Sustainability and HM Treasury Contents


76.The environment and the economy play an important role in supporting each other. As the Government’s economic and finance department, the Treasury is arguably the most important department for ensuring the Government meets its environmental obligations. It wields significant control over all aspects of government policy including spending, taxation policy, regulation and approval of major projects. The Treasury uses a technical and political framework for policy appraisal which results in a preference for promoting projects which deliver benefits in the short-term rather than the long-term – in part because this framework does not take adequate account of environmental long-term benefits. This could lead to higher fiscal and environmental costs in the future.

77.Even if it might be possible for the Treasury to justify specific policy decisions in isolation, the sum of all these decisions have harmed environmental sustainability. It is clear that the Treasury could do more to support alternative policy solutions when it deems an existing solution to be unaffordable or not cost-effective. The Treasury could help to promote environmental sustainability in future by using its position in government to ensure that any strategic choices made by the Government work across the economy to promote sustainability and in particular carbon reduction and resource efficiency. This would require taking a more joined-up approach to its policy appraisal that looked at its decisions overall rather than focusing on justifying its decisions in relation to individual projects. It also needs to be much more transparent about the reasons for its decisions which impact on environmental objectives.

78.The Government’s new focus on industrial strategy has the potential to improve long-term policy-making. However, the Treasury is currently failing to take a long-term, predictable and sustained approach to policy-making – the hallmarks of a good industrial strategy. If the Treasury is going to contribute constructively it will have to step-up efforts to reassure investors and promote industries which help environmental sustainability.

16 November 2016