Natural Resources Wales is facing a challenging financial period ahead, as it grapples with the responsibility of repaying a significant tax bill amounting to £19 million. The environmental agency has had to borrow this substantial sum from the Welsh Government to settle the bill with HMRC, although the final amount is yet to be confirmed. The issue arose from compliance with off-payroll working regulations, also known as IR35 requirements. Sir David Henshaw, chair of Natural Resources Wales, described the situation as “contentious” during a session with the Senedd’s climate change committee. There are concerns that the final amount owed to HMRC could exceed £19 million, but this remains uncertain as legal discussions are still ongoing.
The agency’s executive director for finance and corporate services, Rachael Cunningham, revealed that the terms for repaying the loan to the Welsh Government have been established, with the first payment scheduled for the upcoming financial year. The repayment plan entails spreading the £19 million debt over a decade, with the agency’s budget set to be reduced accordingly to accommodate the yearly repayment. Cunningham highlighted that this issue is not unique to Natural Resources Wales, as many public sector organisations have faced similar challenges related to off-payroll working regulations. The organisation has submitted a report to HMRC outlining their position on the liability, awaiting a resolution in the near future.
Despite the financial strain imposed by this tax bill, Sir David acknowledged the need for reflection within the agency, questioning whether different approaches could have been taken to avoid this predicament. He expressed regret over not acting sooner and emphasised the complexity of the legal landscape surrounding IR35 compliance. The agency has since rectified its employment practices to ensure compliance with current regulations. As Sir David candidly admitted, “We can’t carry on as we are,” indicating a recognition of the tough decisions and changes that lie ahead for Natural Resources Wales.
Amid discussions on potential job cuts and service adjustments, acting chief executive Ceri Davies outlined the agency’s strategic focus on critical areas such as flood risk management, biodiversity preservation, water quality maintenance, and regulatory duties. However, cuts to staffing levels have taken a toll on employee morale, reflecting the broader impact of financial pressures on the organisation’s workforce. The closure of facilities at Nant yr Arian, Coed y Brenin, and Ynyslas has raised public concerns, with petitions and a Senedd debate highlighting community unease over these closures.
As Natural Resources Wales navigates this financial challenge and implements necessary changes to address its obligations, the agency remains committed to its core environmental mandates. The upcoming years are likely to be demanding as the organisation adapts to financial constraints while striving to fulfil its duties effectively. The need for transparency, accountability, and prudent decision-making will be paramount as Natural Resources Wales charts a course through this “rough old 12 months or so” towards a financially sustainable future.