Welcome to the world of DEFRANOMICS

Government ministers are trying to have it all ways when finalising departmental budget cuts, writes Johann Tasker.

Is it possible to slash agri-environment spending while simultaneously increasing investment in higher-level stewardship? Or to cut investment in flood defences while at the same time protecting thousands more homes from rising sea levels?

It is if you are DEFRA secretary Caroline Spelman. Welcome to the brave new world of DEFRANOMICS – a world where judicious accounting makes it possible to have your financial cake and eat it.

More than a week has past since DEFRA confirmed plans to slash spending by 29%, cutting £700m from its annual budget by 2014-15. Everyone knows there will be losers. But the department remains reluctant to say exactly where the axe will fall.

Take this on agri-environment spending: By taking advantage of exchange rates and maximising European funding, the government claims it will save £66m, while at the same time increasing expenditure on higher-level stewardship by 80%.

Or this explanation on sea defences: Despite £61m in cuts, expected efficiency savings in DEFRA’s procurement strategy for flood and coastal defences mean better levels of protection can be expected for 145,000 households by 2015.

Sounds complicated? It is. One week on, government ministers and senior civil servants continue to turn fiscal somersaults in their attempts to explain where the cuts will come from. The truth is, they don’t yet fully know.

Suspicions that things were not as they seemed emerged hours after last week’s spending review, when an internal email banned Natural England farm advisers from approving any new start dates for higher-level schemes (see pages 18-19).

Staff at DEFRA and Natural England are still working out exactly what the spending review will mean in practice, not least deciding how many farmers will be able to join higher-level stewardship – and how much they will be paid.

Part of the problem, Farmers Weekly has been told, is that stewardship agreements starting in the 2010/11 financial year count against next year for DEFRA spending purposes. So no higher-level schemes can start until next April.

Either way, assertions that the spending review was a victory for wildlife-friendly farming now look premature. Some schemes will be delayed by a year. And wildlife – like farming – is not something that can be turned off and on at whim.

Ministers persist in talking about savings, rather than cuts. It would be wrong to dismiss this entirely as semantics. Saving money by slashing red tape could indeed bring real benefits to farmers by increasing the competitiveness of the industry.

But DEFRA’s contribution to making this “greenest government ever” will be increasingly called into question until the department is clear and more forthcoming on the impact any cuts will have on the environment.

In fact, two spending review measures of most benefit to farmers – the green pledges to introduce a renewable heat incentive and leave feed-in tariffs untouched – came from the Department for Energy and Climate Change, not from DEFRA.

While government cuts across all departments averaged 19%, critics also point out that DEFRA saw its budget slashed by almost one third, even though Mrs Spelman opted to reach an early settlement with the Treasury.

It hasn’t helped either that this week she flew to Japan to unveil £100m for international forestry and biodiversity projects. After all, if DEFRA knows how much it can spend abroad, why doesn’t it know how much it can spend here?

We can only hope Mrs Spelman has some answers before she is quizzed by MPs on the impact of the spending review. The environment select committee hearing is due on 16 November. By then, those answers will be long overdue.