Natural Capital (England and Wales)

Caroline Lucas Excerpts

Monday 21st October 2013 Commons Chamber

[Caroline Lucas (Brighton, Pavilion) (Green)]

I congratulate the hon. Gentleman on securing this important debate. Oscar Wilde famously spoke of those who know the price of everything and the value of nothing. If valuing nature in the way suggested will halt the current decline of our precious wildlife and habitats, it is to be welcomed, but does the hon. Gentleman agree that we need very strong safeguards, including in the planning system, to ensure that by putting a pound sign on priceless ecosystems such as ancient woodlands we do not inadvertently open the door to their destruction?

[Mr Stuart]

I am grateful to the hon. Lady for her intervention and she is right to sound a warning note. This whole area is embryonic and it needs to be treated very carefully to make sure that we do not end up with the exact opposite outcomes to those we seek by introducing such thinking in the first place.

In setting up the NCC, the Government said that their ambition was that this should be the first generation to leave behind a superior natural environment to the one it inherited. During the 20th century we placed unprecedented demands on global ecosystems. World population grew by a factor of four. Carbon and sulphur dioxide emissions increased by a factor of 10. Fish catch escalated by a multiple of 35. This has had serious consequences.

In 2011, the first UK national ecosystem assessment found that one third of the UK’s ecosystem services were declining. It showed that if the UK’s ecosystems were protected and enhanced, they could add at least an extra £30 billion to the UK economy. By contrast, neglect and loss of ecosystem services may cost as much as £20 billion a year to the economy. As the NCC report says:

“The risk is that rather than underpinning future growth and prosperity, degraded natural capital assets will act as a break on progress and development.”

The situation is worse in many places overseas. The World Bank estimates that in 2008, the costs of natural capital loss could have been as high as 5% of national income in Brazil, 8% in India and 9% in China. It found that the UK’s natural capital losses stood at just over 2% of national income, although that number is almost certainly incomplete.

The NCC report concludes:

“Until this is addressed, our national accounts will continue to provide erroneous signals about future economic prospects.”

To that end, the NCC recommends that the work being undertaken by the Office for National Statistics to embed natural capital in the UK’s environmental accounts should be given the “greatest possible support” right across Government.

The NCC’s report also recommends that the Government should initiate a programme to provide high-quality evidence on the economic value of changes in natural capital to inform cost-benefit analyses. Let us consider land use change. That may involve alterations in agricultural outputs, which have market prices, but it may also lead to changes in other factors which do not, including outdoor recreation, carbon storage and water quality. The best way to compare changes in such vastly different goods and services is to compare them in common, monetary terms. Developing a system that can achieve that reliably will not be straightforward.

There has been recent progress in this area. The Government’s 2011 natural environment White Paper made a welcome commitment fully to include natural capital in the UK environment accounts, with the first changes coming into effect this year. On the international stage, the adoption by the UN Statistical Commission of the system for environmental economic accounts has been a major step forward.

The prize is considerable. Measuring and accounting for changes in natural capital assets, and improving the valuation of those changes, would help to support better economic decision making. It would improve the delivery of major public policy goals, such as food and energy security, climate change mitigation and adaptation, and public health and well-being. In saying that, it is crucial that natural capital accounting is explained as a way of providing detailed information for better management of the economy. That needs to be done in a way that is coherent internationally but that resonates at home with a public who are concerned about seeing the more immediate benefits of economic growth.

This is not some doom-laden call for us to trade off economic growth for environmental protection. Pre-Victorian England was a low-carbon economy, but it did not deliver too much by way of prosperity. Rather, this is about demonstrating that better policy can result from integrating the value of natural capital into decision making, especially in a world whose population is rising inexorably.

That applies to Government and the world of business. The NCC report calls on the Government to work with leading companies, accounting bodies, landowners and managers to develop and test guidance on best practice in corporate natural capital accounting. As the chief financial officer of Unilever, Jean-Marc Huët, has said:

“The current financial reporting model only tells half the story about a business’s true performance and potential. The numbers say little of its reliance and impact on natural capital, factors that will increasingly influence competitiveness in a resource-scarce world.”

The NCC report is therefore an important document at all levels of policy making: national, local and commercial.

It was particularly welcome that the publication of the NCC report coincided with the launch earlier this year of the GLOBE International natural capital initiative. That is an international policy process driven by national parliamentarians, with the aim of incorporating the valuation of natural capital into policy and economic decision making.

In June this year, legislators from 20 countries participated in the first GLOBE natural capital legislation summit in the Bundestag. The summit considered the international context of the forthcoming UN post-2015 sustainable development goals, and how natural capital accounting should be addressed as a specific goal as well as a cross-cutting theme that affects the delivery of all development goals. For those who are living on less than $2 a day, half of all GDP comes from the environment and its biodiversity. It was therefore encouraging that goal 9 of the recent report of the high-level panel of eminent persons on the post-2015 development agenda, which was co-chaired by my right hon. Friend the Prime Minister, emphasised the importance of the sustainable management of natural resource assets to poverty eradication.

The GLOBE summit in June called on Governments everywhere fully to incorporate the value of natural capital into national accounting frameworks by 2020. It saw the publication of the first GLOBE natural capital legislation study, which reviewed the measures that eight countries, including the UK, are taking to integrate natural capital into policy and economic decision making. Unquestionably, there is a long way to go before natural capital is incorporated in national and corporate accounting across the world. However, the GLOBE study shows that the direction of travel is clear and that the eight countries covered, including the UK, are leading the way.

Embedding the concept of natural capital could mark a milestone on the road towards a more nuanced and complete understanding of our nation’s resources and the impact of our management of them. I congratulate the Government on the letter sent by the Secretary of State for Environment, Food and Rural Affairs and the former Economic Secretary to the Treasury, my hon. Friend the Member for Bromsgrove (Sajid Javid) in response to the report. I welcome its statement that

“The measurement, valuation and good management of our natural capital is crucial if we are to achieve sustainable economic growth and enhanced wellbeing in future.”

However, is that to be the only response from the Government, other than in this debate? My Select Committee insists on a formal Government response to each recommendation that is made in each of its reports. Surely these annual reports deserve just as serious and thorough a response.

Do the Government agree that there is a need for a framework with which to define and measure natural capital? If so, do they think that progress is being made quickly enough? Will they set up a risk register for natural capital, as is recommended in the NCC report, and if so, when? Will they give the Office for National Statistics the “greatest possible support” in its efforts to incorporate natural capital into the nation’s accounts, as recommended by the NCC?

The valuation of natural capital goes to the heart of the biggest question facing humanity: can we adjust our behaviour so as to live within the constraints of living on one planet? Can we live in balance with the natural world, or will we insist on testing its limits?

--- Later in debate ---

[Joan Walley (Stoke-on-Trent North) (Lab)]

It is absolutely right for Parliament to be debating the first annual state of natural capital report, and for the chair of the all-party group for GLOBE UK, the hon. Member for Beverley and Holderness (Mr Stuart), to be leading the debate in Parliament. GLOBE has shown true leadership, both in the UK and internationally, in getting natural capital on to the agenda, and it is vital that the Government now take a lead. I congratulate the hon. Gentleman on securing this welcome debate. Given the way parliamentarians work, it is important that our constituents have an opportunity to have their voice, on how they protect nature, represented here in Parliament. For all those reasons, I value this debate.

As the right hon. Member for Meriden (Mrs Spelman) pointed out, there is a conundrum. The natural capital committee’s work is a centrepiece of the natural environment White Paper. The extent to which the NCC informs policy is a key test of the White Paper’s ability to truly achieve the step change in how we value nature as a society. As Chair of the Environmental Audit Committee, a key issue for me is whether the Treasury is central to that process. I believe that it should be. The right hon. Lady set out how the NCC was established in May 2012 as an independent advisory body to Government, reporting to the economic affairs committee of the Cabinet Office, which is chaired by the Chancellor. In an ideal world, a Treasury Minister would be sitting side by side with the Department for Environment, Food and Rural Affairs Minister to answer the debate, because this is a cross-cutting issue. We are intent on drawing to the Government’s attention that it is no good DEFRA having ownership of the agenda; it has to be reflected in each and every Department of Government. This is one challenge that Parliament faces.

[Caroline Lucas]

I completely agree with the direction in which the hon. Lady is going, but does she agree that one of the NCC’s crucial recommendations is the need for changes to the Treasury’s perhaps ironically named green book to allow decisions to take into account natural capital, even where robust valuations are not likely to be available? Does she agree that that is crucial? Unless the green book is amended in that way, with exactly the kind of integration she is talking about, economic and environmental concerns simply will not happen.

[Joan Walley]

As always, the hon. Lady anticipates what I am about to say. This has been a long-standing matter of concern both to myself and to the Environmental Audit Committee, which I chair. It is vital that the mechanism for integrating natural capital values into policy in the UK is reflected in the green book. I understand, as far as the green book is concerned, that a review is currently in progress.