Environmental Audit Committee - Minutes of EvidenceHC 1025

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Oral Evidence

Taken before the Environmental Audit Committee

on Wednesday 1 February 2012

Members present:

Joan Walley (Chair)

Peter Aldous

Neil Carmichael

Martin Caton

Zac Goldsmith

Mark Lazarowicz

Caroline Lucas

Sheryll Murray

Mr Mark Spencer

Dr Alan Whitehead

Simon Wright

________________

Examination of Witnesses

Witnesses: Rt Hon Caroline Spelman MP, Secretary of State for Environment, Food and Rural Affairs, Chloe Smith MP, Economic Secretary, HM Treasury; Andrew Lawrence, Director, Strategy and Sustainability, Department for Environment, Food and Rural Affairs, and Peter Schofield, Director of Enterprise and Growth, HM Treasury, gave evidence.

Q187 Chair: This is a return visit, certainly for you, Secretary of State, and indeed, I think, for you, Minister, so thank you for taking the time to come before our Committee today. We are expecting votes at 2.30, so we are mindful of that. We have quite a lot of questions to get through.

From the cross-cutting perspective, how is the green economy being understood and implemented by Government? In terms of DEFRA and the Treasury, if DEFRA is playing the lead role in terms of Government policy, how is competitiveness being taken forward, and where is the cross-cutting role? We have particular concerns about press reports of discussions with a Cabinet Minister about environmental regulations. We would like to know a little about DEFRA’s role in that. I understand that there have been meetings with Oliver Letwin, the Environment Agency, and possibly with Natural England. We would like to know the perspective in terms of where the regulation fits into that, and DEFRA’s role in that context. It would be helpful to have that as a starting question, please.

Mrs Spelman: That is a big question, and I am not quite sure what you are driving at. I thought you wanted us to come here to talk principally about the vision for the green economy. That is the first matter I was briefed on. I think the specific thing you are talking about is the Red Tape Challenge on environmental regulation, which is a completely separate issue. As you have seen, at each successive quarter, under the auspices of the Cabinet Office, the Government have systematically been reviewing regulation with a view to better regulation. To make it perfectly clear, the objective of that exercise is to make sure that you protect the purpose for which the regulation was put in place, but you relieve the regulation when it is a duplication or there is any gold-plating to relieve the burden on business.

That exercise was undertaken last summer, for example, for the food, agriculture and catering industries. You will know that DEFRA was one of the first Departments to come forward from the Red Tape Taskforce with its Red Tape Challenge on agricultural regulation and a set of 200 recommendations on how to relieve the burden of regulation on agriculture. In the published sequence of reviews of regulation by Government, environmental regulation is coming up, I think in March. That is just one of a sequence of meetings about regulation.

Q188 Chair: So there have been meetings with DEFRA and the Cabinet Office on this.

Mrs Spelman: Yes, as with agriculture. It was exactly the same in the summer. The Cabinet Office is the lead Department on the Red Tape Challenge-I think I’m right about that.

Andrew Lawrence: That’s right.

Mrs Spelman: And systematically, each Government Department’s regulations come under this exercise. It is perfectly public and open. Last summer, Select Committee members were encouraged, if they wanted to, to take a view about the working of agricultural regulation. I am talking about domestic regulation now; this does not cover European regulation. Of course, an awful lot of environmental and agricultural regulation is determined at European level-80% of it. But in so far as the legislation is domestic, and within our gift, sequentially the Cabinet Office has seen to it that each Department’s areas of regulation come under the spotlight for about two or three months.

Andrew Lawrence: Yes. The environment theme, which is the one we are talking about-there are themes on water and food-opened on 1 September last year, and closed on 2 October. There are 3,100 stakeholder comments on the website, and there are also stakeholder submissions. They are now being considered by the Red Tape Challenge team at the Cabinet Office, and discussions are under way about how to respond and how to take them into account.

Q189 Chair: The point is that while we have the Secretary of State and a Treasury Minister in front of us we have the opportunity to say that we have grave concerns about the way in which the Chancellor has been suggesting that regulation could be anti-competitive as far as business is concerned, yet when it comes to the green economy, clearly quality standards are important. We would like to know what the state of play is between the Treasury and the Cabinet, and how DEFRA is being the champion of the environmental protection in all this.

Mrs Spelman: Absolutely, but did I not say in my earlier answer that we are there to protect the integrity of the purpose for which the regulation was put in place? There is absolutely no suggestion that environmental protection will be compromised by a review of the regulation for it. A better example, because it has come right through to recommendations, which are public, is to look at how the agricultural Red Tape Challenge gave rise to perfectly sensible suggestions from all the stakeholders involved in working with agricultural regulation about how it might work more effectively. The same exercise, and in the sequence, was undertaken on environmental regulation. The same would apply to other Government Departments. When the Government came into office, they systematically gave an undertaking to try to achieve better regulation. It is not that we think regulation is bad or that it is good; it is neither. But bad regulation is bad, and that’s for sure. What we want is better regulation.

Q190 Chair: But what we want is some sense of where the transparency is in all of that.

Mrs Spelman: It is completely transparent. The Red Tape Challenge is on the website.

Q191 Chair: In terms of the meetings that are taking place, can I confirm that there have been meetings with DEFRA officials and that a ministerial representative from DEFRA was not there?

Mrs Spelman: There are meetings all the time between officials. I honestly think, with the greatest respect to the Select Committee Chairman, that you are trying to create a story out of nothing.

Chair: Okay-

Mrs Spelman: The fact is that the Government have systematically gone about a review of regulation in every sector of the economy with the purpose of making it better, so that it is less of a burden on business, while protecting the purpose for which it was set up. Officials meet across Government to discuss such things all the time, Ministers meet across Government to discuss such things all the time, and we meet our agencies all the time to discuss it. I understood that you wanted to talk about the green economy.

Chair: We do.

Mrs Spelman: So maybe I could just say-

Q192 Chair: Hold on a minute. A couple of Members want to come in, but, before they do, could you absolutely confirm, in the interest of transparency-obviously, there are concerns about the way in which the national planning policy framework was condensed in so many ways-that as Secretary of State, in your championing of the environmental agenda, you are going to be firmly at the helm of any discussions that might be taking place with the Treasury and the Cabinet Office on something that is integral to the green economy?

Mrs Spelman: Absolutely.

Q193 Caroline Lucas: Since we are on the issue of regulation, it would be really helpful if you could confirm or deny the stories out there that say that Oliver Letwin suggested that all of the environmental regulation should be condensed into 50 pages. That is the story, so it would be really helpful to know whether it is true.

Mrs Spelman: I am afraid that I do not go around reading stories.

Q194 Caroline Lucas: Well, we are outside the meetings, so we do not have much access because we are not inside. If we were, we would know.

Mrs Spelman: I am not in a position to confirm or deny a story in a newspaper. I do not feel that is my job. I was not at such a meeting. How can you possibly expect me to do that?

Q195 Caroline Lucas: Well, it is very helpful that you have told us that you were not at the meeting, because that is what I am trying to establish.

Mrs Spelman: There are plenty of meetings that take place.

Q196 Caroline Lucas: But if it were the case that Oliver Letwin was suggesting that all of this material should be condensed, in the interest of better regulation, into 50 pages, what would be the response from your Department?

Mrs Spelman: I am not answering a hypothetical question.

Q197 Chair: Okay. If the officials were at the meeting or knew about the meeting, it might be helpful if we could have a response from them.

Andrew Lawrence: I was not at any meeting, either.

Mrs Spelman: You cannot expect an official to answer a question about a meeting they were not at, in the same way that a Secretary of State cannot do that.

Q198 Zac Goldsmith: I do not think it is a matter of creating stories or trying to create stories. There are stories, and people are reacting to those stories. I have had a surprising number of letters from people who have read articles, particularly in The Guardian, about this process that Caroline is ignorant about, and it is causing concern. There was huge concern about the proposals to sell off the forest estate, and there were huge concerns about condensing the planning rules to 50 pages. That concern is raising its head again in response to stories in The Guardian, so I would say that, in the interest of having a proper discussion and finding our way through this process, the Government need to respond to those stories. They exist and people are reading them.

Mrs Spelman: I have responded, and I have explained the process to the Select Committee extremely clearly. The regulation of every area of the economy is being systematically reviewed, under the auspices of the Cabinet Office, in line with the coalition Government’s commitment to try to relieve the burden of regulation on business without damaging the purpose for which the regulation was put in place.

Mr Goldsmith, I would strongly recommend that you go to talk to farmers about whether or not they want to have the burden of regulation on their industry reviewed. They have warmly welcomed the Red Tape Taskforce on agriculture, and the suggestions we receive from them and other stakeholders have given rise to recommendations that will make agricultural regulation better. Why would I think that that is not possible in any other sector?

Q199 Zac Goldsmith: I do not think anyone is saying that it is not possible. I agree with you that farming has been very badly and overly regulated for many years. I have set up campaign groups calling for the simplification of the process. Likewise, there all kinds of elements of the planning process that are not delivering the outcomes that people want. Nevertheless, the 50-page reduction that was provided as the Government’s first draft on planning sent shivers down many people’s spine with its emphasis on development and growth at any cost. The concern that people have, I think justifiably, is that if we were to try to reduce all environmental regulation down to 50 pages, we would lose a lot of the protections that people want. If you look at the website that the Government have put up asking people for their opinion on environmental regulation, I believe that pretty close to 100% of the respondents said that they either want no change or the strengthening of protections. So I would simply say that, in the interest of ensuring that all those people have their say and are reassured, and in the interest of preventing inaccurate stories from appearing in the newspapers, that discussion needs to be as open, transparent and inclusive as possible, because it is a big deal for many people.

Mrs Spelman: And it will be-compared with what we were going to do.

Q200 Chair: Let us move a little further on. In terms of understanding how all parts of Government are actually committed to the green economy, you have the responsibility for sustainability-proofing of Departments’ business plans from that green economy perspective. I wondered whether you could give us an idea of how that is being done?

Mrs Spelman: I have, of course, appeared in front of your Select Committee before to discuss how we were going to go about this, and I think it is good to be able to update the Select Committee on progress. The most recent is that the Home Affairs Sub-Committee on greening government has now been set up and has had its first meeting. I hope this Select Committee will be happy to hear that an idea that it originally suggested-to strengthen the ability of Government to hold itself to account for mainstreaming sustainable development-has found its expression in a Cabinet Sub-Committee that met for the first time yesterday.

Systematically, as the Minister for Government policy who attended with me on that occasion set out, each Department’s Secretary of State appears before the Minister for Government policy for a review of their progress against their business plan, at which point they are also questioned about their progress on sustainable development. I genuinely believe we are putting into place what we promised this Committee on our first visit we would do.

Q201 Chair: Thank you. May I turn to the Treasury Minister? We were very interested in the Government’s response to our Carbon Budgets report. One aspect which was of particular concern, and which we highlighted in our response, was that the Government plans are to go no further and no faster than the position that has been taken in Europe. I just wonder how you feel that that position helps us get further down the road of the green economy.

Miss Smith: I certainly will. May I also, for administrative purposes, introduce Peter Schofield, whose name may not have been on some people’s papers for the meeting. He is the Director of Enterprise and Growth at the Treasury. [Interruption.] I have managed controversy within the first sentence-wonderful.

More seriously, Mrs Walley, as you rightly point out, in a recent speech the Chancellor made that statement about wishing to go no faster and no slower than our near neighbours, in terms of implementing specific carbon targets that, in his layout, should be done in co-ordination with our European neighbours. That speaks for itself. Anyone who has read the entirety of the speech will understand the fullness of that.

The point I would make for the Committee here is that the Treasury’s conception of a green economy is just as it is for DEFRA and as is it is for the whole Government, which is that it is a whole-economy approach-point No. 1-first and foremost. The green economy is not something that is separated and netted off from the whole economy, which means that we need to be able to assist as far as we are able, as the Government, all sectors of the existing economy and what we hope will be the future economy, to be as green as possible. We need to do that.

However, we are aware of the world around us-the fact is that there are targets in some of the international agreements that we have-and there are countries around us that are taking their own choices on that, and we have an economy of our own in the immediate term of which we take great care. It is the whole Government’s priority to do that, but yet to ensure that we meet all our commitments on moving towards the green economy.

Q202 Chair: But I think there is concern that, by taking what appears to be the lowest-common-denominator approach, we are not really putting ourselves at the competitive edge and not really leading in the way we could.

Miss Smith: I would not accept that, for two reasons. Within the broader speech that we were referring to, there is an important point there about going "no slower than". That is one half of the statement. There are two halves to that balance. Clearly, it is important to say that we want to be in a robust position, showing what Britain can do, and I think that that was encapsulated in that balance. The Chancellor clearly also has regard to not wishing to see damage to the UK economy.

However, the other point I would straight away make is that there are many examples where we will be able to demonstrate, and are already demonstrating, that the UK has a competitive advantage. Some will come in some of the more innovative technologies that have recently come about, of which we will see many more, but others will then come as we green the whole of our economy.

Q203 Mr Spencer: I am sure the Secretary of State will be aware of what happened to the pig and poultry industry when the UK moved quicker than our European colleagues. Does the Treasury recognise that danger of moving faster than our European colleagues and exporting quite a lot of our economy, but not actually benefiting the globe in terms of our green agenda? [Interruption.]

Miss Smith: May I answer that question when we return?

Sitting suspended for Divisions in the House.

On resuming-

Chair: I think that the question was to the Secretary of State.

Mr Spencer: To both the Secretary of State and the Economic Secretary.

Mrs Spelman: Oh yes-on pig prices and farming prices.

Q204 Mr Spencer: It is about the comparison between what has happened to the pig industry and the poultry industry, and the way we jumped ahead of our European neighbours.

Mrs Spelman: To be fair, that is an Agriculture Ministers’ question. It is the regulation of the industry at a European level that is at stake. I am sure that Select Committee members will have covered what happened regarding eggs. We complied with the regulations, along with most other member states, but, off the top of my head, 11 member states did not comply. They are currently facing infraction proceedings because they are non-compliant with the welfare regulations on enriched cages for egg-laying hens.

The next problem coming down the track to meet us is the fact that the United Kingdom, in response to a desire on the part of our consumers to have better welfare standards for the pig industry, was one of the first to ban stalls and tethers. In our pig industry-all Select Committee members have probably seen this-free range pork is quite a common feature. The European Commission intend to introduce a ban from January next year. The experience of the egg producers meant that, as DEFRA Ministers, we put on to the Commission’s radar screen as early as February last year the need for it to make an early start on actively encouraging all the other member states to prepare for the ban we already have in place. We are well aware that when we comply with the law here, we expect the Commission to do its job by enforcing the law elsewhere. We are not alone in this; none the less, we are in a difficult position because you cannot just ban the import of products that are not produced to a European standard.

Q205 Mr Spencer: Has the Treasury learned that lesson? Has it seen what has happened in that sector, and will it apply the rules? If we jump ahead of our European neighbours by implementing stronger green regulations, there is a danger that we will export business to our European colleagues.

Miss Smith: Of course the Treasury is aware of those risks, and we seek to make balanced decisions across Government as a whole.

Q206 Caroline Lucas: Going back to the regulation, did you agree, Minister, with the Chancellor-I am not sure whether you are allowed to say so if you didn’t-when he said he thought the transposition of the habitats directive was imposing "ridiculous costs" on British business? Also, does the Secretary of State agree that such sentiments understandably send shivers up the spines of people who are concerned about the future of environmental protection measures such as the habitats directive?

Miss Smith: I will give a very brief answer because I am sure we need to press on, what with the votes in the House. Yes, I absolutely can see the direction in which you are going. Perhaps the Secretary of State will deal with this one.

Mrs Spelman: We have started our work on the habitats directive review. Again, this is part of reviewing the regulation to see how well it works and whether we can make it work better. We had a stakeholder meeting in DEFRA last week, and I thought it was very constructive. We had a wide range of stakeholders that work with the habitats directive sitting together with us and the NGOs, talking about how we might get the directive to work better in the handful of cases where it doesn’t.

I think it is important to put this issue in proportion. In the vast majority of cases, the habitats directive operates perfectly well in the decision-making process. There are a handful of cases where we have had problems, and it is interesting that that often correlates with a port. I found it really encouraging at the stakeholder meeting that the RSPB and Associated British Ports sat together, and together spoke about how they had worked out a way to help the habitats directive work better in the environment of a port. It is in the 0.5% of cases in which the operation of the habitats directive has caused some problems that we are working through, with the stakeholders, how to get that regulation working better. There is no question of resiling from the directive.

Q207 Caroline Lucas: Do you agree, though, that it is unhelpful in terms of wider understanding if you have a Chancellor who talks about "ridiculous costs" on British business, particularly if you are saying that that applies only to 0.5% of the habitats directive? What I want to know is whether you agree-yes or no-that that is an unhelpful comment.

Mrs Spelman: The Chancellor was talking about the ports cases in particular. There were problems at Immingham, Falmouth and Felixstowe, many of which have now been resolved.

Q208 Caroline Lucas: But do you think it was helpful to say it in the way that he did? That is all I want to know.

Mrs Spelman: It has helped the review of the working of the habitats directive to have drawn to the attention of all the stakeholders that there is a better way forward, which is to bring them together and work through how we can get this directive working better. There is no question of resiling from the habitats directive; we have signed up to it.

Q209 Chair: The point we are trying to make is: if it is joined-up government, where does the Treasury fit in with that?

Mrs Spelman: It is perfectly joined up. We sit around a Cabinet table and we discuss the habitats directive. I spoke with my colleagues about our offer to do two things at DEFRA. One was to look in detail at the handful of cases where there are problems, and if we can find better ways of working that benefit everybody, to take those forward. That is exactly what I have been doing. It is a DEFRA lead on the subject.

Q210 Caroline Lucas: Did you know that the Chancellor was going to talk about the "ridiculous costs" on British business of gold-plating the habitats directive? If Government are so nicely joined up-did you know that?

Mrs Spelman: No, in the same way as the Chancellor does not know what I am saying now-he will read the record of it. How can any Secretary of State know everybody’s utterances at all times and in all places?

Q211 Caroline Lucas: That particular statement sent waves through the green movement. It suddenly sounded as though this Government were not trying to be the greenest Government ever, but were actually trying to row back from environmental regulation. If the Chancellor is going to be saying that, I would have thought that he might have cleared it with the Secretary of State for the Environment first.

Mrs Spelman: There is no question of rowing back from our signature to the habitats directive. We have done a great deal of work to make sure that it is applied more effectively and to work with the stakeholders to ensure that we use the regulation better. I think that is a constructive, helpful thing to do.

Chair: We have two quick questions, one from Peter Aldous and one from Martin Caton.

Q212 Peter Aldous: We have covered a wide range of ground on this head question and its supplementaries. In terms of the priority that the Government are giving to the green economy, I am very conscious that one of the Government’s main drivers for economic growth is the local economic partnerships. A number of LEPs, including the New Anglia LEP, which covers both the Economic Secretary’s constituency and mine, very much embrace the green economy message and green pathfinder status. I would like an assurance and some information about what the Government are doing to provide a framework in which those LEPs can move forward.

Miss Smith: First, I welcome, as you rightly say, that we share a LEP, and as a local MP I too am very pleased with its work. I suggest that there is absolutely a role for LEPs in identifying industries that can be the focal point for the areas in which they work. Further to my point that, in many ways, there is no such thing as the green economy because it is part and parcel of the whole economy, I would say that LEPs need to be conscious of the green aspects of every industry and business they seek to support and promote. They certainly should act with consideration of that. You will forgive me, as I do not have ministerial responsibility for the full framework in which they work, but I hope that is enough to reassure the Committee on the basic point.

Mrs Spelman: I think Mr Lawrence would like to come in on that. We should be clear that LEPs come under the aegis of DCLG, but none the less, at DEFRA, because of our cross-cutting role on a green economy, we work very closely with DCLG. The interlacing of LEPs with local nature partnerships is something I am sure Mr Lawrence wants to come in on.

Andrew Lawrence: Yes, absolutely-

Chair: I think perhaps the detail of that might take us in a direction in which we do not want to go, given the number of questions we have. If there is time, we can come to that at the end, but I know Martin Caton wanted to come in.

Q213 Martin Caton: Secretary of State, you said you have been reviewing the habitats directive. Will you share with us what gold-plating you have identified in that review process?

Mrs Spelman: Two examples come to mind. At Immingham, there was a need to find a biodiversity offsetting strategy to deal with the habitat for curlews. I think it was claimed there were six curlews at Immingham?

Andrew Lawrence: I think that’s right.

Mrs Spelman: It was simply a question of trying to find a way forward with the developer to make sure that the habitat of those curlews was protected. It ran into difficulties actually relating to the historical antecedents of a previous planning application. When you drilled into it, it was not in fact mainly to do with any dispute about the habitat of the birds concerned, but it went back to a historical dispute about the planning for the development.

One of the points of having our troubleshooting team in DEFRA to deal with the handful of cases where the habitats directive appears, or purports, to be a problem is to drill into the reality of whether it is the habitats directive, or whether it is, in fact, something else. That case is, if not completely resolved, well on its way to being resolved, so that is an illustration for you of my Department-a lead Department on the environment-working across government to find solutions in the very small number of cases where we are told the habitats directive is a problem.

Q214 Martin Caton: That sounds like it was not the habitats directive.

Mrs Spelman: In the end it mainly wasn’t, when you looked into it, but as you know from your own surgery, people sometimes think it is one problem and are not aware that it is actually another.

Q215 Martin Caton: But the Chancellor of the Exchequer is talking about gold-plating EU legislation, such as the habitats directive. You are reviewing it, but you cannot give us an example of gold-plating.

Mrs Spelman: That is not true-I have not said that. What I gave was an illustration for you of the way in which we resolved the problem, which did relate to the habitats directive. Under the habitats directive, we would be required to satisfy ourselves that the habitat for the stone curlews was going to be protected as part of looking at this development. That was properly followed-the course was followed-and we got into finding a solution with the developer in that instance.

Part of the review of the habitats directive with our stakeholders last week was to identify examples of gold plating. I opened the review process, and I gave you an example of the time when I was there where NGOs such as the RSPB and Associated British Ports themselves came forward with suggestions about how to get the regulation working better. I did not stay for the whole day-my colleague, Richard Benyon, the Under-Secretary of State, was there for the remainder of the day-but we have collated from all stakeholders examples of where there may be duplication or gold-plating and where we can make it work better. That exercise took a full day with good outcomes, which we will take forward.

Q216 Mark Lazarowicz: Can I take the question back to the wider issue of the green economy to get an idea, principally from the Secretary of State, of what you envision the green economy, or a greened economy, looking like in 20 or 30 years? Is it just going to be the economy as we have it now with a few green bits, or will it be something radically different? If so, what will the difference consist of?

Mrs Spelman: I am really glad you asked me that question, because that is what I thought we were here to discuss. I wanted to commend to Committee members, if they have not already read it, this document called Enabling the Transition to a Green Economy, ETGE for short, but we often, in the parlance, call it the road map. It sets out right at the outset what our vision is: "A green economy will maximise value and growth across the whole economy, while managing natural assets sustainably", so that would be our definition. If you ask me what it will look like, it is not a snapshot of how the economy is today, but it is about transitioning the economy to one that is low carbon and has other environmental goods and service sectors transforming the whole economy, as the Treasury Minister has said, into one that is geared towards the long-term and sustainable growth.

The importance of this document-it is in shorthand sometimes called the road map-is that business asked us for this. I am one of the three chairs of the Green Economy Council, which has representatives of all sectors of the economy, including the trade unions. They asked the Government for a road map, so that we would set a clear direction of travel for them as stakeholders in our economy, setting out what we would like to achieve and by when, in order to fulfil this vision. This is really pivotal in terms of delivering that vision for the green economy.

Q217 Mark Lazarowicz: We are fortunate in having questioned some of the officials here on that very document a couple of weeks ago. It is certainly a good document. However, can I press you a bit further? I am not asking you to write science fiction, but can I get some idea of how different the economy might look in 20 or 30 years, rather than dealing with the general document here? How are things going to be different?

Mrs Spelman: I would bring two things together. I would bring the road map, which sets out signposts, together with the climate change risk assessment, which we published last week, which we need to respond to with an adaptation plan by 2013. I think it is very clear that in order for the economy to be greened, we need to have a low-carbon economy; we also need an economy that is more resource efficient. You will know that DEFRA calculated that £23 billion a year could be saved to the domestic economy if we were more resource efficient. By that I mean more efficient use of resources such as water and energy, reduced waste and more recycling. These are all areas of the economy that present enormous opportunities for growth. They are indeed already the growth industries.

If you look at the rate of growth in, say, the waste industry, which is at 4% per annum, it significantly out-performs some other sectors of the economy. It is contributing not only growth to the economy, but the means of greening the economy, so I would expect to see a lot of innovation in this area. I would expect to see adaptation and mitigation as part of our response to climate change. Frankly, if we do not manage those changes to our economy by 2030, the climate change risk assessment shows that we will be in serious trouble. The risk assessment is based on the assumption that if we do nothing, this is what the world will look like in 2030, 2050 and 2080. It has been broadly well received, because all stakeholders can see what they need to do to transform the economy by those milestones.

Q218 Chair: Given that the climate change risk assessment you just referred to came out of the Climate Change Act, why there was not a full statement in Parliament about it, so that Parliament had the chance to look at it?

Mrs Spelman: I am sure you know that I invited you to a presentation in the House of Commons the day before.

Q219 Chair: That is not quite the same thing as actually presenting it to Parliament.

Mrs Spelman: Perhaps you would just let me explain. There is no visual aid capacity in the Commons Chamber. The climate change risk assessment has a really significant number of graphs and tables which are integral to understanding it, so I took the view that it was better to offer, on a cross-party basis, a full briefing for all Members of both Houses the day before we made it public. Obviously, we embargoed it, but we made it possible for all Members of both Houses to come to that briefing. Many did, including the Opposition Front Bench in the Commons, and they were able to cross-question not just the Ministers but the civil servants responsible for the report. I have to say that it was a really valuable occasion to debate and discuss with the scientists, including the maps, graphs and charts that is their evidence.

When the day comes that we can pull down a screen in the Chamber and actually project those graphs and maps and to have that debate as Members of Parliament, I think it would be possible in a 45-minute oral statement to get near the quality of debate that we had in an open-ended time scale for both Houses the night before. It was my choice. I know the Opposition asked for an urgent question, but that was disallowed by the Speaker, in no small part because Members of Parliament in both Houses had had the opportunity to find out more about the risk assessment before we published it.

Q220 Mark Lazarowicz: Can I ask you what your initial thoughts are on the green economy elements of the Rio+20 zero draft, which the UN published early this month?

Mrs Spelman: Yes, you can-with pleasure-and it would be worth taking a little bit of time on this. DEFRA is the lead Department on our preparations for Rio+20. The zero draft is the first thing to appear as the content for the summit in June. There are two aspects of the summit: one is the green economy and the other is the institutional framework to deliver that green economy. The zero draft is good as far as it goes, but I still think it lacks the tangible outcomes that will genuinely drive the green economy. Therefore the UK, as part of trying to provide leadership in this area, is certainly willing to help the Colombians with their endeavour to produce sustainable development goals as a tangible outcome of the Rio+20 summit. We support those in principle, but we want to go beyond that now and actually start to provide some thoughts on what those sustainable development goals might look like.

In a ministerial preparatory meeting in Delhi in October last year, there was very clear consensus among the Environment Ministers from around the world who attended it that Rio+20’s green economy content should cover subjects such as sustainable agriculture, access to energy, water, biodiversity in forests, poverty-eradication-remarkable consensus around the content. What we need to do now is to take that consensus forward in debate and discussion with Environment Ministers and help to provide some thoughts on what a sustainable development goal for sustainable agriculture might look like. We actually need to produce some content, because if Environment Ministers arrive in Rio in June without some significant preparatory work, we will probably end up with a communiqué, which is all fine and good, but will it actually deliver the greening of the economy? Without more content, I am not convinced. Do you want to come in on this, Andrew?

Andrew Lawrence: That is a very clear explanation. The draft-I have a copy here-was issued in early January and the first discussions about it were held in New York last week. They have had an initial discussion on the zero draft; there are regular negotiating sessions between now and June in New York, as well as intersessional sessions to look at the process. We are very much in the sort of mode that the Secretary of State is talking about. We now have a document to reflect and act upon, and countries can now state clearly what they would like to see by way of progress between now and the event in June.

Mrs Spelman: A number of things are coming together here. At green week in Berlin two weeks ago, Agriculture Ministers were convened from around the world, and about 52 countries were represented. There is a very clear desire on the part of Agriculture Ministers to get sustainable agriculture properly debated in Rio. I am talking off the top of my head, because we have not yet done all the theoretical work on what a sustainable agricultural goal might look like, but if you listen to Agriculture Ministers from the developing world, the key thing for them is harvest losses. If you could achieve the ambition of reducing harvest losses by 20%, for example, you would make a huge contribution to food security as part of that sustainable development goal. You could aim to reduce water consumption as part of sustainable agriculture, because all countries, whether they are developed or developing, are facing huge pressure on water resources.

I think these intervening months are a really good opportunity for the United Kingdom to provide some leadership and encouragement to our Colombian colleagues to start to flesh out what the sustainable development goals might look like. I am sure that the Select Committee would enjoy getting actively into that debate, because I think we should bring some content to the table.

Mark Lazarowicz: I am sure we will. I think we had better leave it there, given the time constraints.

Chair: Dr Whitehead, do you want to follow on with further questions about Rio?

Q221 Dr Whitehead: We have the green economy document, which outlines the transition. How do you propose to connect that with what you will be seeking from the Rio+20 process?

Mrs Spelman: I explained that Green Economy Council members were the ones who called for a road map to transition our economy onto a green economy basis. That was in response to demands from the business community, trade union representatives and others. I think several of them are planning to go to Rio for the business segment. I have explained to the Select Committee that the Brazilian plan is to convene business and civil society in the three or four days preceding the ministerial segment, so that business and civil society can help to shape what comes out of the ministerial segment. I think that is a very good idea, and one of the things I need to do is encourage British businesses and British NGOs to go to Rio and to make their contribution count when they are there.

If I give the example of, say, Aviva, it is one of the most advanced in terms of corporate reporting on sustainability. Aviva is really keen to go out to the Rio+20 summit and be an advocate for corporate reporting on sustainability. I think that is an example of the UK providing leadership. We want more companies and organisations from Britain to go. I know times are hard and it is a long way to go, and all of those things, but this is the 20th anniversary of the original summit. I think the UK has some of the most original ideas, and we should go to share our best practice.

That is what I have been actively encouraging through a couple of roadshows in the autumn for the business community and NGOs. I am just about to run another set of roadshows for the business community and NGOs, which I mentioned in response to DEFRA oral questions last week. It is about an active process of engagement across the economy to get a really strong delegation to Rio de Janeiro, providing a really strong input on how together we plan to green our economy.

Andrew Lawrence: Let me talk about the working groups. In October, when the Secretary of State held her consultation sessions with business and civil society, we asked them, "What would you like to focus on?" They came up with three areas: sustainability reporting, sustainable agriculture, and sustainable energy. The Secretary of State asked me to convene a group of businesses-we invited them, but it was their choice whether to come or not-to talk through what we might aim for at Rio in those areas. We have held two of those sessions already, and the third one is to come, so we are making quite good progress ahead of the statement next week, which you mentioned.

Mrs Spelman: It is also important to add that we are part of the European Union’s contribution-we are part of the EU. We have provided a lot of support on this to Commissioner Potocnik, the lead Commissioner, and he has welcomed the contribution the UK has made to the preparation of the EU position on Rio. That has been submitted already, and attached to it is the EU road map for the transition to a green economy. That is one of the reasons why we try not to use the words "road map" for our own, because it creates confusion as to which road map we are talking about. So there is an EU road map, which is attached to the EU contribution to the Rio preparations, but, of course, we have our own domestic road map. We will be working very closely with the EU Commissioner and other member states to ensure that Europe has a strong representation at the Rio+20 summit.

Q222 Dr Whitehead: Road maps have towns and villages marked on them as well as roads. If it is worth trumpeting what the UK is doing on the green economy to Rio+20, rather than just engaging in the process of Rio+20, what are the particular aspects that should be put in that trumpeting?

Mrs Spelman: I think one of our strongest contributions is resource efficiency. Whether you are a developed or a developing country, resource efficiency is for everyone. Resource efficiency is a theme of its time. It is one of the ways that we can all most successfully green our economies. Raw materials are in increasingly short supply in the face of the demand for the uses we require them for.

Resource efficiency is a win-win. It is clear that a more resource-efficient economy is an economy that is more resilient and that will grow sustainably. It is one of our strongest contributions. We know already, from preparatory meetings, that it will be warmly received by both developed and developing countries. The Japanese Minister is very keen to see resource efficiency promoted at Rio+20. The Chinese have a growing economy and-you can perfectly understand why-are looking at constrained natural resources and thinking hard about how to keep their economy sustainably growing with pressure on resources. They are very keen to see resource efficiency discussed.

Europe is in a strong position, because we have an elaborated road map. Its member states that, like us, have a domestic road map really have something to bring and share. If I were to point to one area where I think we can make a really constructive contribution, it is on resource efficiency.

Q223 Dr Whitehead: No doubt you have had a look at the research by the Stockholm Institute on the planetary boundaries within which humanity can operate safely. Its report identified three that may already have been exceeded: ecosystem biodiversity, climate change and the nitrogen cycle. Have you identified- this might relate to what you are thinking about regarding Rio-which of those specific activities you do not want business engaged in, so that they do not push us further towards the nine planetary boundaries the Stockholm Institute talks about?

Mrs Spelman: We are obviously conscious of the risks of crossing planetary boundaries and causing irreversible damage to our ecosystems. I certainly take that from the Stockholm Institute’s work. We value the natural environment as part of that. What their work shows is that we are already on the wrong trajectory with a number of these cycles. I am hopeful that at Rio we might be able to tackle the nitrogen cycle through looking at sustainable agriculture and the water cycle. I think there will be a strong appetite to debate and discuss that at Rio, because it is an integral part of the sustainable development goals. If water is in short supply, it will be very difficult to have sustainable development.

At the preparatory meeting in India, I detected a huge appetite among both developed and developing countries to have that issue debated. They would say that we should talk just as much about the green economy as the blue economy in Rio de Janeiro. It is definitely worth discussing the water cycle when we are there. That is to name just two. I do not see business as being held out of that. Business has an important contribution to make to the debate on this question, and I think it will want to. If I think about the Green Economy Council members’ interests, they have every interest in being part of the debate about what we do to reverse damaging trends. They show signs of really good practice in beginning to reverse those trends. Again, we want to share our best practice.

Q224 Caroline Lucas: Is there progress on any sense of what a concrete outcome might be in this area? I am thinking of the subsidies that go to fossil fuels, for example. That is one thing I imagine we do not want.

Mrs Spelman: Harmful subsidies, yes. In terms of a tangible outcome from Rio de Janeiro, the best option on the table at the moment is the Colombian/Guatemalan proposal for sustainable development goals. That would go further than just a communiqué. There certainly was willingness around the table in the preparatory meetings to discuss the consequences of harmful subsidies. That might well come up in the context of debating sustainable agriculture, because protectionism makes agriculture less sustainable when such subsidies are applied in the wrong way.

We could get the matter discussed, but there is awareness that with the climate change negotiations we have to be careful that the Rio+20 summit does not work across what is being achieved as part of successive climate change negotiations. Progress was made in Durban, including some progress on this question of harmful subsidies, and the willingness to include agriculture as a work-stream in the next COP. We must not work against progress that is already happening in other conventions, and we have the biodiversity convention coming up this autumn. I think it is possible for Rio to have a really constructive debate about what tangible progress towards genuinely sustainable development would look like. Working through the SDGs as a complement to MDGs is a good way of going about it.

Q225 Caroline Lucas: This is a not comment on what you are doing; it applies to all Governments. We have been at this-talking about what a sustainable economy might look like-since 1972. This is not a criticism of the British Government; it is a criticism of the intergovernmental process, I suppose. If we are still sitting around talking about what it might look like, it feels deeply frustrating.

Mrs Spelman: I refer the hon. Lady to the zero draft, paragraph 42c, which reads-this is something we would sign up to-"to gradually eliminate subsidies that have considerable negative effects on the environment and are incompatible with sustainable development, complemented with measures to protect poor and vulnerable groups".

Caroline Lucas: I like it very much, except for the "gradually." That could be another 30 years.

Q226 Chair: Just before we leave the question of Rio, you mentioned, Secretary of State, how important it is that everybody gets involved with this profile. We agree, and we have had our report on Rio, as you know. One of the things I contacted you about subsequently was the Hard Rain project, and the opportunity to use that as a major event at Rio. It would be very helpful to have some indication from you-not necessarily now but in the near future-of how that could be a pivotal event.

Mrs Spelman: I have not forgotten about that, and I know that my private office officials have that in hand. I thought that the Hard Rain event here in the House of Commons was very successful in raising awareness. We have to be conscious that we are not the hosts of the Rio+20 event. Brazil is, so we have to be sure in suggesting to them how they might want to run the conference that the suggestion is acceptable to them. I have a good working relationship with Izabella Teixeira, the Environment Minister, and I am due to see her later this month. On that occasion, I will put the suggestion to her, face to face, and see whether it would be welcomed.

Q227 Mr Spencer: I just want to go back to the statement that "the green economy will maximise value and growth…whilst managing resources sustainably." It seems to me that, given that natural resources are finite and our economy is still based on consumption, there must come a point when growth is no longer possible. I just wondered whether you agreed with that. Can we carry on growing the economy for ever, or is there a point in time when it can no longer grow?

Miss Smith: From a Treasury perspective, we take an interest in the whole of the economy, and green matters must be a priority throughout that. We have a range of different resources that are in use throughout the economy, and perhaps, Caroline, you will go on to talk about natural resources specifically. If I may just take the opportunity to talk about one of the early points on this journey, we have heavy industries in this country that use resources of a further type, including fossil fuels. I think it has been made very clear from our actions in the Autumn Statement, and indeed around that, that we are conscious that we can’t just shut those out. Plainly, we can’t just say, "We’re cutting you off, and that’s the end of it." We as an economy and a nation will need to use those resources for some time to come, hence the package the Treasury has announced to assist energy-intensive industries. I am just putting that forward as recognition that we must of course act with regard to the resources we all use, and absolutely with regard to their greenness-that is what this session is about-and note that there are staging posts on the route to a greener economy. I don’t think we can act with full disregard of where we are at present.

Q228 Mr Spencer: Will we ever get to the point where we are not growing, or will we change, become green and carry on growing?

Mrs Spelman: This is based on a false premise. It is not whether we grow; it is how we grow. What we have learned from the application of science is that there is a great deal we can do to change the way we grow, and that we can grow sustainably. I genuinely think that the perception that somehow environmental and economic goals are incompatible is false. If you take the example of the transition to a low-carbon economy, based, ultimately, entirely on renewable energy, you will arrive at a point exponentially where you aren’t consuming energy in a detrimental way. That is just one example, but there are lots of them. What we need to do is to look for the win-wins whereby, with reduced environmental impact and a more sustainable use of resources, we can facilitate rates of sustainable growth. I don’t think it is either/or; it is both/and.

Miss Smith: May I come back on one vital point? In a number of our questions today we should be conscious of the risks of not taking action. That plays to your point about things that may be finite or infinite. The Stern report sets out clearly what the cost of not acting would be, and that the end point would be pretty catastrophic-at the extent to which he sets it out-if we took the wrong steps on this journey. We need to act in the near future to avoid such catastrophic damage. This speaks to the point about not all things being infinite. We absolutely must act now.

Q229 Mr Spencer: What I am trying to understand is whether we as a nation are addicted to growth, in that your political opponents and the media will challenge you if the economy does not grow. Perhaps the Treasury should be looking at a model whereby growth is not as important as the economy just turning over; or is that something we are not considering?

Miss Smith: I suspect you would allow me to say that that is not something the Treasury can own up to. Obviously, we seek economic growth, and that is a vital priority for reasons that everyone is well aware of, and into which Committees other than this go in detail. The fact is that we have to find ways of growing the economy, because that means jobs. Let’s not use jargon. We are talking about jobs for you, me, our constituents, our mums and dads, and our children. We are talking about basic stuff. That is what economic growth means. Let’s be specific about that.

Peter Schofield: I don’t mean to interrupt the Minister, but I just want to say that a dimension worth flagging up is the work being done through, for example, the Technology Strategy Board to help promote innovation, which will move us closer to the green economy. UK firms have been very successful in bringing innovative ideas and products to market. A key role for Government is to support those firms in creating not only products for a UK market, but export opportunities.

Mrs Spelman: On that export opportunity, we are not hermetically sealed. You cannot look at whether the British economy should grow in isolation from the rest of the world. What really brings that home is the statistic that in just 13 years there will be 1 billion more mouths to feed on the planet. People often focus on 2050, and talk about 9 billion in 2050, but a much more urgent and pressing need is the extra 1 billion in just 13 years. That is one of the reasons why DEFRA has a priority to produce more food sustainably. Absolutely written into our business plan is to do our utmost to help an industry grow sustainably, because it is not just the mouths at home that we need to feed but those in other parts of the world. If you look at the climate change risk assessment, Europe, which has a really significant percentage of the world’s biomass, is still likely to have sufficient water resources to produce more food sustainably, compared with other, more arid and impoverished parts of the world. We have an absolute moral duty to do our best to make sure that people do not starve in the future, which is just one example of why that needs to be.

Q230 Zac Goldsmith: I think you are right that the issue is really the quality of growth rather than growth itself; stimulating different types of growth has got to be the objective. Historically, growth has happened at the expense of the natural world; I don’t think there’s any argument about that. Other than in carbon-we have already talked a bit about low-carbon policies-what are the Government’s big ideas about delinking growth from environmental destruction? What are you going to do to make waste-

Mrs Spelman: Absolutely. We must go beyond carbon. I get frustrated that there is too much focus on carbon. Actually, resource efficiency is much wider than that. It is looking at all natural resources, particularly water, energy, rare metals and mineral resources that are in increasingly short supply. For example, we use drinking water for every water function-pretty much-in our daily lives, and that is one of the things we have to look at. Should we be rethinking completely how to be resource-efficient in relation to energy with renewables, in relation to water with water efficiency, and in relation to natural resources? In a sense, the market is providing one of the drivers, because the steep rise in commodity prices is a warning about the scarcity of those resources, and it is helping to drive the kind of innovation the Treasury official was talking about. We need a lot more of it.

These days, people increasingly do not think about waste; they think about resource. One of the big drivers of change has been the landfill tax. Instead of burying these precious resources in the ground, there is a national realisation, expressed in fiscal form, that we should be thinking about recycling them. DEFRA has certainly pledged in its Review of Waste Policy in England to take forward a consultation on restricting the landfilling of ‘wood waste’ and reviewing the case for restrictions on other materials to landfill. Again, this is to stimulate the technology to find new uses for these resources. I am constantly pleasantly surprised by the level of innovation you see in the waste industry. Something that today-presently-we have not found a recyclable use for, tomorrow becomes a new product used in a different way. There is a continuous and accelerating rate of transition in that area of the economy-but much wider than carbon.

Q231 Zac Goldsmith: I totally agree with you. Landfill tax is probably the most effective environmental taxation we have ever introduced in this country, but because tax is a cost to waste, it made waste into a liability. There are now construction companies that are zero waste, because they fear that this Government are doubling the rate of landfill tax. It seems to come down to the combination of smart regulation and tax. I suppose this goes back to what we talked about at the beginning of the session: if you want to encourage zero waste, create products that last, create products that can be recycled and dismantled easily and so on, that comes down to a different approach to producer responsibility and taxation-things which the current narrative of this Government seems to be moving away from.

Mrs Spelman: We are not moving away from it.

Chair: I think the Economic Secretary wanted to answer that.

Q232 Zac Goldsmith: I accept that you are talking about the quality of regulation, but it is unavoidable.

Mrs Spelman: I don’t accept that we are moving away from it, and I cannot let that go without saying so. Something missed out in the list of good things that we are working on, of course, is the voluntary agreements. Take the Courtauld Commitment, for example, which has had a tremendously good impact on reducing packaging and increasing the amount of recycling. There is a willingness on the part of business to do this, because it makes perfect economic and environmental sense-who wants to waste money at times like this?

Chair: I think the Economic Secretary wants to come in as well.

Miss Smith: The Treasury certainly does not like wasting money either. I will give a few examples in addition to everything that the Secretary of State has just outlined. We have some policies under way that will be implemented very shortly. First is the carbon price floor. I know that you said that you did not wish to go further into carbon, but I will put that on the list, none the less. It is a fairly innovative thing and something that the UK is absolutely leading the way on. It involves producers and many steps of different supply chains.

Further to that, you have moves that go right into the household. The Green Deal will be coming in later this year. Again, it puts power right into the hands of households, but it also involves, again, the whole supply chain. An example of a firm doing things sensibly is B&Q. They will no doubt wish to be involved in purveying Green Deal products to households. Who knows? However, the example I will give is where they have played their part in terms of packaging. That is an example of a company taking action of its own accord and benefiting from a sense of growth, as Mr Spencer mentioned.

My third big example of policy is the Green Investment Bank. Again, that is absolutely not just carbon. It looks right across waste, but also at many other areas. It is absolutely open to promoting the kind of innovation and technology that we will need, and this Government have set that up.

Mrs Spelman: Mr Lawrence just reminded me that we should not sneeze at the impact of these voluntary codes. Phase 1 of the Courtauld Commitment saved £1.8 billion as part of that voluntary code of conduct, so there is a very real win-win there for the economy and the environment.

Q233 Zac Goldsmith: One final point. If the voluntary approach works, it is obviously preferable to a heavier approach involving the state, but equally there are examples of where the voluntary approach has not worked. With plastic bags, for example, we have not seen a dramatic reduction in their use despite endless promises by the big supermarkets. A voluntary approach works best when it is backed up with the threat of legislation. Where your default position is to try for a voluntary approach, it has to be backed up with a very serious threat that you will step in if necessary.

Mrs Spelman: There is more than one tool in the toolbox to drive this kind of behavioural change. In relation to single-use carrier bags, the Commission is looking and consulting on that across Europe. Different member states have tried different approaches, and even within the United Kingdom we are seeing different approaches in the devolved Administrations. We can learn from their experiences as to what works best, but it is a combination of the tools in the toolbox. We certainly prefer the voluntary approach, and it has been used on a number of occasions. As you say, if this does not work, we will look for something that will work better, but we should always be looking for better regulation as part of it.

Chair: We wanted to come on to regulation on voluntary arrangements a bit later, but I think we have some questions relating to this from both Peter and Mark.

Q234 Peter Aldous: The Treasury Minister mentioned the Green Investment Bank and extending the remit to get involved in a wide range of projects. In making that decision, have you had regard to the fact that perhaps the Green Investment Bank might be more effective in helping the transition to a green economy by concentrating on one or two or three original initial projects, which was very much what the original report suggested?

Miss Smith: Do I understand your question correctly? Are you saying that it should focus on one project only?

Q235 Peter Aldous: No, if I correctly picked up what you said, you were saying that the remit of the Green Investment Bank was being extended so that they could get involved in a wider range of projects.

Miss Smith: Wider than carbon was the point that I was making.

Q236 Peter Aldous: I would just pick up on the original report, which came before the creation of the Green Investment Bank. The recommendation was that, to be effective, it should be concentrated on two or three things to start off with.

Miss Smith: I do not think that is incompatible with what I am saying. It is absolutely the case that it has to have a small number of priorities to be successful. I think that is a sound business principle, and I am sure that my colleagues in BIS will ensure that that occurs as we go through to implementation.

Mrs Spelman: We are particularly pleased that waste is included in the first phase of the Green Investment Bank. We think it offers great potential, with Green Investment Bank seedcorn investment to help that highly innovative industry. We are pleased to see it included in the list.

Peter Schofield: To build on that, the Department for Business, Innovation and Skills has set out what it regards as the strategic sectors that really matter for the Green Investment Bank. As the Secretary of State says, they include energy from waste; they also include energy efficiency. It goes wider than just carbon, but still retains the focus.

Q237 Mark Lazarowicz: On the question of the voluntary approach and whether other tools in the toolbox need to be applied, the document, Enabling the Transition to a Green Economy had a lot that businesses were expected or asked to do. That is basically a mixture of a voluntary approach. What mechanisms are in place to monitor the implementation of that report? If businesses, for example, are not investing in infrastructure to support the green economy to the degree that we would like, at what point will consideration be given to measures to make them do so, or to make it less voluntary? How will you monitor the process?

Mrs Spelman: The Green Economy Council, which asked for the road map, meets on a regular basis. The advantage is that we get the opportunity to monitor on a regular basis what sort of progress they are making. One reason for mapping it out, by the way, is quite important. I know this looks like a difficult chart, but it is really about sequencing. There are two things they wanted: a degree of certainty about what we would do over a period of time, and some assurances that we would sequence things in such a way that is manageable for them to cope with. Business makes the point that different Departments sometimes come forward with regulations to implement all at the same time. They make it difficult for business to cope with three coming along at once.

The road map sets out and synchronises the work across Government Departments to transition to a green economy. One thing that we will do in our regular meetings with the Green Economy Council is make sure that we are making the progress that the road map anticipates. So it is a monitoring as well as a signposting vehicle.

Andrew Lawrence: Maybe it is worth trying to explain, on resource efficiency and so forth, the opportunity-businesses seeing and taking opportunities and then going ahead and making commitments on their own behalf. A lot of major companies have, and that is also very much the thinking behind the Ecosystem Markets Task Force, which the Secretary of State set up and which will report to the Green Economy Council, bringing together business people to identify those opportunities. So for businesses, it is almost a no-brainer to move ahead and take advantage of the opportunities and bottom-line benefits that are there for them to accrue.

Q238 Caroline Lucas: I want to go back to the issue of growth for a few moments, because it seems to me to be at the heart of this inquiry on the green economy. When Mark Spencer basically asked, "Can we go on growing indefinitely?", I think, Secretary of State, that you said something like "It’s not whether we grow; it’s how we grow."

Clearly, it’s better if we are growing in a more environmentally friendly way than if we are not, but I wonder if you would accept that there are, ultimately, finite limits. I know that you have talked about efficiency and innovation, and those are important too, but at the end of the day, the economy is a subset of the wider ecology, not the other way around. I appreciate that that is a difficult thing to start implementing in policy documents here and now, but I would be interested to know whether any thinking about that is going on in the Treasury or DEFRA-the kind of thinking that Tim Jackson, for example, set out in his report Prosperity Without Growth? when he was with the Sustainable Development Commission.

The truth is that however more efficient we become, if the total number of cars on the roads or planes in the sky is increasing, that efficiency is outweighed and undermined by the total amount of growth. As long as we go on thinking that the ultimate end of an economy is just to get bigger and bigger, in a way, we are on a hiding to nothing. There are some shocking figures saying that, in a world in which 9 billion inhabitants all aspire to the level of affluence in OECD nations, we would need an economy 15 the times the size of this one by 2050 and 40 times this one by the end of the century. Sooner or later we are going to have to change our economic model. I would just like to know if there is any debate going on about that anywhere in Government.

Mrs Spelman: Of course there is debate about it.

Q239 Caroline Lucas: But where? Where can I see it?

Q240 Chair: We want specifics on it.

Mrs Spelman: Can I just answer? Sorry, I didn’t quite catch what you said. Chair: I think we want specifics on where the debate is taking place.

Mrs Spelman: Okay. Specifically, that is why we published the national ecosystem assessment, one of the world’s first such assessments for any individual country. Its headline finding was that 30% of our ecosystems are in long-term decline. It also revealed the immense range of benefits that can be gained from ecosystems, so in terms of dealing with finite resources, we are obviously trying to transition away from finite resources to renewable resources, so that we can continue to grow sustainably. Where we need to reverse a trend, where an ecosystem service is in decline, we need to find an alternative solution that measurably restores the damage to the ecosystem.

One thing-a piece of good news-that came out of Pavan Sukhdev’s work on the economics of ecosystems and biodiversity was that quite a lot of the damage can be reversed. Again, when that is achieved, it helps sustain growth.

Another specific thing is that we are going to set up the Natural Capital Committee-we are already interviewing for the Chair of that Committee-which will report to the Economic Affairs Committee, chaired by the Chancellor. Again, it is an opportunity to quantify what we need to change and by how much, to reverse environmental degradation and change behaviour, so we start restoring our ecosystems, so they can sustain growth.

Q241 Caroline Lucas: But with respect, Secretary of State, the word "growth" keeps coming up. I am trying to ask whether any deliberation is going on anywhere in Government about a different paradigm, based on Prosperity without Growth?-the title and focus of that report by the Sustainable Development Commission, by Tim Jackson.

Mrs Spelman: I do not accept the hon. Lady’s view that we cannot grow sustainably. All the work of the Government is directed towards transitioning our economy into one that is green and sustainable.

Miss Smith: Just to reinforce, if I may, that economic growth remains the primary objective of the Government.

Q242 Caroline Lucas: Just for the record, can I point out the way in which "growth" is being used as a proxy for "well-being"? There is so much research out there to suggest that there are better ways of achieving well-being than thinking that ever-growing an economy is the best way to do it. Let me just move on to something else, because time is short.

Mrs Spelman: No, I cannot just let that go. Growth is not a proxy for well-being, and the Government would not accept that interpretation. The Government have put a lot of work into the well-being agenda, and DEFRA has contributed to this. In April last year, we published our contribution to the Social Impacts Taskforce on this. These two things are integral; they are linked-growth and well-being are linked together. One is not a proxy for the other, and I do not accept that analysis.

Peter Schofield: Just to build on that, the Office for National Statistics is taking forward quite a lot of work on that. They have published the results of their work, in terms of what people think matters from the point of view of well-being, and they have identified the key factors. As the Secretary of State says, it is not just about growth, but economic prosperity is one element of well-being.

Andrew Lawrence: If I may add to that, the well-being indicators that they will be generating through the course of this year will be aligned with the sustainable development indicators that we publish from DEFRA, so we are very much involved with that.

Caroline Lucas: I would love us to have more time to debate, but may I ask one other question?

Q243 Chair: Before we move on to what I know you want to ask about, can I just ask, in terms of what was just said, where the thinking is in terms of the Office for Budget Responsibility? You have talked about the ONS but clearly the remit of the Office for Budget Responsibility does not include, as things stand, the sustainable development issue. It would be very interesting to know how you will include natural capital in the national accounts, so there is a basis then for long-term planning, based on sustainable development.

Miss Smith: Both bodies in question-the ONS and the OBR-are, of course, independent bodies, both accountable to Parliament.

Q244 Chair: But set up by Government to do a certain function.

Miss Smith: Indeed, but independent in doing that function. They are both accountable to Parliament in their separate ways; the ONS through the national accounts, and the OBR through forecasting and further budgetary monitoring. The answer, I am afraid, to your question is that the Government would not be in a position to tell them how to do their independent jobs. I appreciate where you might wish that to occur-

Q245 Chair: In relation to Caroline Lucas’s questions, if you go back to debates on, for example, energy, and the role of the regulator, it seems to me that if you were looking at long-term thinking in the Treasury about how you link well-being and finite resources, and how you link that to the economic debate, setting up a body that is independent of Government and has no remit for sustainable development will not assist you with the thinking when the Office for Budget Responsibility is putting you on to a different trajectory, which is just looking at sustainability in respect of economic viability.

Miss Smith: To be fair, I suspect you would criticise if the OBR did assist us too much. I am afraid the point I want to make is that we are not in a position to ask them to take one measure over another in the way that they do their work.

Chair: No, but you chose to give them a remit that did not have that in its terms of reference.

Peter Schofield: May I help the Committee on this? As the Minister says, there are two separate bodies here. The Office for National Statistics, as I said earlier, is doing a lot of work.

Chair: I was talking about the Office for Budget Responsibility.

Peter Schofield: Sure, but the Committee referred to the national accounts, which are the responsibility of the Office for National Statistics. It produces statistics in line with internationally agreed norms as to how national accounts should be put together. The Office for Budget Responsibility is charged with a specific purpose under the Budget Responsibility and National Audit Act 2011. Under that Act, it is required to examine and report on the sustainability of the public finances. That is the remit as set out. It is obviously possible for Parliament and, indeed, this Committee to suggest to this independent body that it meets that remit in a particular way. How it meets that remit is the responsibility of the Office for Budget Responsibility itself.

Q246 Caroline Lucas: I want to ask the Treasury Minister about the kind of investment climate that we are creating here for green industries. Everything that we know, and what is in this document as well, talks about the importance of predictability and certainty and so forth. How does the current court case affect that when we are looking at the FITs issue, because the court case on feed-in tariffs is not really about feed-in tariffs per se. It is about whether it is okay to change the investment rules retrospectively. That is what the Government are now contesting at the Supreme Court-whether it was right and proper to be able to change the date retrospectively for when the new FIT rate came in. Can you share your reflections on what kind of signal that is giving investors in the UK?

Miss Smith: The short answer is no, I cannot share those reflections, because it is a legal matter at present.

Caroline Lucas: That is awfully convenient.

Miss Smith: I am sorry, but it is wiser if I do not attempt to answer your question.

Mrs Spelman: I am sorry; I wanted to come back to something on the ONS. We are working with the ONS on how the environment can be better incorporated into national accounts. In 2012, we are going to publish a document with them for further improvements up to 2020. I want to remind the Committee that in November 2010, it was the Prime Minister who asked the ONS to develop measures of general well-being to complement our understanding of GDP growth, and it launched a consultation on what matters to you. The important thing is that it identified six themes, which included having good connections with your friends and relatives; health; job satisfaction; having a good relationship with your spouse or partner; economic security; and the present and future condition of the environment.

If you stand back and think about those six themes, most directly relate to the greening of the economy: job satisfaction, economic security and future condition of the environment. So, we are working very closely with the ONS on this. The appointment of the chairman of the natural capital committee is imminent. It will be another very important advance in our understanding of factoring the value of natural capital into our Government accounting, so there are things to look forward to.

Chair: I will let Caroline Lucas resume.

Q247 Caroline Lucas: Briefly, the national infrastructure plan announced that over £1 billion would be invested to tackle areas of congestion and improve the national road network. Also, we know that the Government are looking at ways of maintaining the UK’s position as an international aviation hub. What are the Secretary of State’s reflections on the extent to which those measures are compatible with the green economy?

Mrs Spelman: Certainly they are. You may want to talk to the Treasury about this as well. Remember that one of the key things about infrastructure is that we need to adapt it to the challenges of climate change and other big challenges facing our economy and our society. It is difficult to get away from the fact that the increasing cost of fossil fuel means that people are increasingly resorting to public transport, and you see in the decision that the Government have made with respect to High Speed 2 a commitment to sustain growth and sustain our economy by renewing our rail infrastructure. One cannot simply say, "We don’t need to invest in the roads." We know there is terrible congestion at particular pinch points, and where there is congestion, it has an impact on air quality. Again, if we are to marry up our concerns for people’s well-being, their health and the sustainability of the economy, of course we have to invest in the infrastructure to make sure that we get a win-win out of that.

Q248 Caroline Lucas: How can building more roads be the best way of dealing with bad air quality? That seems a bit counter-intuitive to me. More roads mean more traffic on the roads, which means worse quality.

Mrs Spelman: I think it entirely depends on where you make the investment. As I said, there are points of congestion where it is right to make an investment, which will have the benefit of easing the flow of traffic, helping to improve air quality and supporting sustainable growth.

Q249 Caroline Lucas: Has your Department done an assessment in the public domain on the impact of that road-building proposal?

Mrs Spelman: We provide support to other Departments, such as the Department for Transport, in the work that we undertake. For example, on the proposals for High Speed 2, we have offered to work actively with the Department for Transport on the route that they plan for high speed rail, looking not just at the impact of the mitigations that they propose, but at the parts of the route that require biodiversity offsetting, because mitigation is not possible along the entire length of the route. I think that offers something really significant. Our Natural Environment White Paper states that biodiversity offsetting should become a feature of development and sustainable growth. That project is a prime example of where a significant step change in biodiversity offsetting could be achieved, and I am working closely with my colleague at DFT to help to achieve that.

Q250 Caroline Lucas: Could you give the same level of answer on the road-building programme, too? Did you use the same enhanced impact assessment set out in the Natural Environment White Paper to assess the environmental impact of the road proposals?

Peter Schofield: Should I answer that one? It is fair to say that each and every public sector infrastructure project goes through the same assessment process, which has to take account of all the benefits and costs, which include the environmental impact. That process follows the Green Book guidance. Each and every one of those public sector projects, including the national infrastructure plan, will go through that assessment.

Q251 Caroline Lucas: Does that get done within DEFRA, or does that get done within DFT or some other Department?

Peter Schofield: That gets done by the Department responsible for the project, following guidance every Department has signed up to.

Q252 Caroline Lucas: What I am trying to get at, in terms of joined-up government, is the practical extent to which people from DEFRA are involved in the process, or whether it is a template that other Departments use that has been agreed previously. How hands-on is the involvement?

Mrs Spelman: We should not overlook the fact that a new Cabinet Committee has been set up to take forward the national infrastructure plan. I have not been in government before, so I would not know what it was like not to have Cabinet Committees, but all I can tell you is that I think the Cabinet Committee structure is extremely good. It means that Cabinet Ministers meet more often than just at Cabinet once a week. We regularly meet in these cross-cutting Cabinet Committees, which I think is the ideal structure to take forward the national infrastructure plan. The Cabinet Committee structure means that I will be there to put the perspective of DEFRA and to make other Departments aware of the environmental impact, which leads to better decision making. That is the kind of joined-up process that you want.

Peter Schofield: It is also important to say that by no means is the national infrastructure plan just about roads. If you look through the document, there are sections on each major element of infrastructure. Each section starts with a vision that is very much consistent with the move to a low-carbon, green economy. For each of the projects listed, the document goes into the specifics about how we will achieve it. So it is a comprehensive document which covers all aspects.

Mrs Spelman: May I give some support to that? The national infrastructure plan, which the Treasury published, has a really important table, table 1.C, that perfectly shows sustainable development in action. It not only covers the road for the purpose of people driving along it, but brings forward the questions of road safety. On rail, it talks from the point of view not only of moving people from A to B, but of well-being aspects, such as passenger crowding. The sectoral performance not only takes on board transport infrastructure, but asks us to look at water, sewerage, waste and flood defences. If we are going to mainstream sustainable development, this national infrastructure plan demonstrates clearly and publicly that sustainable development is embedded in the infrastructure planning.

Miss Smith: May I add a short section? This document, which I have here as exhibit B-I think that is where we are up to-underlines the Government’s commitment to their legally binding Department targets and their other environmental goals, which we are discussing at length today. It does it by the means that Peter and my colleagues have described already. It is embedded through each section of the document. It is embedded through each section of the document. It demonstrates how much this is part of an overarching priority, which is to, as I have already said, have economic growth, unashamedly, but also to ensure that it is green and sustainable growth, using our resources in a sensible way.

Q253 Martin Caton: Economic Secretary, continuing on the relationship between Departments, what was the Treasury’s role in developing and enabling the transitions?

Miss Smith: I’m so sorry, I could not hear you.

Martin Caton: What was the Treasury’s role in producing the road map, enabling the transition?

Miss Smith: The Treasury was certainly engaged at an official level and, as the Secretary of State has already said, it was led by the green economy group, which then moved into the Green Economy Council, which she and two other Secretaries of State chair. It was thought appropriate, just for the record, that those three Secretaries of State were the signatories therefore to it. In case your question is asking why the Treasury was not one of the signatories, I answered that proactively. It is absolutely a cross-Government, joint-agreed and supported document.

Q254 Martin Caton: In that case, do you plan to incorporate provisions from Enabling the Transition into the Government’s future versions of the Plan for Growth?

Miss Smith: I am sorry. Will we incorporate parts of that into the whole thing?

Q255 Martin Caton: Yes. Either the whole thing or provisions within it into the future Plan for Growth.

Miss Smith: As I say, I think that the principles of that will be throughout what we do, so on a qualitative level, the answer is absolutely. As has already been said, the Plan for Growth and the national infrastructure plan under the aegis of the Autumn Statement, which sat together, are being reviewed appropriately by Cabinet Committees, which is a sound level of oversight, shared by the Chief Secretary to the Treasury. I think that that will provide them with a forum to ensure that such goals as this are then seen throughout the planning.

Mrs Spelman: In terms of the preparation of this, the green economy group, which the Economic Secretary referred to, consisted of director-general level civil servants from the Treasury, DEFRA, DECC and BIS. The interdepartmental group on the green economy and growth was made up of the senior economists from the Treasury, BIS, DECC and DEFRA. We do operate together in that joined-up way and we have benefited from working in that way. The outcome-the road map-is the better for the input from all four Departments.

Miss Smith: As we hope you saw from the officials’ session that you had sometime earlier.

Q256 Martin Caton: Moving to the green economy may increase short-term costs, with investments needed to reduce resource consumption, as you have mentioned already, and emissions. Some of the cost will count as public expenditure, presumably. How much higher will public spending be, up to 2014-15, because of measures in the road map?

Miss Smith: I think it is quite important to first say that that document is not so much about announcing new initiatives, which could be broken down into a priced table. It is, instead, about setting out the principles by which Government and business should be working together. If I may suggest it, a more appropriate way of totting up public spending in that sense would be to look at the announced policies, such as I gave to Mr Goldsmith before, which will absolutely have their price tags and can be seen in Budget and Autumn Statement documents.

Q257 Martin Caton: Can I ask, then, is the Treasury committed to finding funding to move towards the green economy?

Miss Smith: Well, absolutely. I again refer to the examples that I have already given. They are there, they are committed and they are under way to implementation and they have been there for all to see in Budget and Autumn Statement documents.

Mrs Spelman: Right at the big end of the scale is the £3 billion for the Green Investment Bank. The Chancellor was the first Chancellor to identify that sort of money for green investments. There is £200 million being made available for the Green Deal so we can adapt existing housing, which is going to make a very big difference to our ability to meet our carbon emissions target. Running down to some smaller-scale decisions that are just as important at the local level, there is the £15 million fund from the Rural Growth Review as part of the Autumn Statement for a Rural Community Energy Fund. Taking the model that works extremely well in Scotland, it is a loan fund where communities can draw down from that fund to establish a renewable energy capacity in their community, which provides an income stream that allows them to pay back that loan. Right across the piece, we have got investments, despite hard times, through the Treasury commitment to make sure that we do green our economy at every level.

Miss Smith: If you were to look back at the Stern report-a very sound rationale for taking action in this area-he laid out very clearly that the costs of not acting far outweigh the costs of acting in the short term. The Government accept that point, understand it and wish to incorporate it in the actions that we take. That means-I hope this is clear-that we accept that we have to put in place measures, which involve public spending at times, to deal with things now.

Q258 Martin Caton: You mentioned hard times, Secretary of State. Is our current economic situation delaying the shift to a green economy?

Mrs Spelman: It has not delayed our shift to a green economy, because it is driving change. It is absolutely the right time for companies to be more resource-efficient. The combination of the rise in commodity prices and the need to innovate and grow their businesses is a very strong driver on businesses to become more resource-efficient. It is a time when business is particularly receptive to the message of the benefits that come from greening the economy. The enthusiasm of the Green Economy Council members to espouse this, share their best practice and actively promote it both at home and abroad is testament to the fact that this is the right time.

Q259 Peter Aldous: We have just received the Government’s response to the Report that this Committee produced on the Budget 2011 environmental taxes. It took seven months to get to us. Can I ask the Treasury Minister why it took so long?

Miss Smith: The short answer is that we want to get it right. You will understand from my predecessor’s appearance before you in May that there is a sizeable amount of work involved, which we want to work through and get right.

Q260 Peter Aldous: Some people might jump to the conclusion that there might be disagreement in Government on how to respond. That would not be correct, then.

Miss Smith: Governments have to act collectively, of course, and talking to each other takes time. I think some of the examples we have already given show that we take pride in doing that.

Q261 Peter Aldous: Might some Departments have been more reluctant than others?

Miss Smith: As I say, we are working together to arrive at the material, which I know this Committee will welcome.

Q262 Peter Aldous: Thank you. Minister, what role do you see environmental taxes playing in supporting the transition to a green economy? Miss Smith: I think there is a very clear role. As I say, with reference to my previous answer, there is of course a question about the piece of work that we are working on to get a workable definition, but the point is that the Government appreciate at present the indicators that environmental taxes can be seen to give. We will also further explore the opportunities to go greener within our taxes. We have already spoken about tax and regulation, as well as the voluntary approach, as some of the levers available, and the Government certainly see environmental taxation as important, albeit we are working on a piece of work for it.

Q263 Peter Aldous: How are the Government delivering on the coalition agreement pledge to increase the proportion of tax revenue that is accounted for by environmental taxes?

Miss Smith: As I say, there is a piece of work that we have committed to the Committee to do. You had my predecessor here in May 2011 discussing the broad principles that should go into such a definition of environmental taxation. The first part of the exercise is the definition. The second part then can be to commence tracking on an appropriate definition.

Q264 Peter Aldous: Is there any time scale on those two aspects of the work?

Miss Smith: As I say, we are working as hard and as fast as we can to get a definition that works. I would just highlight, so you are fully aware of the complexity there, that there are definitions in use already by both the ONS and the OECD, but they are different, crucially. There is not, I believe, a full consensus on what environmental taxes are. If you look internationally, they will, of course, be different for every single economy, because every economy does things very slightly differently. So there is a job of work to do to get a really workable, robust definition on which we can then carry forward our hopes.

Q265 Peter Aldous: So, to wrap up, when the Committee makes its report on the Budget 2012, perhaps we can hope for a response a little more quickly than in seven months, and perhaps we might have taken that particular issue on environmental taxes and their measurement a little bit further forward.

Miss Smith: I am sure that the Committee will always appreciate fast responses.

Q266 Martin Caton: I think it’s very disappointing that a Treasury Minister can’t tell us, or even give us some sort of indication of, the time scale for when it can come up with this new definition for environmental taxation, when increasing environmental taxes has been given some priority by the Treasury. Can you not give us any indication of when this review will be completed?

Miss Smith: As I say, we are working on the definition. I have tried to lay out why it is taking time. It is not a magic-wand question; I suppose those things rarely are. Please be reassured that in taking over from my predecessor, I am absolutely working onwards from the broad principles that she set out for you here last year. Also, as you just said yourself, Mr Caton, the Government are already taking action in introducing more environmental taxes, particularly in the sense of the carbon price floor.

Q267 Martin Caton: So in the meantime, is your definition of environmental taxes the same as the previous Government’s?

Miss Smith: As I say, we are working on the definitional question and hope to return to the Committee as soon as possible.

Q268 Chair: But can you not understand our concern? We did an inquiry, and we have waited longer than we should have done for the Government’s response, but the worst part about it is that there are at least four aspects of that which appear not to have been addressed. What this Committee is concerned about is where the Treasury’s overarching environmental taxation strategy is. It is that which we have concerns about.

Miss Smith: I do appreciate that. As I say, we are working as hard as we possibly can to address that for you.

Q269 Dr Whitehead: Does that mean that as a result of the work on that definition, it will be impossible thereafter to compare anything that we do as far as green tax is concerned with any other OECD country? They all run on a common definition at the moment, which was in fact derived from the ONS definition in the first place.

Miss Smith: I think your question is quite hypothetical, isn’t it? If I am not able to give you a definition, I am not quite able to answer your question, but in general principle, of course you would wish for a workable definition-as I said in my previous answer-that is robust, that stands up to scrutiny and allows for appropriate comparisons.

Q270 Dr Whitehead: Who would define appropriate comparisons at that point?

Miss Smith: As I say, I am undertaking that definitional work at present.

Chair: I am conscious that earlier on, we covered some of the voluntary aspects. I just wanted to check whether there was anything-

Mark Lazarowicz: I have nothing more to add.

Q271 Simon Wright: In this document, Enabling the Transition, we have heard a number of times that the added value that this brings, essentially, is to bring together policies related to that transition in one place for businesses. I just wonder on what basis some policies have been left out of this document. For example, some of the actions within the Natural Environment White Paper are not specifically pulled out in the document. Neither is the national well-being project. Can you say a bit about what is not in here that might be relevant to business, and why it is not included in the document?

Andrew Lawrence: I think all actions from the Natural Environment White Paper are in the link through from this document into the Natural Environment White Paper. What we aimed to do-we discussed this a little bit when I was before this Committee last year-was create a document that was not a heavy carry-around but an opt-in document, principally an online version, that people could then navigate.

The Natural Environment White Paper, in its entirety, is available through the document, and the headlines are signalled through the front of the document, and also where we go into the overarching policy framework. Everything is in there and available to people who want to read it. I am not aware that we missed out anything at all.

Q272 Simon Wright: I can certainly see that the White Paper is on the timeline, so your argument is that, if you are reading this online, you click on that and it would take you on?

Andrew Lawrence: You hover over it and it will tell you what the Natural Environment White Paper is; then there is a link in one of the annexes which, if you click on it, takes you straight to the DEFRA website, where you will find the entire White Paper. That is the format we followed for essentially everything we refer to. If they were all bundled together, the document would be enormous. This was designed to be a quick online guide so that people could get to everything they could possibly want to know without having to carry around everything they did not want to know as well.

Q273 Simon Wright: Mr Lawrence, you referred earlier to the Ecosystem Markets Taskforce, which will look at the opportunities for businesses to develop new green products and markets. Which Department will ensure that the taskforce makes practical recommendations that businesses of all shapes and sizes can actually adopt?

Mrs Spelman: It reports into all three co-chairs of the Green Economy Council-DECC, DEFRA and BIS. The taskforce has already had two meetings, in addition to the launch. Its chair is Ian Cheshire, Group Chief Executive of Kingfisher Plc. It has already identified some interesting areas for ecosystem services, new markets and products. As much as anything, I think the taskforce will help to promote best practice-it will uncover best practice and come up with a good method of sharing it. A good example of that would be payment for ecosystem services by water companies: a couple of them do it already and we would like the taskforce to actively promote with other water companies the adoption where appropriate of those models, new products and services. The taskforce has already started its work, it reports to the Green Economy Council and we look forward very much to hearing its other suggestions.

Andrew Lawrence: To be clear on when it has committed to report into the Green Economy Council, it is March 2013.

Q274 Chair: May I interrupt and ask whether there is a way in which funding can be guaranteed for the proposals that come out of that, whether that is through BIS or the comprehensive spending review? What is the Treasury input to make sure that where there is innovation or the possibility of innovation, new technologies, or new means of production-for example, in recycling or reuse-there is not only the business idea but provision of the gap funding to get it to market?

Mrs Spelman: It does not always require state funding-let us be clear about that. The example I just used does not require state funding.

Q275 Chair: No, but it may need incentives-Treasury incentives.

Mrs Spelman: Well, it might do. Waste, for example, qualifies under the Green Investment Bank for investment funding. There are funding vehicles across Government, but what is exciting about the Ecosystem Markets Taskforce is that these are businesses that, by coming together and sharing, are uncovering market opportunities that do not require subsidy. It is a question of raising awareness of those opportunities and, essentially, getting the market to work. If you take payment for ecosystem services as the example, if you pay a farmer to farm in a different way in a river catchment area, it costs the water company less downstream to clean up the water. The state does not need to get involved in that.

Q276 Chair: I am not necessarily talking about state subsidy, but there are ways in which, through the Treasury, there can be incentives to get different business models. That needs to be linked into the Treasury’s consideration of incentivising certain behaviours where we need to get a paradigm shift in processes.

Mrs Spelman: Sure, but I do not think it is the primary function of the Ecosystem Markets Taskforce immediately to look to the state to fund everything they come up with. They are realistic about the spending situation. That does not mean their proposals would be excluded from the funding capacity the Government have; it is just that it would be good if a market-led solution could be found. Do you want to add to that?

Miss Smith: Sure; if it is helpful, I can name a couple of funding mechanisms that might be of use in some of those instances, with the right applications and checks and so on. They include the Technology Strategy Board, which Peter mentioned, and the Green Investment Bank, which we have covered in some detail; but the Regional Growth Fund may also be relevant to some of these cases, and on a very general canvas, there are many ways in which the Treasury seeks to support small, medium-sized and entrepreneurial businesses. Indeed, the Department for Work and Pensions is also involved. There is certainly cross-Government effort and awareness of the need to encourage innovation, and through it economic growth.

Q277 Simon Wright: Going back to an earlier discussion about the inclusion of natural capital in the national accounts, will that information be there purely for informative purposes, or can we expect it to be fed into some sort of fiscal mandate-type mechanism, with targets being set so that stocks of natural capital are maintained?

Miss Smith: First, as we have said, the ONS is an independent body that provides information-that is its stock in trade-so first and foremost that is a set of data that is available to Government. It will then pop up in various decisions relating to the Green Book process, which Peter has already described. Would you like to go into more detail?

Peter Schofield: Yes. In terms of the fiscal position, to which I think you are referring, Mr Wright, this goes back to the role of the Office for Budgetary Responsibility. I described earlier that body’s remit and obviously it is up to the OBR to use whatever data seems appropriate, whether from the ONS or other sources, to help it to meet that remit.

Mrs Spelman: I felt you were not quite catching the question. The Natural Capital Committee is what you asked about, wasn’t it, not the ONS? The Natural Capital Committee reports into the Economic Affairs Committee, which is chaired by the Chancellor. What it brings is an understanding of the value of natural capital, and we now have the scientific tools through the national ecosystem assessment that allow us to calculate the value of the natural capital. Immediately, what that does is provide information based on which you can make better decisions. The first thing that will happen through the Natural Capital Committee is that we will base our decisions on a better understanding of the true value of the natural capital involved.

Chair: I think that brings us to the end of the session. When we planned it, we were not aware that half an hour would be taken by Divisions, so thank you for the extra time you have given us. Hopefully, we shall have made some progress on the inquiry.

Prepared 18th May 2012