Today’s blog is written by Paul Morling, Principal Economist reflecting on the outcomes of the Autumn Budget and Spending review.
Fiscal statements are primarily economic statements and building back from the ravages of the pandemic is uppermost in the government’s mind. The Government is committed to a green recovery and a nature positive future and its Budgets and Spending Reviews are critical in setting the strategic and spending decisions to make that happen. So how did nature fare this time around?
A rebounding economy provided the Chancellor with something of a Budget windfall that he added to with tax rises that lift the tax take to its highest since the early 1950s and, confounding expectations, allowed the Chancellor to increase spending for all Departments for the next 3 years. So here’s our assessment of what we got for nature.
The latest estimate of the funding shortfall to achieve the UK’s environmental goals is £5.6bn a year of which we need 1.2bn alone for habitat and species targets.
An increase in Defra’s budget is good for nature, but this announcement needs to be understood with context. Defra’s budget was cut by 40% between 2009-2016 (to £2.1bn), seriously compromising it and its agencies to deliver on statutory obligations. Subsequent increases since then relate to specific post Brexit needs and the repatriation of former EU allocations. How this increase is allocated will be crucial. We estimated nature agencies alone will need around £500m a year to carry out existing duties, new Environmental Bill obligations and create new market approaches for nature.
Its great to see explicit nature needs reflected but this £83m a year stands in stark contrast to the minimum £1.2bn annual shortfall.
Again, on the surface this sounds good, but the devil’s in the detail. We concur with the Prime Minister when he said the climate and nature crises are two sides of the same coin. This money must be used to address both crises and deliver public goods, notably biodiversity. Planting non-native species that deliver private commercial outcomes do neither. In addition, we need to see funding extended to other habitats which deliver nature and carbon outcomes, like saltmarshes.
This will map the extent, condition, and biodiversity of England’s natural habitats. This is really good and was a key ask in our response to the Dasgupta Review. Achieving nature positive requires national baselines against which future progress is measured. Biodiversity targets and outcomes must be core to the governments assessments here.
There is real concern that the evolving Environmental Land Management scheme (ELM) will be expected to deliver net zero/agricultural transformation funding and a host of other outcomes beyond public goods. The underlying rationale for the new ELM is public money for public goods and unless we have a strategic and laser like focus on biodiversity, other public goods and true environmental sustainability, these schemes will substantially underdeliver.
Again this is good, but is way below the £5.5bn we believe is needed over 3 years to begin to make a difference to the climate and nature crises. The pandemic has taught us how important it is to look after nature and shown us the vast wellbeing benefits it can deliver to all if only we have the right quality and the right access. Nature needs to be factored into the government’s levelling up aspirations.
The Treasury has included new biodiversity guidance in its main spending appraisal guidance, the ‘green book’, and is doing more to get the guidance used properly. We welcome the progress.
What we don’t welcome is the decision to freeze fuel duty, for the 12th year in a row, and the reduction in air passenger duty on domestic flights. Such announcements, coming between the launch of the Net Zero Strategy and the Climate CoP is a woeful example of what psychologists call ‘cognitive dissonance’. Transformation means rethinking, which for transport means designing new mobility policies that enable reduced travel needs and drive shifts in how we travel, not pursuing policies which drive the very behavioural changes we need to avoid.
The Spending Review introduced a new target to raise at least £500 million in private finance for nature’s recovery every year by 2027 and more than £1 billion a year by 2030. It also announced £20m more to create new markets and public private approaches to nature delivery. We welcome these but such private approaches need the right standards and high integrity design to ensure they actually deliver national nature targets.
Overall then, we had some good news and progress on some specific asks but we are well short of the kinds of transformational funding and thinking we need to see.
The next opportunity to drive progress will be the Spring Budget. Here we need the government to pull new policy levers to drive the behavioural changes the climate and nature crises demand. That means green tax reforms. Existing plastic bag and sugar levies already demonstrate the art of the possible and all future tax and subsidies need to align and drive change to a net zero, nature positive future. Following that will be the Convention on Biological Diversity CoP, the single biggest opportunity we have to establish the right targets, measures, actions and finance to nature proof our future.
We know how much money we need and can’t wait another 3 years or rely on incremental changes to both bend the curve on biodiversity loss and re-establish those past losses. We will continue to work with others and call on Government to fund nature’s recovery.
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