Select Committee on Environmental Audit Eighth Report


EIGHTH REPORT

The Government's pursuit of environmentally sustainable growth

25. In our reports on the Pre-Budget and Budget Reports we have argued that the Government's commitment to sustainable development requires that these economic reports address their impact on the environment, as indeed they also need to address social implications. In our last such report, on the Pre-Budget Report 1998, we concluded that the Government had made no start on using information already available to do this. We recommended that the Treasury should explore how they can use the results of modelling already done by the Government and review the relationship between labour productivity and environmental and social factors and present wider analyses of the productivity challenge facing the UK.[27]

26. The Economic Secretary's explanations and the Government's subsequent response to our recommendations were disappointing, indicating that the Government considered it was already doing enough to address sustainable development requirements in its work on the Budget and the revised Sustainable Development Strategy. Ms Hewitt said that it was not possible to assess the impact of "a higher trend rate of growth on greenhouse gas emissions, miles travelled or whatever". She argued that you cannot extrapolate from historical time series, because the tax and other policy changes the Government is introducing are designed to change the situation at a micro level. She compared the Government's efforts to allow higher growth at the same time as not increasing damage to the environment, to the monetary policy framework which is designed to allow the economy to grow at a higher rate without increasing inflation. She added that some economists may wish to do modelling in the future, but that it cannot be done at the moment.[28] Dr Barker provided directly contradictory evidence, saying that his model does enable integrated modelling of the energy system, the economy and the environment. He explained that this approach allowed for the various feedbacks between the different parts of the system to be included, enabling analysis of impacts on income distribution and competitiveness.[29]

27. The Government's written response to our last report pointed to its environmental assessment table in the Budget Report as the evidence that it was assessing the environmental impact of measures whose primary aim was environmental or which were expected to have a significant environmental impact, and noted that the table draws on the Government's modelling work. And, it pointed to the then forthcoming revised Sustainable Development Strategy, as the place in which the Government would set out further details on its approach to achieving high levels of growth and employment, while at the same time protecting and where possible enhancing the environment.[30]

28. The Budget 1999 in our view did not move significantly further towards assessing the impact of economic and fiscal policies on the environment, although we welcome its inclusion of an explanation of the Government's commitment to sustainable development. The Budget Report set out the Government's macroeconomic strategy and prospects, discussed how to raise labour productivity and increase employment opportunity, and then addressed selected areas of environmental impact (where changes to or new environmental tax measures were proposed) in a section entitled "Building a Fairer Society" which also addressed social issues. It described the Government's work to develop Sustainable Development Indicators but, as Mr Mayo pointed out, it made no attempt to "integrate these in a meaningful way that could enable observers, or policy makers, to gauge the overall effect of economic development and patterns of development on the environment".[31] We would add our particular concern that Gross Domestic Product remains a major focus in the Government's overview of its economic and fiscal strategy, without qualification, despite the Government's own stated reservations about this as a measure of quality of life, expressed most recently by the Prime Minister in the foreword to the new Strategy for Sustainable Development for the UK.[32]

29. So, overall, the Budget 1999 still did not in our view address the fundamental point that economic growth of itself conflicts with two core aspects of sustainable development, the use of natural resources and the protection of the environment. Whilst we acknowledge the case that the Economic Secretary made, that growth rates and environmental consequences vary from country to country and that some of the worst environmental damage is done in countries where there are the lowest growth rates,[33] we believe that in the United Kingdom, other things being equal, growth will from here be accompanied by higher consumption and hence greater use of natural resources and pollution. Not only is this generally the case, but the Environment Agency also pointed out that the Government's particular approach to promoting growth has placed emphasis on high technology sectors, which will bring new pressures on the environment, and on a review of planning policy to facilitate new business start-ups.[34] Whilst we accept that increasing prosperity can provide the financial wherewithal to invest more to address these matters we consider there may be no direct incentive within the market to achieve this by itself. Therefore we consider a policy to support growth should be accompanied by a Government analysis of its impact on the environment and areas where Government action is required to address this, as a demonstration of the Government's recognition of the need for a joined-up approach. We do not see how the Economic Secretary can make the statements she has made to the Committee that the Government's actions are designed to achieve higher growth without damage to the environment[35] without having done the kind of analysis that we are advocating here.

30. In the light of these concerns we were pleased to see the new Sustainable Development Strategy's exemplary words of principle on the need to achieve a sustainable economy and its promises to attempt to spotlight the resource use issue further through a new resource efficiency indicator. We fully endorse the Strategy's statements that "continued improvements in resource efficiency are essential for the UK's future prosperity and competitiveness as well as the health of the environment" and that "the scale of the challenge may be as significant as for carbon dioxide emissions".[36] The relevant headline indicator on prudent use of natural resources is for waste— total arisings and how they are managed. Clearly this does not address all the pressures on the use of the key natural resources, air, water, land, minerals and wildlife. But other headline indicators partially address some of these, in particular road traffic indirectly addresses the use of fossil fuels, and the proportion of new homes built on previously developed land is one measure of the pressure on land use. The Strategy shows acceptance that the current headline indicators do not fully do justice to the issue.[37] It also sets out the intention to develop a new indicator of UK resource use to add to others already available in the full set of indicators, including energy efficiency (but not source of energy), water use, use of primary aggregates in the construction of homes, environmentally sensitive land management by farmers, net loss of greenfield soils to development, soil protection, fishing within safe limits for fish stocks and sustainable management of woodland.

31. The Office for National Statistics explained to us that the work it is doing on developing indicators of resource productivity and eco-efficiency is at a very early stage. Its explanation shows the intention to cover the use of natural resources and renewable resources and to show the natural resource implications from the import and export of goods and to analyse this information by sector. This work will draw on the work the Office is already developing for the environmental accounts, which complement the national accounts. The latter now show the stocks and depletion of oil and gas reserves, water use and pollution and the import and export of material resources. They do not as yet address other resource inputs, such as forestry or fish stocks, which some countries have now developed, or land use, for which the Office is now leading international efforts to develop a conceptual framework. And the Office is working on determining the level of atmospheric emissions that can be attributed to imports of material resources. The analysis of outputs to the environment in the environmental accounts includes atmospheric emissions, but not yet all greenhouse gases, and the data is beginning to be collected on wastes which will be added to this analysis in due course. The Office for National Statistics concludes that its work on resource and eco-efficiency indicators will provide the information to enable the assessment of whether there has been a significant decoupling of production from resource use and environmental impact.[38]

32. English Nature told us it also considered the work of the Office for National Statistics would be useful for predicting the impact of economic growth in different sectors on different environmental media. But it expressed concern that the Office's pace of development of the work is heavily constrained by resource availability.[39]

Conclusions and recommendations

33. The very positive developments in the work of the Office for National Statistics on environmental accounts and the measurement of resource productivity will in due course provide a firm basis for analysing historical impacts of the economy on the environment. We consider it is this historical analysis and related predictive modelling that is required in the Treasury's key economic planning documents, the Pre-Budget Report and the Budget to show the compatibility of the Government's economic policies with its commitment to sustainable development.

34. We recognise the complexity of the work being undertaken by the Office for National Statistics and the even greater difficulty involved in modelling these relationships for predictive purposes. However, we stress again that it is important for the Government to start using what is becoming available as well as indicating where progress is being made towards better information for the future. We recommend that the Treasury should present environmental impacts separately from social issues in their own chapter in the Budget Report. This chapter should address historical trends and predictions based on expected growth and the environmental implications of general economic policy; and it should include the material already presented on proposals for environmental taxes and other measures to address the need for decoupling growth from environmental degradation.


27  Op.cit. Paragraph 9 Back

28   QQ96-97 Back

29   QQ24-25 Back

30   Appendix I, Government response to (e) Back

31   Q3 Back

32   A better quality of life, A strategy for sustainable development for the UK, Cm 4345, DETR, May 1999 Back

33   Q96 Back

34   Ev p 80 Back

35   Q96 Back

36   A better quality of life, Op. cit. paragraphs 6.3 and 6.12  Back

37  Op. cit. paragraph 6.13 Back

38   Ev pp104-105 and 108 Back

39   Ev p79 Back


 
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Prepared 27 July 1999