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The chief executive of the Environment Agency (EA) has warned that declining funding is limiting the work the body can carry out to monitor and improve the environment.

Speaking to the cross-party Environmental Audit Committee, James Bevan noted that funding for enforcement of environmental regulation has been cut as well as grants for monitoring the activity of private companies, including the water sector.

“Our ability to see what is happening to the environment is starting to decline, and that will affect our ability to improve the environment,” Bevan said. “The answer to both those things, frankly, is better funding.”

He told the panel that enforcement activity has vastly declined with prosecutions down from 514 in 2011 to 168 in 2018/19, and only 23 cautions issued in 18/19 compared to 168 in 2011.

Bevan said the significant drop was because resources have declined from £9 million allocated to enforcement in 2017 to £7 million two years later.

Across the organisation the funding allowed for activities not including flood defences has been cut from £120 million to around £50 million. Bevan said the EA is “doing a lot with a little” but welcomed the £200 million announced last year for natural flood management innovation such as re-coursing rivers and planting trees.

Emma Howard Boyd, chair of the EA, called for greater penalties against polluters that reflect the value of the environment. “We are yet to see the sorts of fines against businesses that consistently show the value of the environment,” she said and admitted that for some businesses, fines are accepted as a cheaper option than following regulations.

“Penalties must be at a level that make companies look seriously at the risks they are taking. We need to make company boards look at and commit to the investment that is needed to not pollute,” Howard Boyd said.

The pair answered questions on pollution and combined sewer overflows (CSOs) with Bevan noting the EA was satisfied with environmental commitments in water company business plans. “The plans for the next five years make sense, and we want to see those plans implemented.”

Howard Boyd praised the ongoing level of engagement among water company chief executives and at executive and board level. She said the sense of ambition was clear to make sure they get on track, particularly with pollution incidents.

She added that it will be important to manage expectations within communities about the level of investment required to stop using CSOs and bring water courses to bathing standard.

Bevan echoed this, saying: “It will take time and money to change expensive and old systems that water companies run to improve bathing quality in rivers,” and defended operator self monitoring of water quality.

“The broader picture of water environment is not where we want it to be but self-monitoring is not the main problem,” he said.