Budget Resolutions and Economic Situation — House of Commons, 2015-07-08
Topic: Macroeconomics
Barry Strachan Gardiner (Labour, Centre-left): I am so glad I took that intervention, because the hon. Gentleman makes an extremely important point—one that I totally agree with The amount of tax raised could be substantial: an annual tax of just £200 per acre could raise £9 billion—more than by putting an extra penny on income tax. The unpopularity of raising corporate or personal income tax has been a straitjacket. If the Chancellor feels comfortable wearing it, he may be madder than I think For 10 years, I ran my own business in the City of London. I focused on two things: first, manage your assets; secondly, manage your risks. The same is true for Government. One would not—should not—have any confidence in a management team that did not know the value of its asset base, and one would not have any confidence in a management team that either failed to properly quantify its strategic risks, or that, having quantified them, failed to take appropriate action to mitigate them. Yet we have a Government who have no proper account of their natural capital asset base, and although they have identified the risk of climate change and the linear economy as a real threat to growth, they are failing to take the necessary steps to mitigate those risks adequately Dr Richard Spencer of the Institute of Chartered Accountants in England and Wales has put the case for valuing our natural asset base most succinctly: "The argument for natural capital accounting is that measuring nature makes its contribution to the economy and our wellbeing visible and allows for effective decision making." Global businesses extract an estimated $7 trillion from the environment each year. That $7 trillion does not appear on balance sheets; it consists of free goods—externalities as classical economics prefers to call them. No Government account exists that charts their contribution to the national wealth. Globally, they represent the annual income from a gigantic asset base that is, quite simply, the precondition of all other economic activity. What sort of economic managers do we have who fail to quantify an asset base of such magnitude and such importance The IMF has calculated the cost of the financial crisis at $11.9 trillion. Each year, the degradation of natural capital around the globe erodes our natural asset base by more than that. Our natural environment as represented in our natural capital stocks and flows faces a bigger crisis every single year than the world faced in the 2008 global financial crisis, yet the crisis of the environment is invisible. We were prepared almost to bankrupt ourselves to save our economic system. Our natural capital debt is, arguably, a much more urgent issue than our financial debt, yet this Budget does nothing—nothing—to reverse the decline of that asset base. Natural capital valuation is a powerful tool for policy making and policy delivery, and it is entirely absent from this Budget. So much for managing the assets But what about managing the risks? This Government have identified the risk of climate change. With considerably less clarity they have identified the risk of a linear economy. However, as Peter Young, the chair of the Aldersgate Group, said only a few weeks ago: "The UK is a world leader in environmental science and in writing policy; it is not a world leader in taking subsequent action." Just over a week ago the Government’s independent advisers on these matters, the Committee on Climate Change, set out the key actions that Government needed to take if they were to respond appropriately in managing and mitigating the risks. The committee criticised the fact that many low-carbon policies have no investment certainty beyond the next few years. That, it says, is preventing efficient investment in low-carbon technologies and their supply chains, which often have long lead times. To bring those investments on stream the Government should give policy certainty and clarify ongoing funding commitments beyond the cliff edge that is currently 2020 What did the Chancellor announce? He removed the exemption for renewables from having to pay the climate change levy. Instead of incentivising investment and stabilising the low-carbon industries, the Chancellor put a £3.9 billion tax on renewables. It was very softly spoken in the Budget, but at a stroke he killed off our chances of developing this growing green economy. The jobs, the growth and the international exports that could have come from it have just been thrown away to raise £3.9 billion for the Exchequer. It is a dereliction of duty as a manager of risk The Committee on Climate Change says that the Government must do much more to support private innovation to develop the future technologies that still need research, development and demonstration. These are technologies such as electric vehicles, carbon capture and storage, and offshore wind turbine technology, that can help us meet our 2050 targets. They are also the new green industries that can bring growth and high-skilled jobs Specifically, the committee’s report called upon the Government to "ensure the power sector can invest with a 10-year lead time" To do this, they need to set a clear carbon target for the power sector by the end of the next decade, and extend the funding under the levy control framework to match project timelines out to 2025 with annual rolling updates. In his Budget speech today the Chancellor steadfastly refused to do so, against his own independent advisers In the built environment the report calls on the Government to "develop plans and policies that deliver low-carbon heat and energy efficiency". Nothing! A strong Budget would have strengthened and implemented a zero carbon homes standard. It would have driven investment in low-carbon heating. A strong Budget would have provided increased support for electric vehicles, as well as pushing for stronger 2030 EU CO2 targets for cars and vans. The Economic Affairs Cabinet Committee, which the Chancellor chairs, received a report over a year ago saying that the cost to our economy of air pollution from existing vehicles from the 29,000 premature deaths it causes, was between £9 billion and £20 billion lost to our economy each year. A strong Budget would have mitigated those costs by tackling the problem at source The Chancellor talks about hypothecating vehicle excise duty to a road building programme, but he does nothing to put any money behind the electrification of those same vehicles to deal with particulate matter and nitrogen dioxide, which the committee says is costing so much every year. In this Budget the Chancellor failed to manage the natural asset base and failed to manage the environmental risks.