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11:00 - 14 November 2006

Ministers sat on £750 million of rural funding over five years before making swingeing budget cuts amid claims that there was not enough money to go round, it emerged last night.The Department for Environment, Food and Rural Affairs has underspent its budget in every year since it was set up in 2001 - but this year ministers say it is £200 million in the red and have told agencies funded by the department to tighten their belts.

Last night the scale of the underspend was branded "staggering", and it was claimed the funding could have been used on projects including tackling climate change, bolstering finances in veterinary research or helping farmers hit by delays in subsidy payments.

The news that Defra has repeatedly failed to spend its annual budget of around £3.7 billion comes weeks after the Western Morning News revealed the extent of a major savings programme which has seen the budgets of several rural agencies slashed.

Liberal Democrat environment spokesman Chris Huhne compared the underspend to the financial fiasco caused by the Rural Payments Agency's (RPA) handling of the Single Farm Payment subsidy. He said: "Just one-tenth of only one year's money unspent would have covered the £23 million spent by farmers on interest and fees to banks as a result of their late single farm payments. Around 1 per cent of one year's underspend would have covered the foolish false economy of cuts to the State Veterinary Service."

It was still unclear how much of the underspend was taken back into central Treasury funding or carried over into Defra's budget in subsequent years, but "the sheer scale of it is staggering".

Natural England, the Government's new flagship agency for the countryside, has been banned from spending more than £5,000 on new conservation projects after its budget was cut by £12.9 million, and there is no new spending on coastal defence schemes this year.

The Environment Agency's budget this year has been cut by £23.7 million, while the State Veterinary Service and the Veterinary Laboratories Agency face cuts totalling £5.4 million. Earlier this year wildlife officers who may be needed to carry out a badger cull to control bovine TB were axed to cut costs.

Ministers were forced to reveal the full extent of Defra's underspending in parliamentary answers. In 2001-02, £177 million was unspent; in 2002-03 it was over £148 million, and in 2003-04 £259 million. In 2004-05 more than £163 million was not allocated and even during 2005-06, when ministers claim the RPA was draining resources, £1.1 million is believed to have gone unspent.

Ministers say this year's deficit has been caused by costs caused by the response to avian influenza in the spring and extra resources needed by the RPA.

South Devon beef farmer Richard Haddock said the revelation would provoke anger in the rural community.

"They could have spent a huge amount on diversifying or environmental projects," he said. "Defra is failing to do what the taxpayer has given it money to do - to protect British agriculture."

Shadow Environment Secretary Peter Ainsworth said the underspend was "absolutely absurd". Hundreds of millions of pounds were going unused each year - precious financial resources that could have been used as part of the campaign to tackle climate change.

A Defra spokesman said the figures represented "a year-on-year rolling underspend" but the rules on carrying over underspends changed in 2005-06, which saw restrictions placed on how the extra money could be spent.

"It's important to note that in 2005-06 Defra delivered a spending programme of some £3.7 billion with an underspend of £1.1 million - just under 0.02 per cent - which is a testament to improved financial and programme management."