Natural Capital (England and Wales)

Caroline Spelman Excerpts

Monday 21st October 2013 Commons Chamber

[Mrs Caroline Spelman (Meriden) (Con)]

I was lucky enough to be at the helm at the Department for Environment, Food and Rural Affairs when the Government published the first natural environment White Paper for 20 years. We had the lofty ambition—cited by my hon. Friend the Member for Beverley and Holderness (Mr Stuart)—of being the first generation to leave the natural environment in a better state than we inherited. The significance of that challenge is not to be underestimated because it comes against the backdrop of an accelerating loss of species, with natural capital being lost at an ever-faster rate. The United Nations Environment Programme has calculated that for the UK, although overall wealth increased up to 2008, during the same period natural capital decreased by 30%. I invite Members to consider whether we want to go down in history as the generation that knowingly squandered the inheritance of future generations. I do not think so.

The Government had to decide what structures to bring in that would bring about change—that was the genesis of the natural capital committee under the inspired chairmanship of Professor Dieter Helm. That architecture in government is significant because the committee reports to the economic affairs committee, which is chaired by the Chancellor. That is important because it means that the natural capital debate is being hardwired into economic decision making.

It is stating the obvious to say that decisions will be better if the true value of what nature provides for free is factored in. I have always loved the example that if bees decided not to go to work for 12 months, it would cost our economy more than £400 million a year. That is not fanciful thinking, but based on real experience of what happened in China where, as a result of pesticide use, the pollinators died and fruit trees had to be hand pollinated by Chinese labourers. I invite Members to consider what the bill would be by comparison in this country. It is, however, a sombre fact that that has happened.

We are failing to conserve our natural capital assets, which is in stark contrast to the way we approach physical and financial assets. Such inconsistency comes at a high economic cost. Some of the natural capital that we have already lost is irreplaceable, but other parts can be regenerated. There are great opportunities for better management and stewardship of those natural assets, but that must be hardwired into the normal way we do business. Water companies have understood that rather than pouring chemicals into water to make it drinkable, simply paying farmers to keep the upland catchment clean can save money and the environment. Several water companies, including Yorkshire Water, South West Water and United Utilities, pursue the practice of paying for ecosystem services, and I expect other water companies to adopt the same practice.

Recognising the potential of business opportunities through better management of ecosystem services led to the establishment of an ecosystems markets taskforce, chaired by Ian Cheshire, chief executive of Kingfisher, which sets out to practise what it preaches in the marketplace. The taskforce identified important economic opportunities in bioenergy, local wood fuel, water cycle management, soft flood defences, better use of waste, and using nature to enhance resilience—all at their heart showing a better understanding of the importance of natural capital.

We all understand the importance of economic recovery in these austere times, but it is important that the return to growth is on a sustainable footing. A better understanding of how we use natural capital is essential to achieve that, so I agree with the natural capital committee that we need to develop a framework with which to define and measure natural capital. As the GLOBE initiative shows, that approach should be considered around the world as far as possible. I am not saying that every country should approach the matter in the same way, but legislators around the globe should recognise the importance of accounting for natural capital. It is salutary to recognise that some of the best practice does not come from the largest countries. Costa Rica is considering legislating on natural capital, and Peru has embedded natural capital in law. The work of GLOBE in showing legislators the approaches taken by other legislators is important.

By a happy coincidence, when we launched the natural environment White Paper, a new tool—the national ecosystem assessment—was developed with the help of no fewer than 200 scientists from around the globe. The assessment allows us to measure natural capital. In other words, as a result of that excellent scientific work, we can put a financial figure on what we previously thought was free. I would go so far as to say that, were such an assessment applied to the use of land in Europe, the common agricultural policy could be made far more efficient. There is certainly scope for that. We currently pay farmers for stewardship schemes at entry and higher level. If funds were directed to payments for ecosystem services, there would be a tangible benefit to the farmer, other ecosystem users, the taxpayer and nature. What a shame, therefore, that the 2013 CAP reform missed the opportunity to achieve that while claiming to promote greening.

Another major European policy—the water framework directive—could give a clear indication of the quality of the freshwater natural capital and its capacity to deliver ecosystems services, and not just as a part of those services. It is therefore in our interest to draw up that register of our natural capital assets and important that we understand which ones are most at risk, so we can prioritise our efforts to protect them. The committee’s report lists the wide range of those natural assets, from soil, water, air, carbon, energy and minerals, through to wild species habitats and landscapes. I therefore urge the Government to get on with overlaying those assets with a risk assessment and give us a time scale for achieving that.

Ash dieback is an example of a significant loss of natural capital through natural causes. However, in order to estimate the loss, we need to map the distribution of ash trees, their age, profile and susceptibility to the disease, and then calculate the negative value of the loss. That could include the loss of timber and of the amenity for recreation, as well as loss of carbon storage and the impact on other species. The second part of the exercise would be to calculate what it would cost to restore ash tree capital. Those are practical examples of what embedding natural capital in policy making could achieve.

That brings me to the important concept of offsetting for loss. The national planning policy framework says that the planning system should contribute to conserving and enhancing the natural environment by

“minimising impacts on biodiversity and providing net gains in biodiversity where possible, contributing to the Government’s commitment to halt the overall decline in biodiversity”.

One approach to compensation would involve the offsetting of losses, recognising the irreplaceability of some wild species and habitats. There is a significant opportunity to demonstrate that with the proposed high-speed railway. As there is an inevitable loss of green space to build the new line, it should be possible to create a significant offset for the loss of that natural capital. Not everything can be replaced. Ancient woodlands along the line of route will be lost for ever—more’s the pity—but new woodlands could be planted to buffer those at risk of being eroded and address the fragmentation of woodlands, which makes it difficult for species to migrate and sustain themselves. There could be a significant restoration of damaged natural capital. For example, we could restore the Tame valley, a polluted river valley on the east side of Birmingham that follows the spur of the new line into Birmingham city centre. Plans to deliver such natural capital regeneration have been drawn up by Arup, the engineers, and a professor of geography from Birmingham university—I commend them to my hon. Friend the Minister. Offsetting is a tool that could do a great deal to bring that vision about.

In conclusion, I strongly support the recommendations of the natural capital committee, in partnership with my hon. Friend the Member for Beverley and Holderness; the framework within which to define natural capital; the risk register we need; and embedding natural capital fully in the UK’s national accounts. In addition, I wonder whether we can reach across from the public to the private sector and develop guidance on best practice in natural capital accounting and improve the treatment of natural capital in cost-benefit analyses. We should also take up a recommendation of the ecosystem markets taskforce and explore how natural capital accounting could be included in guidance on strategic directors reporting under the Companies Act 2006. I hope the Government urgently explore offsetting and other forms of compensation to restore and replenish lost natural capital. Together, we need to nail the myth that preserving and enhancing natural capital is somehow incompatible with economic growth.