(c) Andy Hay (RSPBimages.com)
This blog is written by Douglas Peedle Head of Economics and Valuing Nature on how the Chancellor is missing the opportunity to put nature and wellbeing at the centre of our economic framework.
After the turbulent and costly economic events of last year and as we endure the largest squeeze on our living standards on record, now is a good time to rethink our economic strategy. The Chancellor of the Exchequer Jeremy Hunt set out the Government’s new approach to increasing economic prosperity earlier this year. The ambition is to be one of the most prosperous countries in Europe and the Chancellor laid out his 4 pillar plan to achieve this - the four ‘E’s of economic growth and prosperity as Enterprise, Education, Employment and Everywhere. Unfortunately, an open goal was missed to significantly enhance the framework by adding ecosystem restoration as the fifth ‘E’.
The Chancellor used a range of economic statistics to assess our economic position but failed to recognise the simple truth - set out by Sir Partha Dasgupta in his seminal review on the Economics of Biodiversity commissioned by HM Treasury – our economy is embedded in nature. This simple truth does not bode well for our economic prospects as we are one of the most nature depleted countries in the world, a situation well highlighted by the new BBC series Wild Isles that started on Sunday. If we fail to address the dire condition of biodiversity then we can forget the Government’s twin ambitions to halt species decline by 2030 and improve our economic prosperity.
We need to focus on new measures that deliver the things we value and improve our wellbeing.
Laudable ambitions about economic prosperity are one thing, but without clearly defining how we measure it, they will quickly flounder. There is an emerging consensus that using narrow definitions of economic success such as GDP is flawed. We need to focus on new measures that deliver the things we value and improve our wellbeing. UK Government has already made significant progress in developing alternative measures of wellbeing that include the benefits of the environment and natural capital. However, other countries such as New Zealand are leading the way by placing wellbeing at the centre of their economic framework.
It was pleasing to hear a recent speech by John Glenn the Chief Secretary to the Treasury which set out an environmental, economic vision for the UK even if it seemed somewhat disconnected from the Chancellor’s statement. There was clear recognition that biodiversity has been declining at a rapid rate because of human activities, we have allowed our natural assets to degrade and we have pushed some species to the brink of extinction. There was also acceptance that “Successive governments, in the UK and across the world, have failed to put in place the measures demanded by our collective responsibility for this loss”.
Nature ultimately sustains economies, livelihoods and well-being
The urgent need for action was accepted both to protect ecosystems on moral grounds and because their degradation will significantly undermine our economic prosperity. The Chief Secretary echoed the findings of the Dasgupta Review “that nature, and the biodiversity that underpins it, ultimately sustains economies, livelihoods and well-being”. There was a recap of the key policies announced in the Environmental Improvement Plan which intends to halt and reverse the decline of nature in the UK. It includes welcome measures such as legally binding nature targets to halt species decline, reducing risks of extinction and increasing habitat for nature.
Things are a little less clear as to where the new money will come from to deliver on these commitments. At COP15 in Montreal 196 countries including the UK agreed that both governments and the private sector will mobilise at least $200 billion in investment each year. The government has already set out a goal to raise at least £500m per year of private finance for nature’s recovery by 2027 and more than £1bn by 2030. Private finance will undoubtedly have a key role to play but so will public finance and government is quieter on its own financial commitments. A new Green Finance Strategy is promised later this year and that may well tell us more.
More Clarity is needed on financing nature recovery
More clarity is needed. The Green Finance Institute has estimated that the combined public and private finance gap to meet the UK’s nature related outcomes is just under £6bn a year over the next ten years. The 2023 Spring Budget is a challenging one for the Chancellor given our economic and fiscal headwinds. However, it does provide a perfect opportunity for the Treasury to reconnect its approach to the economy and environment. Ecosystem restoration that delivers improved wellbeing for all should be positioned at the heart of the new economic approach as the fifth ‘E’, with firm commitments for public investment to support the fine words in the Environmental Improvement Plan. If the public sector leads the way this will catalyse the increase in private sector investment that government requires and is essential if we are to simultaneously meet our biodiversity and economic commitments. After all, action and finance for nature would speak louder than words.