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Call for Evidence

Aligning the UK’s economic goals with environmental sustainability

A new economic measurement suited to sustainable development

There are growing calls from economists and environmentalists for current measures of economic progress to be developed to reflect the importance of sustainable development. The current primary measure—GDP growth—is often presented as a proxy for economic prosperity. Critics argue that GDP only measures current flows of investment and consumption, and does not measure stocks of human or natural capital. 

Accounting for natural capital

Professor Sir Partha Dasgupta’s recent review of the economics of biodiversity, conducted for the Treasury, concluded that because GDP does not account for the depreciation of natural assets it encourages the pursuit of "unsustainable economic growth and development".[1] In evidence to the Committee, Professor Dasgupta has outlined an alternative conception of "inclusive wealth", which would require economists "to measure not only human capital and produced capital but natural capital as well."[2]

This is a view echoed in a recent joint report from the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) and the Intergovernmental Panel on Climate Change, which concluded that there needs to be a move away

"…from the conception of economic progress based solely on GDP growth, to one that balances human development with multiple values of nature for a good quality of life, while not overshooting biophysical and social limits."[3]

The Kunming Declaration, adopted by Ministers of states party to the UN Convention on Biological Diversity in October 2021, committed states to “work across our respective Governments to continue to promote the integration, or 'mainstreaming' of the conservation and sustainable use of biodiversity into decision-making including through […] economic accounting […]”.[4]

The Committee’s recent report, Biodiversity in the UK: bloom or bust? called on the Government to detail how it intended to move beyond GDP and develop a concept of inclusive wealth.[5]

In response the Government recognised that GDP had limitations, and that it should not be seen as an all-encompassing measure of welfare.[6] HM Treasury plans to provide further funding to the Office for National Statistics (ONS) to assist in the improvement of its natural capital accounting.[7] In response to the Dasgupta Review, the Government has undertaken to work with the ONS to improve the way in which natural capital is reflected in the official statistics which indicate the UK’s prosperity.[8]

Terms of reference

The Committee plans to undertake hearings early in 2022 in which it will examine how the UK Government could incorporate environmental sustainability into its leading measures of UK economic success.

The Committee invites written submissions of no more than 2500 words, addressing any or all of the issues raised in the following terms of reference, by noon on Friday 7 January 2022:

  1. How does the way the Government currently uses GDP in setting macro-economic policy affect the development of environmental policy and of cross-departmental action to achieve the UK’s environmental goals?
  2. How could GDP, or other current measures of macro-economic activity, more fully account for human and natural capital assets? What are the challenges and/or opportunities in moving to a way of measuring economic progress which takes greater account of such assets?
  3. How effective has the Government’s response to the recommendations of Sir Charles Bean’s Independent Review of Economic Statistics (2016) and Professor Sir Partha’s Dasgupta Review of the Economics of Biodiversity (2021) been to date?
  4. How could Professor Dasgupta’s conception of ‘inclusive wealth’ be made operational as an economic measure?
  5. How is the Office for National Statistics’ work on the measurement of national well-being and on the development of natural capital accounts contributing to the development of the Government’s macro-economic policy?
  6. To what extent is the preparation of the UK’s national accounts governed by international standards for national government accounting? In the light of the Kunming Declaration of October 2021, what prospects are there for reform of the United Nations System of National Accounts (SNA) to assign greater importance to natural capital?
  7. How might the public, businesses, financial institutions and the financial systemreact to any move away from GDP as the primary indicator of prosperity? What challenges could this present for policymakers, and how might these be overcome?

Written evidence should be submitted through the Committee’s web portal.

It is recommended that all submitters familiarise themselves with the Guidance on giving evidence to a Select Committee of the House of Commons[9] which outlines word count, format, document size, and content restrictions.

We encourage members of under-represented groups to submit written evidence. We aim to have diverse panels of Select Committee witnesses and ask organisations to bear this in mind when we ask them to choose a representative. We are currently monitoring the diversity of our witnesses.

References

[1] Dasgupta, P. (2021), The Economics of Biodiversity: The Dasgupta Review. (London: HM Treasury).

[2] Professor Dasgupta gave evidence to the Committee’s inquiry into Biodiversity and Ecosystems on 9 December 2020 and again on 24 February 2021.

[3] Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) Media Release: Tackling Biodiversity & Climate Crises Together and Their Combined Social Impacts, 10 June 2021.

[4] UN Convention on Biological Diversity, fifteenth meeting (part 1), Kunming Declaration: “Ecological Civilisation: building a shared future for all life on earth”, Kunming, China, 13 October 2021, para 3.

[5] Environmental Audit Committee, First Report of Session 2021–22, Biodiversity in the UK: bloom or bust?, HC 136, para 298–300.

[6] Environmental Audit Committee, Biodiversity in the UK: bloom or bust?: Government Response to the Committee’s First Report, Third Special Report of Session 2021–22, HC 727, section 26.

[7] The ONS issued its UK natural capital accounts for 2021, described as “its estimates of the financial and societal value of natural resources to people in the UK”, on 12 November 2021.

[8] HM Treasury, The Economics of Biodiversity: The Dasgupta Review—Government response, CP 504, July 2021, paras 3.4–3.7

[9] UK Parliament, Guidance on giving evidence to a Select Committee of the House of Commons.

This call for written evidence has now closed.

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