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Natural Capital Committee

Volume 748: debated on Thursday 24 October 2013

Question for Short Debate

Asked by

To ask Her Majesty’s Government what changes they will make in resource allocation in the light of the assessments of the Natural Capital Committee.

My Lords, the Natural Capital Committee is clearly a bit like a bus. There has been no mention of it in either House for ages, and then suddenly this week two debates come along at once. I am delighted about that. We are privileged in this House to have the Defra Minister responsible for it, my noble friend Lord De Mauley, to respond to us.

Although the Natural Capital Committee deals with many Defra matters, it was commissioned by the Treasury and reports to the Economic Affairs Committee of the Cabinet, which is chaired by the Chancellor of the Exchequer. The NCC’s job is to advise the Government on the state of English natural capital. The establishment of the NCC is one of the rather quiet but very significant things that the coalition has done. It is part of a package. In 2011, the Government also introduced the natural environment White Paper The Natural Choice and the UK national ecosystem assessment which shockingly found that one-third of the UK’s ecosystem services was declining severely. If the UK’s ecosystems were protected and enhanced, they could add at least an extra £30 billion annually to the UK economy. By contrast, neglect and loss of ecosystem services can cost us as much as £20 billion a year.

The Government made these moves as part of a plan. Previously, successive Governments and the public have really thought about natural capital only in response to a crisis, some sort of wake-up call, whether floods, droughts or food prices. The coalition Government were certainly reminded early on of just how much the public value natural capital when they announced their plan to sell off UK forests. The coalition Government learnt that the public value natural capital, even if they do not consider all parts of it.

I was moved to bring this debate as a result of a conference on soils. Soils are perhaps the most vivid illustration of our natural capital. The development of soil takes between 500 years and perhaps 10,000 years. Even a centimetre of topsoil takes at least 200 years to develop. Soil is the basis of our food production, but it is much more than that. It is important for carbon storage, water absorption and water filtering, and is crucial as the first layer in the food chain. How have we treated this virtually irreplaceable resource? We have allowed it to be eroded, polluted, washed away and built over. People may own the land, but the timescale that soil takes to form puts it into the category of a real commons for the nation—or natural capital.

Let us take another part of our natural capital that has been the subject of debate in our Chamber recently: bees. Pollinators are—to mix my metaphor—perhaps the canary in the coal mine. We do not know why bee colonies have collapsed; there seem to be several possible contributory factors. Only recently have people begun to appreciate that, beyond the luxury of honey, the pollinator services of bees and their many pollinating relatives are critical to food production. The collapse of bee populations is mirrored by those of frogs and other amphibians. Could it be that the use of substances such as neonicotinoids is having a much wider effect, or is it the cocktail of pesticides that needs further examination? It has always seemed bizarre to me that a product is tested alone when in reality a cocktail is being used out there.

That brings me to the first question for my noble friend. The NCC rightly sees developing a research agenda on natural capital as a priority. The research agenda on the constituents of natural capital is badly in need of some major help and overhaul. I have seen plenty of evidence which suggests that attempts to ensure the future health of our natural capital might be undermined unless research priorities are better aligned to overall needs and move away from the quick buck producing areas. The determinants of innovation and factors that influence research choices, such as science policies, public-private partnerships and the career paths available, all combine to favour technological regimes that tend to suit very focused, reductionist approaches rather than the holistic ecological approach that is needed to address ecosystems and the sort of complex interactions that we get between, for example, soil and water. Can my noble friend confirm that the Government will ensure a move to a more appropriate balance of research?

I have referred to a few other elements of natural capital such as water, minerals, stone, gravel and energy sources, whether oil or gas. They are all part of the natural capital that is fundamental to our manmade economy and society. We could not have a manmade economy if it was not underpinned by all those elements. Our failure to adequately protect our natural capital could well be a fatal step towards an economy that diminishes severely over time.

One of the problems is that efforts to protect our natural capital have too often been made on the basis of the intrinsic or aesthetic value of, say, woodlands, uplands, clean streams or bird populations. I accept that we may succeed in better protection if we explicitly demonstrate the value that society places on our natural assets, thereby protecting and maybe even enhancing them for future generations. The Natural Capital Committee is part of that effort. The first annual report of the NCC earlier this year contained a number of important recommendations, and I wonder if my noble friend would be able to comment on one of them. The NCC stated that,

“the Government’s efforts to reform the Common Agricultural Policy be intensified, with a long-term view to phasing out Pillar one support and moving subsides towards Pillar two and the provision of public goods”,

and thereby,

“securing as much flexibility as possible in how funding can be allocated for the period 2014-2020”.

If my noble friend could tell us how that work is going, I would be grateful. Will he also encourage the NCC to consider who should be the innovators of these approaches? Clearly, there will need to be some pilot areas; the national parks are one obvious example, but what about the Crown Estate? It is also responsible to the Treasury, and there it is with swathes of our natural capital under its management. Surely it should be a cradle of innovation.

I have a few comments to make on the NCC itself. It held a useful open event at the Royal Society and its first annual report is quite readable. However, the minutes of the NCC are dry to the point of desiccation. This is important because it needs to be outward facing if it is to succeed in integrating the thinking that is being developed into the mainstream and make it the discussion of the day in boardrooms. It will also need to develop some work with institutions such as Cranfield because it is disappointing to read that the Committee concluded,

“that it is not currently possible to identify with any certainty precisely which natural capital assets are being used unsustainably, especially given the available data and knowledge about limits and thresholds”.

That seems to be under-ambitious, although the Committee does go on to say that the rate at which natural assets are being consumed is “unprecedented”.

In conclusion, I must say that there are plenty of cynics out there who think that the NCC is just a way to suggest that the Government are after some green credentials. Whether that is the case or not will be proven in whether policies start to shift in decision-making across all departments, and by the Treasury itself in the way it allocates resources. We need some startling, if welcome, decisions and some much more radical policies.

The next debate, which my noble friend is also going to answer, is on the Thames Tideway Tunnel. That is a good example of what I am talking about. Faced with the same sort of problem as London, the city of Philadelphia chose a radically different solution, avoided many costs, enhanced its environment amazingly and brought solutions down to a neighbourhood scale. The NCC is perhaps looking at such worldwide examples of practice that could help its deliberations, and I hope that the noble Lord, Lord Berkeley, may go into the Philadelphia example. The NCC is subject to review in 2014, and I certainly hope there will be no question but that it should continue. We really need its work.

My Lords, I thank my noble friend Lady Miller of Chilthorne Domer for initiating this debate. Her speech was very educational, and told me much about natural capital that I did not already know. I read the debate in the Commons earlier this week, and so far today I have learnt a little bit more about it. I look forward to hearing what the noble Lord, Lord Grantchester, and my noble friend the Minister have to say.

In the debate in the Commons on Monday, my right honourable friend the former Secretary of State at Defra, Mrs Spelman, made a very telling and—as expected—well informed speech which emphasised the importance of this subject. She stated:

“We had the lofty ambition … of being the first generation to leave the natural environment in a better state than we inherited”.— [Official Report, Commons, 21/10/13; col. 101.]

This sets the bar very high indeed, but so long as we work towards this aim it must be better for our environment and for the people who come after us.

The United Nations Environment Programme calculated that although overall wealth in the United Kingdom increased up to 2008, during the same period natural capital decreased by 30%. These are similar figures to those already quoted. Much work is required here. It will be interesting to hear my noble friend the Minister’s response to any foreseeable changes in policies relating to natural capital and its future.

As my noble friend said, the White Paper published some years ago also introduced the national ecosystem assessment. This was developed with the help of scientists as a measure of natural capital, which is not an easy job in itself. We must not forget that environmental legislation has done much good. For example, it has transformed watercourses, many of which were very badly polluted but which have now improved in many places throughout the country.

I give another example of how important infrastructure is to natural capital. I had some experience of this in an area of which my noble friend the Minister might be aware, in Priory Vale, north Swindon. There was an extensive development programme there, involving some of the biggest housebuilders in the United Kingdom. I was involved in the planting of native trees, shrubs and hedges, using the old hedge lines and retaining the old hedges and ancient oaks. There are green corridors throughout this development which are so important for the environment, and make it a much more pleasant place to live. There is a lot of benefit from that, which people have been trying to measure as well.

It is welcome to hear that the Natural Capital Committee may be chaired by Professor Dieter Helm. It is relevant to both the Treasury and Defra. The Natural Capital Committee information pack refers to its work programme and in particular to its annual report. It works with Defra, the Office for National Statistics, landowners, academics and the research councils.

I would be grateful if my noble friend the Minister could inform the Grand Committee how the NCC works with other departments. Perhaps he could draw to our attention—I refer to my example of Priory Vale—how the NCC works with planning regulations to ensure that where development does take place the land used is replaced as much as possible with other green areas.

My noble friend reminded me earlier, before we started this debate, about the previous time we were both speaking in this Room, when we were discussing a possible Severn barrage. It is absolutely frightening to think of the debit on the natural capital balance sheet if that project had gone ahead. I look forward to what the noble Lord, Lord Grantchester, and the Minister have to say.

I thank the noble Baroness, Lady Miller of Chilthorne Domer, for tabling this debate this afternoon. It gives the Committee the opportunity to debate the first report of the Natural Capital Committee, issued in April this year, following its establishment in May 2012. There has always been a debate around the relative merits of the environment when set against economic development and around how to translate this into public policy priorities. The debate initially focused on sustainability, with the thought that competing claims had to be balanced between two polarities. When English Nature was set up some 10 years ago, sustainability was likened to a stool with three legs: the first leg being the economy, the second the environment and the third, in equal balance, being communities or society. At that time, debates contested whether it was possible to balance these competing aims and whether economic benefit would take precedence or the environment should be given an overriding veto.

The difficulties in settling this debate can be readily appreciated when there is no clear and independent assessment of value. When the environment, or elements in it, can be described, in the classical sense, as a free good, how can it be assigned a value? Meanwhile, the degradation of our environment here in the UK and internationally could not be denied. The effects of waste and pollution in one country are often visited on its neighbours. Nature and the environment cannot simply be seen as isolated elements or units in a biodiversity action plan, such as one to increase songbirds. Instead, the natural environment needs to be assessed and valued as an ecosystem. No longer can this be seen as an either/or debate; instead it must now be recognised that nature and the environment represent a complicated, interrelated system. A properly functioning natural environment is the foundation of sustained economic growth and prospering communities. It bears repeating that we need to create a green economy, where economic growth and the integrity of natural resources sustain each other and the consequences of actions and decisions better reflect the importance of the environment.

Although some may find it reprehensible to try to assign value to natural capital, nevertheless the widening recognition of other assets, such as intellectual property and brand values, perhaps points to natural capital accounting as the best way forward, especially across continents, cultures and national governance divergences. In advising the Government on the state of natural capital in England, the Natural Capital Committee set out to do three main things: first, provide advice on when, where and how natural assets may be being used unsustainably; secondly, advise the Government on how they should prioritise action to protect and improve natural capital and the environment through its methodology; and, thirdly, advise on research priorities to improve future advice and decisions on enhancing natural resources and natural capital.

In reporting directly to the Cabinet’s Economic Affairs Committee, it must work across government and have an interdepartmental profile. It will not be lost on many that this is where it is most needed—under the nose of the Chancellor of the Exchequer. The committee could be seen to have already had an effect on resource allocation and decision-making through its advice on accounting for forest assets in response to the recommendations of the Independent Panel on Forestry, which was set up following the disastrous disregard for woodland assets in the early days of the coalition.

The committee has produced an interesting and thought-provoking first report. The Woodland Trust urged the Government to adopt the committee’s recommendations, stating that the extent to which the NCC informs policy will be a key test of the natural environment White Paper and its ability to achieve a paradigm shift in how nature is valued. With the disastrous lack of border controls and risk analysis of tree diseases in the UK, better protection of our natural assets means, to the Woodland Trust, stronger and better enforced planning protection and robust action on tree diseases. The UK’s woodlands are vulnerable to the effect of historical fragmentation and a continual drift towards decreasing diversity.

The report made reference to trends in UK fisheries but made no reference in its recommendations to the marine environment. This is perhaps a glaring omission that the committee should correct as soon as possible. In the four years since the Marine and Coastal Access Act 2009 was passed, the designation of the first tranche of up to 31 marine conservation zones is still awaited. These sites represent less than a quarter of the sites proposed to achieve an ecologically coherent network, known as an ECN in the jargon. The designation of a network of marine conservation zones is vital to stemming the degradation of the marine environment. Does the noble Lord agree that this is perhaps one of the most pressing issues that his department should be tackling? Will he put the marine environment at the heart of the debate on the EU fisheries policy? Will he ask the Natural Capital Committee to undertake some work on this for inclusion in any report it might produce in 2014?

The committee made 13 recommendations in its report. Will the Government be making a more comprehensive reply beyond the succinct, one-and-a-half-page letter dated 22 May 2013? I believe that the committee deserves better. It is interesting that the committee wishes to develop a framework to define and measure natural capital by drawing on data across departments. If it follows the UN’s global standard known as the System of Environmental-Economic Accounting, will that fall foul of the UK’s data protection laws? It will be interesting to hear the accountancy profession’s assessment of this, as well as of the Prince of Wales’s Accounting for Sustainability project.

The accounting profession will be very familiar with the notion of a risk register as set out in the second recommendation made by the committee. The risk register will identify a range of risks and make assessments against the size of the impact and against the likelihood of occurrences. Will the Minister comment on whether the Government see this as a useful tool to inform practical applications in policy and decision-making? While some may find it difficult to identify the practical usefulness of natural capital accounts, risk registers throughout government applicable to ecosystems and regions could develop into a useful policy assessment tool. Are the Government actively considering this recommendation?

In the thesis undertaken by Mr Christopher Baldock of Imperial College London, Opportunities for Development, he states that the main reasons given for the lack of use and integration of natural capital accounts in decision-making were identified as the lack of a recognised framework of evaluation methodologies, too many ad hoc initiatives hampering development and the lack of recognised uses and application of accounts. Have the Government considered how this could be tackled and improved? How will they identify and embed best practice in the uptake of methodologies across the public estate?

The report identifies the United Nations Statistical Commission of the System for Environmental-Economic Accounts as a major step forward and, importantly, that this system uses the same accounting conventions as the UN system of natural accounts. The report sees UK environmental accounts as limited to a number of physical flows and natural resource assets accounts that include only partial aspects of natural capital. They are not currently aligned with ecosystem accounting and do not provide a fully integrated account of the stocks, flows and changes over time. Can the Minister update us on whether his department has asked the Office for National Statistics to prioritise activity on this?

Will the Government press for an international natural capital accounts body to co-ordinate efforts and collaboration between states and between corporate and international bodies? There is a need to link up and demonstrate the importance and usefulness of accounts if natural capital accountancy is not to fade slowly away from being central to the green economy.

Much debate could be had on each of the other recommendations of the report, not least its comments on agriculture and the natural capital of the countryside in relation to bees and other pollinators, a subject that I know is most dear to the Minister. It must be borne in mind that agriculture exists in a food chain, and that the actions of all in that chain, not least of food retailers in setting the price of food that the consumer pays, have a bearing on agriculture’s ability to respond. These are important matters in the redesigning of the common agricultural policy. The five lines on this in recommendation 13 are incredibly flippant and risk alienating one of the most important communities whose good will is vital in maintaining the nation’s natural capital—the farming community.

I end with one or two remarks on offsetting. The report has merely one sentence on this, which states:

“Offsetting and other forms of compensation are explored after a clear set of principles and a policy framework have been developed”.

Quite simply, offsetting means that if a developer is going to build something that will damage or destroy a habitat of conservation value, it must buy a biocredit to compensate for that loss elsewhere. I find this incredibly dangerous because it sends the mixed message that it is somehow all right to denigrate our natural assets in exchange for making a payment to a good cause. It is the equivalent of having an environmental swear box. Disconcertingly, this was picked up and referred to in the Secretary of State’s page-and-a-half letter to the committee, which stated that the Treasury was particularly engaged in exploring this potential. While the Government may warmly welcome the committee’s ongoing input, I urge them to dismiss this as a very retrograde and dangerous activity to promote.

That said, the committee’s first report is very provocative. The state of natural capital in the UK is at a critical point. Recognition of the committee’s work from the Government who set it up must amount to more than lip service. With the debates over decarbonisation targets and climate change at the forefront of public policy, the Minister’s department should respond more constructively to the committee’s recommendations. I look forward to the review of the Natural Capital Committee in 2014.

I start by thanking my noble friend Lady Miller of Chilthorne Domer for raising this important issue today. I welcome the chance to discuss the vital topic of England’s natural capital. As my noble friend set out, our natural capital provides a range of essential services to society. We all rely on the benefits of natural capital for our clean air, water, food, energy and well-being.

The contents of my noble friend’s speech and, indeed, that of the noble Lord, Lord Grantchester, draw me to make a couple of declarations of interest. I have a farm with a river running through it and some trees growing on it, so I hope noble Lords will appreciate that I come to this with an interest in, and a limited amount of knowledge of, some of the issues.

My Lords, natural capital therefore underpins two of the Government’s key priorities: encouraging economic growth and enhancing the natural environment. These two agendas are not mutually exclusive. In fact, the sensible use of our natural assets is an essential precondition of our prosperity.

In its first report, The State of Natural Capital, published in April this year, the Natural Capital Committee made just this compelling argument: that long-term economic growth will be undermined if we continue to erode our natural capital. The Government agree: long-term prosperity is possible only if we preserve the foundations on which our economy and well-being are based.

It is therefore crucial that we measure, value and protect our stocks of natural capital. Indeed, this is why the Government set up the independent Natural Capital Committee in 2012, the first of its kind in the world. The committee has been asked to provide expert, independent advice to government on the state of England’s natural capital assets. In the past, the benefits that flow from our natural capital have too often been taken for granted, and as a result our assets have become eroded.

The job of the Natural Capital Committee is to highlight where we are not on a sustainable path and advise the Government on how they should prioritise action to protect and improve natural capital. This will help us deliver on the White Paper commitment to leave the natural environment in a better state than that in which it was inherited.

I read with great interest the Natural Capital Committee’s first report earlier this year, which set out its views on why valuing, maintaining and restoring natural capital is important. It also presented initial evidence of the benefits of incorporating natural capital into decision-making at all levels.

As my right honourable friend Owen Paterson’s and the Economic Secretary to the Treasury’s official response to The State of Natural Capital makes clear, the Government welcome and fully support the analysis offered in it. However, the specific issue of what resources have been reallocated in light of the Natural Capital Committee’s assessments is as yet difficult to address. I shall discuss that a little more in a moment.

The committee’s first major publication was a framework-setting document that principally set out what it was going to do to inform its next annual report. It contained no substantive recommendations to the Government that required an immediate change in resource allocation. Rather, the majority of the recommendations referred to work that the NCC is undertaking. For example, one of the key recommendations was to develop metrics to value and measure changes to natural capital. This is a job that the committee is undertaking. It is currently doing excellent work to advance our understanding of England’s natural capital assets. This will be reported on in the second state of natural capital report.

As we have yet to be advised to take specific substantive action, it is not yet possible to attempt meaningfully to hold government to account on the Natural Capital Committee’s recommendations. One potential exception to this is the Government’s work to develop national natural capital accounts.

The Natural Capital Committee recommended that work led by the Office for National Statistics to produce UK environmental accounts should be,

“given the greatest possible support by Government”.

I can confirm that that is the case and, despite the scale of the challenge involved, work is progressing well. My department and the Office for National Statistics are working closely with the Natural Capital Committee to ensure that the accounts are completed on target by 2020. Resource had already been allocated to this work.

The noble Lord, Lord Grantchester, asked whether we will produce a full response to the committee’s next report. We are very much looking forward to it. We will respond appropriately once we have seen what the report contains and have had chance to consider it.

Another area where resources are being committed to the important subject of natural capital is research—my noble friend Lady Miller referred to that. Following discussions with the committee, the Natural Environment Research Council recently announced that it was contributing £5 million to a programme that will deliver on the research priorities of the NCC and its aim to improve understanding of how the state of the natural environment affects the performance of the economy and individual well-being. This is good news and another sign of how seriously the work of the committee is being taken.

In addition to the Natural Environment Research Council’s important contribution, the Natural Capital Committee is undertaking some research of its own to enhance our understanding of natural capital, which it will advise on in its second state of natural capital report. We are very much looking forward to reading that report, the development of which is under way. It will be submitted to the Economic Affairs Committee in early 2014.

It is, of course, too early to speculate what resource implications this may have for the Government, but we will consider them at the appropriate time. I appreciate that there is eagerness to push forward with the natural capital agenda, and that eagerness is shared by Defra and the rest of government.

My noble friend Lady Miller highlighted the importance of soils, and I echo her enthusiasm for them. We recognise that soils are an essential part of our natural resources and support food production, carbon storage, water filtration, biodiversity and wildlife. I can find little to disagree with in what she said about them.

She also spoke about bees and pollinators. The noble Lord, Lord Grantchester, also mentioned them. Noble Lords may like to know that today we are holding a workshop of interested NGOs and other parties on the national pollinator strategy. We are working towards the publication of a document at the end of the year which will go for consultation with a view to finalising it in spring 2014. I am excited about that.

My noble friend asked about the common agricultural policy and the extent to which we are moving in what one might describe as away from subsidising production towards paying for environmental benefit. The United Kingdom has always made clear that we would like to move away from subsidies in the long run. We support a greener cap with the emphasis on Pillar 2, recognising that there is scope for using taxpayers’ money to pay farmers for public goods that the market otherwise would not reward, such as protecting the natural environment and supporting biodiversity. We negotiated hard to secure a final outcome that was a significant improvement on the Commission’s original proposals, but it is very disappointing that we did not get as far as we would have liked. Securing the flexibility to transfer up to 15% from Pillar 1 to Pillar 2 was a good outcome of this set of negotiations. The Government have always made the case that transferring funding from Pillar 1, which is subsidy, to Pillar 2, which is in favour of the environment and the rural economy, represents the best use of taxpayers’ money while supporting farmers to deliver the valuable goods and services that the market left alone would not provide.

As part of our consultation on the implementation of the new cap in England, we would welcome the views of interested parties, including, of course, noble Lords, on how much that transfer should be. That consultation will commence shortly.

My noble friend also mentioned the Thames tunnel, but in the interests of economy of time, I hope she will forgive me if I leave that until the next debate.

My noble friend Lord Courtown mentioned work he has been doing in the north Swindon area, which I know well. He talked about retaining existing features—hedges, trees and so on—while conducting development between them. I congratulate him and thank him on that.

My noble friend asked about co-operation between Defra and other government departments on natural capital. The natural environment White Paper is a cross-government document. It contains a number of important cross-government commitments, and we have made good progress on them. We work closely with the Treasury and have produced new supplementary Green Book guidance for all government departments on valuing nature in policy appraisal. The Natural Capital Committee will report to the Chancellor’s Economic Affairs Committee. In the planning system, the new NPPF is a good outcome. I regularly meet Ministers from the Department for Communities and Local Government. There is also good work in the area of schools and health, so I can confirm to my noble friend that we work across government departments.

The noble Lord, Lord Grantchester, raised a number of issues. In forestry, he will know that we have accepted the vast majority of the recommendations of the independent panel led by the right reverend Prelate the Bishop of Liverpool, who we thank enormously for his work.

The noble Lord spoke about tree diseases and pests. He will know that since concerns about Chalara arose some 12 or 13 months ago, we have developed a risk register of pests and diseases, and we have progressed substantially with contingency planning. Both those elements were recommended in a report by the experts we convened.

He asked whether the Government will provide advice on marine conservation zones. The NCC’s terms of reference are very clear that the committee may not perform a watchdog or advocacy role with respect to government policy decisions or be policy prescriptive in its advice. However, the NCC is interested in all categories of natural capital and will provide advice on whether all assets are being used sustainably.

I am running out of time. If I have not answered all noble Lords’ questions, I will write to them. I ask your Lordships to accept that we have already shown international leadership in this field and no longer take our natural capital assets for granted. We recognise that natural capital is integral to delivering sustained, and sustainable, economic growth in England. As a result, the Government fully support the work of the Natural Capital Committee and are looking forward to its upcoming advice.

Sitting suspended.