Sustainability and HM Treasury: Government’s Response to the Committee’s Fifth Report Contents

Sustainability and HM Treasury: Government Response

1.The Environmental Audit Committee published its Fifth Report of Session 2016–17, Sustainability and HM Treasury (HC 181), on 17 November 2016. The Government’s response was received on 27 January 2017 and is appended to this report.

2.We are grateful to the Treasury for its response. We are pleased to learn that the Treasury is working with the Department of Environment, Food and Rural Affairs and the Natural Capital Committee to incorporate natural capital into the Green Book.1 We look forward to seeing a revised version of the Green Book, promised by the Treasury, later this year and expect to see real progress on incorporating Natural Capital. We also welcome the Treasury’s commitment to review current energy performance standards for new buildings and to see whether there are opportunities to do so more cost effectively, as long as this does not result in a lowering of standards.

3.Our report recognised the significant change that the Treasury had undergone while we were conducting our inquiry and stated that the aim of our report was to learn lessons from the past and provide proposals that we hope will be useful to Treasury in the future. Despite this positive progress set out above, we are disappointed that the Treasury’s response has not responded to our individual recommendations or addressed some of our key overarching points set out below. It is also not clear how it will do anything different in future as a result of our inquiry.

4.The Treasury did not adequately address our conclusion that the appraisal and allocation process the Treasury used to assess individual environmental interventions consistently favoured short-term priorities over long-term sustainability. It also failed to respond to evidence that comparatively expensive low carbon technologies (e.g. nuclear) have received more attention than cheaper alternatives (e.g. energy efficiency) which might represent better value for money (paras 30–32). Furthermore, the Treasury ignored our conclusion that, even though it might be possible for the Treasury to justify specific policy decisions in isolation, the cumulative impact of its decisions were having a negative impact on the private sector – which is increasingly concerned about policy risk (para 61). Both of these overarching points were exemplified by the Treasury’s decision to approve Departmental proposals in the 2015 Spending Review, which did nothing to close the gap between the emissions reductions that current policies will achieve and the reductions required to meet the fourth carbon budget, which runs from 2023–2027 (para 40).

5.The issues raised in our report are not just about the environment, they are about jobs, growth and prosperity. We are disappointed that the Treasury has not embraced the report in the spirit in which it was intended. We request that the Treasury respond directly to the overarching points and individual conclusions and recommendations set out in our original report.

1 HM Treasury, The Green Book: Appraisal and Evaluation in Central Government (2003)

2 March 2017