovery	1,745	1,907	2,653	2,227
	Incinerated without energy recovery	464	511	341	385
	Landfill	1,674	1,204	875	703
Financial indicators (£000)	Total disposal cost	3,510	4,750	3,991	4,047
	Hazardous waste	623	375	527	493
	IT waste recycled and unrecyclable	Not reported in these years		3	3
	Recycled	698	1,122	944	1,154
	Composted	Included in recycled cost		57	47
	Incinerated with energy recovery	347	480	1,006	987
	Incinerated without energy recovery	n/a	6	91	153
	Landfill	119	404	1,346	1,211

WATER			2017-18	2021-22	2022-23	2023-24 (Note)
Non financial indicators (m3)	Water Consumption	Total scope 2 water consumption	598,781	405,797	570,582	551,136
Financial indicators (£000)	Water supply costs		1,051	1,076	1,272	1,541

GREEN HOUSE GAS EMMISSIONS		2017-18	2021-22	2022-23	2023-24 (Note)
Non financial indicators (‘000 kgs CO2e)	Scope 1: direct emissions	31,698	27,959	25,339	27,117
	Scope 2: indirect emissions	34,275	17,192	19,049	21,247
	Scope 3: emissions	10,214	5,886	8,518	10,954
	Total emissions	76,188	51,037	52,906	59,318
	Direct emissions from buildings	21,604	21,576	17.925	18,436
	Scope 3: emissions from electricity	3,206	1,521	1,743	1,866
	Scope 3: emissions from domestic public transport	7,008	4,364	6,775	9,089
Financial indicators (£000)	Expenditure on official business travel	27,560	17,366	33,955	38,862

OTHER TARGET AREAS		2017-18	2021-22	2022-23	2023-24 (Note)
Non financial indicators	Emissions from domestic flights (‘000 kgs CO2e)	265	26	87	155
	Emissions from International travel (‘000 kgs CO2e)	203	270	1,870	2,844
	Number of domestic flights	3,457	386	1,347	1,161
	Distance of domestic flights (kms)	1,877,458	199,188	672,822	1,002,170
	Distance of International flights (kms)	2,374,360	2,909,213	20,465,469	21,898,172
	Distance of International rail (kms)	54,171	7,008	263,055	299,616
	Paper use (reams)	72,833	10,359	9,735	10,585

Notes

(i) 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.

(ii) Distance of international flights, distance of international rail and emissions from international travel were only partially collected in 2017-18 so do not cover all organisations. International travel was lower in 2021-22 due to COVID-19 lockdowns.

(iii) Gas used in combined heat and power (CHP) units is not included in the gas figure as GGC reporting guidance states that this energy is reported as CHP output.

(iv) All consumption data presented in this report reflects reported GGC figures. Cost figures reflect the accounting records for the respective year.

(v) Hazardous waste is included in the landfill waste figure as per GGC reporting.

(vi) Previous years’ 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.

(vii) 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.

(viii) 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 £2.50 per km.

(ix) 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.

(x) Data for the baseline year 2017-18 differs from previous versions of this report due to the baseline being recalculated following the launch of the new GGCs and with a larger scope of organisations. Further amendments were made to the baseline in 2022 to incorporate Forest Research into scope. Other years prior to 2022-23 have not been adjusted to incorporate Forest Research.

(xi) Incinerated waste costs appear lower as we use our own incinerators rather than third party suppliers. Costs for fuel used in incineration are reflected in the costs for energy.

(xii) In instances where data is unavailable but believed to be immaterial or minimal impact to the overall performance, an estimate has been used. A methodology of reproducing figures from a previous quarter or previous year has been applied for the missing data points. For missing quarterly data, this will either be the quarter immediately before the missing quarter or the same quarter from the previous year in order to avoid seasonality impacts. When the data becomes available, corrections will be made in future editions of this report.

Definitions

Scope 1: direct emissions – emissions from buildings that ‘burn’ fuel on site such as emissions from oil, natural gas, liquid petroleum gas, biomass etc. Also includes emissions from vehicles owned or leased by the department such as badged vans and lease cars.

Scope 2: indirect emissions – only emissions from electricity that comes from the national grid, regardless of supply contract type. As these emissions are from the generation process of creating electricity, mostly at power stations, the emissions occur away from the department’s sites and so are considered scope 2.

Scope 3: emissions – emissions from vehicles and public transport that are not owned by the department, such as trains, planes and staff’s own personal vehicles used for business purposes. Also includes emissions from national grid electricity generated by the distribution of electricity, e.g. the maintenance of the power lines and other operations carried out by network operators. Note that the scope 3 emissions in this report do not include emissions from any other suppliers to the department as these are out of scope for GGC reporting.

Footnotes

1. The CAP is the agricultural policy of the European Union (EU) and is a system of agricultural subsidies and rural development programmes. 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. Defra’s accounts in previous years included a provision to recognise the outstanding liability for disallowance. ↩

2. 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 floor area. The diversity of business delivery across Defra group 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. ↩