This year’s budget (18 March) will be one of the last big actions of the Coalition Government. Will the Chancellor take bold steps to enhance long-term economic security by safeguarding the environment and accelerating low-carbon innovation? Or will it be a damp pre-election squib? At WWF-UK, we hope it is the former.
Last week we launched our ‘A Greener Budget’ report in the company of Danny Alexander, chief secretary to the Treasury; our CEO David Nussbaum; Steve Waygood of Aviva Investors; John Mann MP; and Baroness Parminter.
In the report we’ve argued that it is imperative to shift the UK economy on to a more sustainable footing. We want the government to respond to the growing global risks from environmental degradation, resource scarcity and climate change.
Where there is risk, of course, there is also opportunity. The report’s proposals focus heavily on the potential benefits of bold policy action. We should be stimulating new and emerging sectors – the vital engines of clean, hi-tech, sustainable growth in the future – and helping to drive investment in improving the natural asset base on which the economy and businesses depend.
Backed up by the latest evidence (in some cases from the government’s own research), these measures have the support of government, businesses, industry bodies, academic institutions and NGOs.
Good for the economy and the environment
Danny Alexander welcomed the report as “excellent” and the product of “careful economic thinking”. He highlighted that we need to “tackle the environmental as well as economic deficit, both of which are crucial to the future of our economy and country”. He shared the view that “there is no dichotomy between doing what is good for the economy and what is good for the environment” and that the report is “a good guide to help us get this policy mix right”.
Danny talked of his ambition for the UK to lead the world in green technology, creating huge opportunities for innovation and UK exports. He painted a positive picture of the enormous progress being made already, such as in low-carbon technologies and through the work of the Green Investment Bank. His view is also that “the National Infrastructure Plan has brought about a massive shift towards long-term thinking in the government over the last five years”.
Numerous local initiatives were also flagged up – Mr Alexander was evidently proud of the work happening in Bristol (my home city), the 1st European Green Capital, which is slashing carbon emissions, improving the environment and boosting the local economy.
So what are the chances of action?
The report was “extremely timely”, according to the chief secretary, and contained some “excellent ideas” that would be carefully looked at. I was pleased to hear him refer to our proposal for a new Office for Environmental Responsibility (OER) as “an extremely good idea”. We shares his view that “we need an institutional framework to hold us [government] to account, as we have done via the Office for Budgetary Responsibility for fiscal policy”. We hope the manifesto pledges reflect this.
But he also warned: “Being so close to the election, this is not likely to be the time for a raft of new economic policies”. So it seems there remains a strong risk of a damp squib. This would be an opportunity missed in our view. As our report sets out, there are many quick-wins to be captured – already widely supported by other government departments and businesses – such as promoting energy efficiency and resource efficiency.
Other proposals will generate returns over longer-term timeframes – such as recovering fish stocks to boost coastal economies, and landscape-scale environmental improvements (e.g. woodlands, rivers, wetlands, and peat-bogs) to reduce flood risk, improve health and boost local economies.
One thing these proposals all have in common: huge potential to improve economic resilience and competitiveness, cut public sector costs and stimulate innovation, investment and job creation. They are not costly nice to haves; they are a means to accelerate economic recovery whilst improving the environment and communities.
We hope that the Budget doesn’t take a step backwards, increasing support to the oil and gas sector, for example. Now is not the time to lock further into high-risk infrastructure assets that will be more costly in the long-run. As the CBI highlighted in its letter to the Treasury this week, we need a budget that “spends funds wisely on those areas which will keep growth on track”. Precisely. Unfortunately though, it also called for support to the ailing North Sea sector. Far better to manage the inevitable decline in these sectors (with appropriate transitional support, particularly to dependent local communities), whilst ramping up growth in new, clean, less volatile industries such as renewables, energy efficiency, recycling and remanufacturing.
Danny also brought up another elephant in the room; that there are big ideological barriers at play – “too many people in the public discourse think that green growth is a contradiction in terms – that ‘green crap’ is too expensive, too uncertain and can’t produce the sort of growth we’re looking for”. Apparently this has been one of the biggest areas of contention between the Lib Dems and Conservatives over the last parliament.
We believe that better information is, in part, key to changing perceptions and driving the paradigm shift required. One of the big thrusts of A Greener Budget is on busting myths around this false dichotomy – revealing our dependence on nature, and highlighting how protecting, improving and use nature’s assets sustainably is good for the economy, business and human well-being.
This is why, in our report, we’ve asked for the Treasury to include a new section in the Budget on natural capital, to publically report on the status of natural assets and associated risks and opportunities, and help to inform policy (including budgetary) decision-making. The information required is increasingly available, for example through the ground-breaking work of the UK’s National Ecosystem Assessment, Natural Capital Committee and Office for National Statistics. This where the OER comes in too; which would help to provide that crucial bridge between environmental and economic/fiscal policy – interfacing with the OBR on investment needs for the environment, for example.
Risks and opportunities
We’ve also called for a new strategic assessment of the risks and opportunities arising from natural resource depletion (a ‘Stern 2’ type study), echoing similar calls from government departments, businesses and other NGOs. Other ideas include a new natural capital ‘stress test’, (modelled on an approach already used in the finance sector), to look at natural capital-related risks to the UK economy under different future scenarios.
These kinds of approaches will help to put these risks on the agenda of the National Security Council, and generate the political (Cabinet level) support that is sorely needed.
Steve Waygood (Chief Responsible Investment Officer, Aviva Investors), highlighted how the news headlines rarely mention the growing risks we all face due to environmental degradation and climate change. How many of us with a pension know what proportion of their future income is at risk – 5% or 20%?
He argued that, if we all had the knowledge to assess the sustainability of investments made with our funds, and acted upon it, these vast capital assets could be a powerful force for change in driving the transition to a more sustainable economy. Aviva is pushing hard for improved transparency and accountability, to ensure that the risks of existing patterns of investment are made clear to pension holders, shareholders, asset owners, brokers and managers, and CFOs.
A long-term project
During discussion at the launch, the key question of how to make this agenda politically relevant now came up – do we reach out to the Treasury, businesses and/or voters? David Nussbaum (our Chief Executive) highlighted that a combination of national and local action was key – but also, crucially, the Treasury must step up to the plate (giving us an enduring image of the Treasury as a ‘fitness instructor’ for the new economy).
The sense was that, whilst this is as much about big banks, big energy, big corporates and increased global competitiveness, it’s also an opportunity to fundamentally address the needs at the local level. Based on his experience as an MP, John Mann argued that “we mustn’t underestimate how much support there is out there in communities”.
Mindful of the many issues and barriers, we have always seen influencing economic policy as a long-term project. The proposals made in the report will also be relevant to future budgets, as well as future Spending Reviews. Fully incorporating this kind of thinking into the way we manage the economy and public finances will take time.
As John Mann pointed out, the first six months between May and November are crucial for shaping the next parliament’s priorities. We fully intend to use this window of opportunity to drive home the message.
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