Endangered species

A change of prime minister threatens a vital review of the economic value of nature, says Ehsan Masood.

What’s the UK’s wildlife worth? What are the costs of losing the estimated million species that the UN says are threatened with extinction?

These are among the questions that chancellor Philip Hammond has asked Partha Dasgupta of the University of Cambridge, a leading authority on economics and the environment.

Hammond announced the review of the economics of biodiversity in his spring statement in March. Dasgupta has started on the terms of reference and has been given access to a 20-strong team at the Treasury to assist him. He has 18 months to produce his report.

But with prime minister Theresa May departing, the government in disarray and Hammond unlikely to return as chancellor, the review’s fate is in doubt.

The Treasury under Hammond commissioned Dasgupta for a number of reasons. When a forest is cleared so that a road or houses can be built, the immediate benefits—such as housing, jobs, or improved transport—are rarely weighed against the long-term costs. These could include the forest’s value as a carbon sink, or as a natural water purifier, or as a recreational resource.

Some environmental economists argue that governments would value species and ecosystems more if they knew their monetary value. Another argument is that we wouldn’t be so blasé about losing say, bees, if governments weighed the cost of paying humans to facilitate pollination.

Such questions, once a niche interest among environmental scientists and policymakers, are now mainstream. In 2011, a team from the Office for National Statistics estimated the UK’s “natural capital” at around £1.6 trillion, roughly the same as its GDP. The team also found that this value was down 4 per cent on 2007, presumably owing to environmental degradation.

Now, as any mention of climate change or biodiversity is increasingly followed with “emergency” and “crisis”, economic policymakers are paying more attention to environmental economists and statisticians.

The Labour Party’s economics team has put environmental valuation at the heart of its thinking. In April, shadow chancellor John McDonnell said that a Labour government would review spending decisions for environmental impact. He added that this will mean rewriting the Treasury’s fabled Green Book, the government’s benchmark for judging value for money.

The Dasgupta review may well be the Treasury doing its homework in case of a Labour government. However, it also has a lot to do with Brexit.

When or if Brexit happens, UK farmers will lose access to subsidies from the European Union’s Common Agricultural Policy. These amount to €2.4 billion (£2.1bn) a year for England’s farmers.

Environment secretary Michael Gove has promised to replace this money. But there’s a catch: farmers will have to demonstrate an environmental or public contribution—such as clean water, preserving wildlife or flood prevention—if they want to keep receiving public funds.

There isn’t as yet agreement on which environmental services could be claimed for, nor what they are worth. On 5 June, a report from the National Audit Office warned that the absence of this information would delay roll-out of the new payment scheme—which could be catastrophic for farmers if it created a gap between losing EU payments and accessing the replacement funding.

And now Dasgupta’s project finds itself amid messy politics. A new chancellor looking to cut public spending yet further might shelve a review that has not yet published its terms of reference.

On the other hand, civil servants from the Treasury and environment department ought to be able to persuade their new bosses that they need the review to establish a benchmark to vet any claims from farmers.

Dasgupta and the Treasury have yet to engage with either the expert community or the public. I understand that the Natural Capital Committee, which advises the government, only knew about the review when it was announced.

The review team also had no public role at last week’s annual conference of the Natural Capital Initiative, a network of policymakers, academics, funders, businesses and non-governmental organisations working in economics and the environment.

In response to enquiries, the Treasury is revealing little, beyond what is in the chancellor’s statement and confirming the review’s 2020 deadline.

Given what is at stake, the Treasury, Dasgupta and his team need to be more visible, engaging with expert communities and the public. This would keep the idea in view of would-be prime ministers. It will also help solicit input into the review process.

Keeping a low profile puts this important review at risk.