Transparency data

12 August 2021: NO2 Programme accounting officer assessment

Updated 5 October 2023

Background and context

The NO2 programme is a joint programme with the Department for Transport (DfT) to deliver nitrogen dioxide (NO2) levels within legal limits in the shortest time possible. The programme aims to improve public health through tackling the worst excesses of roadside NO2 in local authorities across England.

The government published a UK Air Quality Plan for NO2 and Clean Air Zone Framework in 2017, setting out how local authorities with the worst air pollution concentrations must take robust action to improve air quality. Clean Air Zones are a means of achieving compliance with NO2 levels and local authorities must consider these when developing their local air quality plans.

Our plans have had significant legal scrutiny, including successful legal challenges at UK and EU level. The High Court judgment in 2016 sets out the clear legal requirement that plans must deliver compliance with legal limits as soon as possible and that cost cannot be a determining factor where one option produces results faster than another (Neutral Citation Number: [2016] EWHC 2740 (Admin)).

The Joint Air Quality Unit (JAQU) delivers the programme and is jointly accountable to Defra and DfT, including joint Ministerial and budget responsibilities and a total of £880 million has been announced for the programme.

The Defra Secretary of State is the cabinet representative for air quality. The two principal accounting officers for Defra and DfT are jointly responsible for delivery of the NO2 programme.

The programme is in the delivery stage and this accounting officer assessment was made at delivery stage.

Regularity

The UK is under a legal duty to achieve compliance with NO2 limit levels in the shortest possible time under the Air Quality Standards Regulations 2010, transposing the Ambient Air Quality Directive 2008.

For that purpose, the UK government published the 2017 Plan and its 2018 Supplement and directed Local Authorities to implement the measures identified in their Local Plans. The NO2 programme has been established to deliver the plan. Non-compliant Local Authorities were directed in 2017 and 2019 by government to implement a series of measures including the establishment of Clean Air Zones where this was deemed necessary under Section 85(5) of the Environment Act 1995. As the Direction to implement NO2 compliance measures represents a new burden on the Local Authority, the department is obliged to provide funding for these under the New Burdens Doctrine.

The power to pay a grant to Local Authorities towards expenditure incurred or to be incurred by it is supported by Section 31(1) of the Local Government Act 2003. In accordance with S31 grant processes, requisite approvals and determinations are obtained from HM Treasury (HMT) and Ministry of Housing, Communities and Local Government (MHCLG) prior to grant award.

Overall assessment

Met.

Propriety

The government is under a legal obligation to develop local plans to tackle non-compliance and implement corrective measures, including Clean Air Zones (CAZs). Alongside this we are also funding measures to mitigate the impacts to certain groups. This is intended to make the impacts on businesses and those individuals least able to adapt proportionate, legal and effective. These measures are provided through the Clean Air Fund (CAF). These measures also support the effectiveness of CAZs by supporting behaviour change.

Different users are expected to respond to CAZs in different ways: choosing not to enter the CAZ, upgrading their vehicle or paying the charge. Depending on the scope of vehicles covered by such a zone this could particularly impact on low income families, small businesses and people living or working in a particular area. The objective of the Clean Air Fund is to help local authorities to support those impacted by their specific local plan. It is intended to do so in 3 broad ways:

• making it easier, more attractive or more affordable to upgrade or switch to a cleaner form of transport
• enabling a local authority to introduce measures which impact on fewer people
• reducing transport costs for certain people

Further details of the CAF were set out in our response to a consultation in 2018.

Ministers and HMT have accepted the financial implications of the policy decision to implement CAZs through the issuing of Directions to Local authorities and the funding of other mitigation measures through the CAF as outlined in the 2017 NO2 plan.

Funding to each Local Authority is awarded following the submission of a business case. The information provided is scrutinised by internal and external assurance processes. In accordance with the S31 grant approvals process, requisite approvals are obtained from both HMT Departmental Spending and Local Government teams in addition to the MHCLG S31 team prior to grant letters being issued to Local Authorities.

The JAQU NO2 programme has established appropriate governance and approvals arrangements to effectively manage spending.

Overall assessment

Met.

Value for money

Government is under a duty to comply with statutory limits “within the shortest possible time”. The High Court has ruled in 2016 and 2018 that “the obligations imposed by the 2008 Directive are not qualified by reference to their cost” or “administrative inconvenience”. As a result, cost cannot be a barrier to meeting legal obligations in relation to Air Quality exceedances.

Within that framework, the Programme seeks to ensure that measures are implemented in the most cost-effective manner. However, given our legal obligations, value for money is a secondary consideration and would only be used as a determinant of the amount to be awarded if a set of proposals achieves the same results as another but one set costs demonstrably less than the other. DfT and Defra accounting officers have agreed to this approach.

While the legal obligation to provide funding applies to the implementation of measures, CAZs can particularly impact on low income families, small businesses and people living or working in a particular area. The objective of the Clean Air Fund is to help local authorities to support those impacted by their specific local plan.

The Clean Air Fund ensures that local plans are equitable and that bids are assessed by whether they deliver against this objective. Once this criterion has been satisfied, value for money (VfM) is a key criterion to assess the relative strength of different bids (and the financial case is reviewed by our external Delivery and Impacts Independent Review Panel (DIRP). Due to the nature of the CAF, the economic VfM of CAF interventions often come out as poor.

This economic VfM does not fully account for the wider benefits delivered by CAF interventions, which include:

• ensuring local plans to improve air quality can be delivered by making them politically and publicly acceptable; without the CAF a local plan is very unlikely to be successfully implemented. The CAF is therefore an enabler, but economic analysis does not attribute the benefits of the resultant air quality plan initiatives back to CAF (to avoid double counting)
• further benefits derived from the CAF’s enabling function are the reduced risk of further successful legal action against the government (and the ensuing reputational cost) and the reduced risk of having to pay future infraction penalties (infraction proceedings are ongoing)
• ensuring local plans to improve air quality are fair through a re-distribution of costs from the weakest groups in society to government. This equity effect is not reflected in VfM assessments but is deemed to be a significant societal benefit

In addition, through the scrutiny of bids, the Programme aims to ensure that the bids are cost-effective (that the proposals are delivered efficiently). It is the benefits outlined above and the relative VfM derived that justify the investment decision made using the evidence gathered and provided by Local Authorities in support of their planned interventions or measures.

The levels of CAZ and CAF awards to Local Authorities are assessed based on evidence of need provided as part of the business case process and the extent to which they will drive compliance once size of area/scale of those impacted are taken into consideration, ensuring that funding is awarded proportionately across Local Authorities.

Overall assessment

Met – on consideration of the government’s legal obligations relating to air quality exceedances.

Feasibility

The Programme is confident that the proposals being put forward by Local Authorities to deliver compliance with ambient air quality levels can be delivered in line with the policy intention.

The feasibility of the measures proposed by Local Authorities for achieving the policy outcome (for example compliance with ambient air quality levels) are fully assessed by internal and external independent panels prior to funding awards being recommended. Based on the evidence provided, the panels assess the viability of the measures proposed and make recommendations on which measures should be carried forward to implementation.

The Joint Air Quality Unit (JAQU) team works closely with Local Authority delivery teams to review progress against plans and agree any mitigating actions required.

Overall assessment

Met.

Affordability

The total JAQU allocation that has been announced and awarded from programme inception through to the end of 21/22 by HMT is £880 million. Requirements and allocations beyond 2021 and 2022 will be subject to future fiscal events. The budget is split between DfT and Defra and the majority is for the implementation of local plans by Local Authorities. Resource Departmental Expenditure Limits (DEL) spend includes staff costs for the JAQU team.

Overall assessment

Met.

Conclusion

Overall, the expenditure incurred by the Programme is judged to be a satisfactory use of public money. The NO2 programme delivers compliance with legal limits through the Implementation Fund with mitigating support provided through the CAF, with VfM a secondary consideration across the programme. While the VfM implications of certain measures/interventions (for example those funded through CAF) will generally be weak, there is a clear policy requirement and legal need to assist those businesses and individuals least able to adapt to the CAZ measures being implemented.

The overall policy approach is supported by legislation and reinforced by legal judgements, where the key assessment criteria for approving local plans is whether they deliver compliance in the shortest possible time.

As the accounting officer for Defra I considered this summary assessment of the NO2 programme and approved it on 12 August 2021. The full accounting officer assessment was approved in January 2021 with vfm considered from the outset of the programme via approvals for the 2017 UK Air Quality Plan for NO2, supplement and Clean Air Fund.

I have prepared this summary to set out the key points which informed my decision. If any of these factors change materially during the lifetime of this project, I undertake to prepare a revised summary, setting out my assessment of them.

This summary will be published on the government’s website (GOV.UK). Copies will be deposited in the Library of the House of Commons, and sent to the Comptroller and Auditor General and Treasury Officer of Accounts.

Tamara Finkelstein (Defra Permanent Secretary)

12 August 2021