CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1357-ii

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Environment, Food and Rural Affairs Committee

Natural Environment White Paper

Wednesday 11 January 2012

Pavan Sukhdev and Chris Knight

Jonathan Garrett, Chris Matthews and Paul Allison

Evidence heard in Public Questions 40 - 87

USE OF THE TRANSCRIPT

1.

This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2.

The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the Environment, Food and Rural Affairs Committee

on Wednesday 11 January 2012

Members present:

Miss Anne McIntosh (Chair)

Richard Drax

George Eustice

Barry Gardiner

Mrs Mary Glindon

Neil Parish

Dan Rogerson

Amber Rudd

________________

Examination of Witnesses

Witnesses: Pavan Sukhdev, The Economics of Ecosystems and Biodiversity (TEEB) Project, and Chris Knight, Assistant Director, Sustainability and Climate Change, PricewaterhouseCoopers, gave evidence.

Q40 Chair: Gentlemen, may I welcome you both formally to our proceedings? Thank you very much indeed for participating in our inquiry into the Natural Environment White Paper (NEWP). Could I ask each of you in turn to introduce yourselves and give your position for the record? I will perhaps start with you, Mr Sukhdev.

Pavan Sukhdev: My name is Pavan Sukhdev; I am at present at Yale University as the McCluskey fellow, but before this I was the study leader for the TEEB Project, and also the head of the green economy initiative at the United Nations Environment Programme.

Chair: Thank you very much.

Chris Knight: My name is Chris Knight; I work for PricewaterhouseCoopers in the Sustainability and Climate Change Team. We provide advice to the public and private sectors on matters relating to loss of biodiversity and ecosystem services.

Q41 Chair: Could I ask a couple of general questions at the beginning? What do you think we would like to achieve from the Natural Environment White Paper?

Pavan Sukhdev: To me, this Paper represents quite an interesting set of opportunities, and let me pick three that are top of my mind right now. One is to see how we can reflect, through the commitments of this Paper, the reality that there is a significant amount of interest in the UK in nature, and among the statistics that I keep in my mind is that something like 54% of the adult population in the UK visits a natural area once a week. That is economic value; that is willingness to pay; that is economic content that needs to be tapped into. Related statistics, like a Defra study that suggested that 85% of people do worry about the loss of species, are also important. These are aspects of living and aspects of well-being that need to be taken into policy areas, and need to be taken into administration in practice. I am interested to see how this White Paper and its implementation will come out with recommendations to make that happen.

My second area of interest is to do with the Common Agricultural Policy (CAP), because if we look at the recommendations of the European Commission, one of them relates to the greening of Pillar 1, which relates to direct payments. Something like 64% of all farmland in the UK comes under some form of EU cover, and the proposal we are looking at here is that 30% of the national pillar of direct payments should have to do with maintaining permanent grassland, crop diversification or ecologically focused improvements. There basically has to be some form or other of ecological improvement. If that is the case, there is clearly huge value, potentially, in aspects such as developing pilot catchments, developing Local Nature Partnerships (LNPs) or developing Nature Improvement Areas (NIAs), because these are all going to contribute in the same direction. I am not sure to what extent work has already been engaged in this direction, but it will be very interesting to see what thinking happens in this connection between the CAP’s aims, which are environmental, and the commitments of the White Paper, as expressed in its annexure.

The third dimension is more generic, in terms of how this will play out in ecosystem markets. In fact, there is a risk that aspects such as what has been recommended for Pillar 1 and Pillar 2 in terms of development potentially could be in conflict with ecosystems markets. On the one hand, you are prescribing policy, and on the other hand saying we should have markets; it could be an interesting challenge to see how both work. Partly in connection with the policy, but also partly as ecosystems markets fold out, it will be very interesting to see how a developed world context would respond to that. It is much more complicated than in Costa Rica, for instance, where payments for environmental services do work and have worked for a long time, and hopefully will continue to work, and the context is different.

These are three areas that to me are particularly interesting.

Chris Knight: I have probably just a simpler and abbreviated message, which is around responsibility, first of all. Climate change was seen as too complex an issue to begin with, and certainly not an issue that the private sector needed to worry itself about years ago. We now have a price on carbon; we have an established protocol for reporting carbon emissions; and companies are taking action to reduce their emissions. I think if we can demystify and make visible some of the dependencies companies have on nature and engage them in taking responsibility for protecting nature, that will be a real step forwards. It is not a small task, but I think it would help.

We have also talked about the value of natural capital, and the TEEB effort helped massively there. However, that has not translated into a movement of capital. For example, we now have the Low Carbon Innovation Fund in places like Norwich-regional development funds that reward companies for taking risks in investing in low-carbon technologies and solutions. We do not have anything like that for ecosystem services, and we should all be cognisant of the fact that investing in these areas at the moment is a high risk. These are unproven technologies, and a lot of the money that is going into these technologies to monitor the health of ecosystems is provided by venture capitalists, and in this current economic environment there is not too much venture capital going around.

Therefore, I think we need a sense of responsibility and engagement of the private sector, and also a translation from the theory of the economic value of nature into economic instruments and financial incentives that get companies on board in delivering solutions to protect nature.

Q42 Chair: Thank you. I am going to ask one question in two parts, if I may, on delivery. When the NEWP was published, it was pretty much allsinging and alldancing, and everybody welcomed it. Do you think that, six months on, the Government has shown sufficient commitment to deliver? That is where most of the caution was expressed at the time that it was announced. Would you say that there has been sufficient commitment to deliver on the ambitions set out in the White Paper? Secondly, do you think that it would be easier to judge how the Department is delivering if Defra were able to set out intermediate, timetabled actions and milestones to achieve the broader NEWP aims, and progress could be published against these? Would you agree? Shall I ask in reverse order? Mr Knight, do you want to go first?

Chris Knight: Yes, I think a timetable would be very useful. We have over 90 pledges or commitments. I understand responsibility is assigned for those, but the general public at least do not have a view as to how they will be delivered and in what sort of sequence, so that would be very helpful.

On the other aspect that we mentioned in the session on 29 June 2011, around the funding actually to deliver some of these commitments, lots of things have been announced by the Government, and there have been lots of followon actions as well. With the Ecosystem Markets Task Force, which was announced in the White Paper, there is an ecosystem markets opportunities assessment that I understand the Government is going to be undertaking quite soon. I think this will generate some useful ideas as to how companies can be brought into this discussion. As to how that is going to be funded, and as to how the Natural Capital Committee will actually engage with business as well, there is still quite a distance between the pledges of the commitments and the actual action the Government will take to deliver.

Pavan Sukhdev: Certainly, given the vast swathe of activity and actions that it is proposed will be covered, a timetable would help. At the same time, I will say that quite a number of things have already happened. For instance, the Local Nature Partnerships fund for capacitybuilding has been fully subscribed; that was way back in October. I believe there were as many as 76 applications for Nature Improvement Areas, of which 20 have been moved forward. The biodiversity offset projects have been given a fair amount of attention: people have supplied more than 20 expressions of interest, with 10 pilot catchments and so on. Therefore, a fair amount of activity has definitely happened, which is good to see, but at the same time it is difficult, without targeting, and without stating what the plan is and over what time frame it is to be delivered, to say whether this is excellent, or whether it is just par for the course. It is difficult to say that without having the context of targets and timelines, so I would go along with my learned colleague, Chris, and say that is definitely worth having.

The other point I might make is that this should not be seen as the endgame. This is not the final answer. Clearly, it does point and pose questions in the direction of policy overlap and policy interplay. As I was briefly mentioning earlier, alluding to the CAP, it is important to ensure that a degree of policy overlap is recognised in advance, managed well and taken forward, because there are both positives and negatives. It could play either way depending on how one grabs the bull by the horns and what one does.

Q43 Barry Gardiner: Mr Sukhdev, you spoke about a fair amount of activity already having taken place, and you alluded to the Local Nature Partnerships, but I think the seedcorn funding for that is £1 million from the Government. You will know that the Lawton report, prepared by Professor Lawton, spoke of between £0.6 billion and £1.1 billion being necessary to implement this. Clearly, that is not all from the public sector, and I recognise that, but given what Mr Knight has said about the difficulty of accessing venture capital funds in the present climate, how the funding streams are going to be put together becomes critical to take the objectives of the White Paper forward. Therefore, I think it is important that the Committee gets some sort of idea of what, at this stage, the primary financial pillars are that need to be put in place to enable that sort of funding to flow. Can you give us your thoughts on that?

Pavan Sukhdev: Yes, I note your point, which is quite valid. Even in the Nature Improvement Areas, it is not as if £7.5 million is a huge amount of money. The point here is whatever has been put up has been snapped up, and I think that tells you that there is significant interest in meaningful financing. I would look at the budgeting process again in the context of the overall allocations-I am sorry to hark back to the CAP-that have been made. We are talking about pots of money that are significant-in the billions. If one looks at what nature improvement does on the ground, or what a Local Nature Partnership does on the ground, there are aspects such as the socalled 7% requirement for ecologically interesting locations on farms, and it would be quite interesting to see how that money could help achieve that aim.

If the CAP and the European approach is moving in that direction, here is one additional rationale or justification for why investment in the objectives set out by the White Paper could actually be economically worthwhile or, in fact, economically return a lot more than perhaps appears to be the case. These are the areas where additional attention needs to be paid right now. It is nice to see what has been done, but I am really looking at the overall picture and wondering how we take this to the next stage.

Q44 Barry Gardiner: Before moving to Mr Knight, you would say that, to see major flows of funding, it is critical at this stage to have some way of tying the greening of Pillar 1 to the ecosystem services improvements that are required.

Pavan Sukhdev: Absolutely, and to see the two as connected, and then to try to explore the economic connection between the two, which I believe will come through once one pushes the investigation.

Q45 Barry Gardiner: So it is a big year for CAP reform for us in the negotiations.

Pavan Sukhdev: That’s right.

Chris Knight: I think the quantum of funding, which, based on backoftheenvelope calculations, is singledigit millions for the implementation of 90-plus pledges, really calls into question what the role of Government is here. It certainly is not as the main funding agency. Is the role of Government, in terms of delivering the NEWP, that of a convener or a facilitator, or is it to use the economic analysis that has been generated through things like the fisheries assessments around the British Isles, looking at the amount of subsidies that would be required to be shifted to ensure that marine protected areas or marine conservation zones could be implemented in the right places? Is the role of Government to use some of that information to redirect some of the flows, which are significant, as Pavan describes?

Q46 Barry Gardiner: Part of that role as a facilitator is having clarity around the Government accounting framework, isn’t it? Really, I suppose what I need to ask you there is: have both the Treasury and the Cabinet Office demonstrated a tangible commitment to turning the principles in the White Paper into practice on that issue of embedding the value of natural capital into Government accounts, so that even if it is not saying, "And we will ourselves push public funds in that direction," what it is doing is setting out very clearly where the wealth exists in natural capital?

Chris Knight: My disclaimer here is that I may represent an accounting organisation, but I am not an accountant by trade or an expert in Government finance. What I would say on that subject, though, is first of all the point I mentioned at the last session around the budgetary framework that Local Authorities operate within, which does not allow them to invest in some of the areas we would like them to invest in, such as permeable road services that deliver benefits over more than four years, for example. There is no case for them to invest in those in the short term. I do not see any indication that is likely to change.

The other issue that we identified quite early on when we were involved in the TEEB study, looking at some of the challenges in terms of restructuring the economic framework that is used for infrastructure investments in the UK, was the discounting rate practices used by Government. Again, the private sector operator trying to use other forms of discounting would be completely disadvantaged versus its competitors. Therefore, the question we got to in our TEEB work on discounting was what role the Government can have to try to alter the discounting rates that it uses for major infrastructure projects. I am sorry that does not answer your question directly.

Q47 Barry Gardiner: Let me ask you this, then: do your clients consider that there is a consistent message from Government about the need to embed the environment in economic decision making? I am talking about the private sector clients.

Chris Knight: We have been working with companies to try to get clarity on that ourselves. I think there is recognition that we are entering an experimental phase, and that the policy focus of the Government has broadened out now to look at the health of ecosystems. My answer would be that there is not really that clarity of policy yet from the Government.

Pavan Sukhdev: Let me try to address the measurement question that you raised earlier. I think that is pretty important. Not only are we within a few years of actually creating natural capital adjustments to be reflected in national accounts, but we are also among the eight or 10 nations that are involved in the World Bank’s WAVES project for wealth accounting and valuation of ecosystem services. To some extent, the willingness of other Departments-and I am talking Defra and Treasury as well, because in a sense the Natural Capital Committee creates a connection with the world of finance-to look at these values is linked to their official recognition in national accounts. Unless these numbers are reported on a regular basis and calculated with some degree of consistency and confidence, all of this will still remain in discussion.

Today, nobody questions numbers such as inflation increases or GDP growth increases; no matter that GDP is an estimate and everybody knows that it is an estimate at best. One does not debate that, and I think that is the need here: to really move this forward. I believe the UK is in a good position in that sense, and we should leverage that advantage.

Q48 Barry Gardiner: Let me ask you this then, because you mentioned WAVES: do you believe that, in the structures the Government have set out in the White Paper, they have adequately differentiated between Wealth Accounting and Valuation of Ecosystem Services?

Pavan Sukhdev: Not enough, but then I think one needs to look at that as a separate exercise on its own. There is an issue here in terms of wealth accounting overall. Let me just clarify what Barry meant here: the whole issue of wealth accounting overall is not just about natural capital, but also human and social capital. If one takes a holistic approach across a nation, you should be doing all of the above. WAVES alone has a brief to look only at natural capital and the missing elements of natural capital stock, which are not reflected; the depreciation of that stock as a result of losses that are not accounted for; and the flows of value. I mentioned, for instance, the whole issue of the recreation values that come from nature to society in the UK. These are not captured, these are not measured and these are not estimated.

Therefore, there is a question of estimating flows, estimating stocks, estimating depreciation of stocks and doing that for natural capital, but also potentially looking at the wider issue of wealth accounting. Frankly, we are in a closer position to do that wealth accounting framework in the area of natural capital than in the area, perhaps, of social or human capital. The complexity of those calculations is quite significant as well. I would say: let’s go with WAVES; let’s try to be the first to implement or, indeed, influence the framework and the methodology that is required. As I mentioned in earlier sessions, there is a lot of expertise here in the UK that can be leveraged, and there is no reason why we should not do so.

Chris Knight: One thing I would just add to that is one of the things we were pleased to see announced was the natural capital asset check, which is the commitment by the Government to undertake some kind of check of the health of ecosystems and try to quantify what level of ecosystem service we actually need within the UK. I do not think that will necessarily apply an actual monetary value to ecosystem services rather than just quantify the level of environmental safeguard we need around some key habitats and services from nature, but we welcome that either way.

Q49 Barry Gardiner: It is critical to move from a theoretical framework in all of this to practical implementation and funding streams flowing through. For that to happen, we are certainly going to need a bit of money; we are certainly going to need political will; and we are going to need regulatory change. In your minds, what are the key things that have happened in jurisdictions like Costa Rica, as you mentioned, that have enabled this to happen? You said the situation is very different here in the UK, and indeed it is, but what are the similar critical elements that must be in place here? You talked about assets, and as far as I can recall, the White Paper does not, for example, mandate all Government Departments to draw up an inventory of their natural capital assets. Is that something that you see as a critical first element in this transition from theoretical to practical?

Pavan Sukhdev: If we again look at Costa Rica as an example, I think the driver there was a recognition that the loss of forest cover had been very substantial and was creating problems within the agricultural space. There was that recognition. Then, perhaps the success of this scheme in Costa Rica was to do with its simplicity, because they only ever decided to reward four ecosystems services-namely, the water regeneration and regulation values, forest carbon storage values, the amenity values and the biodiversity values, as in species. They only ever wished to reward four, and the reward was constructed with enormous simplicity. All of these conditions are quite different here because you are dealing with the framework of EU regulation, and doing something outwith that is not that straightforward, so we need to recognise that. Having said that, the principle should be admired and observed, and we should draw whatever we can from it.

It is the case that value does flow in terms of upstream prevention of flood losses, for instance, in the UK. So why not provide some means of rewarding afforestation and land maintenance activities upstream that reduce the incidence of flooding and reduce, therefore, the huge economic damage that is caused as a result of that? Without having necessarily looked at this in detail, I would be surprised if there was something within EU regulation that prevented us from doing that, because exactly the same happens in Germany. The River Danube has been an example of where they have undertaken such activities and clearly have put in systems of investing in upstream ecosystem maintenance and restoration in order to prevent downstream damage.

These are some aspects of the context of payments overall and the context of-again, Costa Rican style-looking at what the policy issue is. There the issue was not flood damage; it was agriculture, forestry and so on. Here, there is clearly a recurring incidence of flood damage. We recognise the ecological reality behind it; why can’t we address this? These are some of the explorations that need to be undertaken. The White Paper does touch on these topics, but I think maybe it should focus on the basis of a project and the design that is required to implement this.

Chris Knight: I would agree with that. It is in some ways all in the design. If we look at the biggest markets where the most capital is flowing into the kind of projects that Pavan is alluding to, it is the US habitat banking market and the BushBroker scheme in Australia, which allows companies essentially to offset some of their impacts on biodiversity by funding projects elsewhere. The key thing that allowed that money to flow there was the regulatory support from Government-the regulatory requirement that essentially linked environmental impact assessment findings to the need to offset, and also a level of space for companies to innovate and to develop their own ways of doing things. That was a far more cost-efficient scheme than anything that had happened previously to that. If we look at what is happening in the EU, essentially we have Natura 2000 and we have CAP. There are inefficiencies in the systems, but there are also inflexibilities in the system as well, so we will not have these levels of capital flowing with the current system in place. I think there is an element of looking at what has happened in the US and Australia, where we have markets of scale.

Pavan Sukhdev: You mentioned Australia, and Australia is an excellent place to look at in terms of the statistical database that they have-the quality of land-use patterns and monitoring/management reporting is outstanding. I think one could benefit from looking at that.

Q50 George Eustice: Coming back to the more basic principles of what this is trying to achieve, I just want to ask you about the value of trying to put a monetary value on nature, because it does seem to me that it gets a lot of accountants very bogged down trying to put a price on everything. If you look at what has been successful in the last few decades, the water pollution in our rivers was solved by just having very clear regulatory measures. You did not have to put a price on the fish that were in the water; they just knew what needed doing. I am just quite sceptical about the need to do this.

I want to enhance our habitat, deal with species that are facing extinction and all those sorts of things, but I wonder whether focusing on clear regulation is better. If you look at something like the Royal Society for the Protection of Birds (RSPB), which is the biggest membership organisation, people do not do that because they have the value of a sparrow in their mind; they do it because there is an intrinsic value in life itself and they care about it. The public actually support and care about our environmental support regulations, so why can we not try to put a value on things but just be clear about the regulation that is required?

Pavan Sukhdev: You raise a good point. Frankly, of the countries where you can rely on people’s willingness to pay and people’s recognition of intrinsic value, the UK stands very high-in just some of the statistics that I quoted earlier in my comments. The challenge here is that economics has become the currency of policy. Whatever rightthinking, commonsensical, intuitive approach you apply as a regulator or policy maker, it will always get challenged in newspapers and in forums, because it has not gone through the rigour of an economic justification. I am not saying that this is necessarily the best way of doing things, but it just happens to be the way we are. In a sense, it is therefore recognition of where humanity is today-very centred on economic argument and economic logic. It is really that that brings the power of valuations into play. In a sense, valuation sometimes can just be a justification of what intuitively and commonsensically you would do anyway if you had the choice of doing it; sometimes you may not have the choice of doing it because you do not have the numbers with you.

Q51 George Eustice: Are we right in assuming that, though, or is it just that the policymakers have this in their head? The public do not think, "What’s the value?". They join the RSPB and give them their money because they care about birds.

Pavan Sukhdev: Sometimes they do and sometimes they do not, and there will be times when they will say, "But, you know, this is a destructive or harmful practice," not understanding the economic value that comes through farming as a result of these activities. Others might say, "This is preventing the opportunity for creating more car parks and private spaces." You will have all kinds of arguments to any commonsensical, sensible approach towards ecosystem management. At some point, using the economic statistics-no matter how much of an estimate they might be, and no matter how much an art they are, as compared with a science-makes sense, because that strengthens common sense; it strengthens intuition. Sometimes it might actually give you new intuition.

Having said all that-and I have said this in forums as western as The Economist-basically, how we react to nature and how we recognise nature as one with us or as something to be valued, measured and managed separately is also a part of the societal backdrop that we come from. If we are JudeoChristian in our background, we may have a particular approach; if we have naturist and tribal in our approach, we have a different approach. There are societies and societies; our society happens to be broadly JudeoChristian in its thinking and broadly econometric in its approach, and I am afraid we are kind of stuck with it. I am not saying it is the best place to be, but that is where we are.

Q52 Neil Parish: Good afternoon. I want to pursue this briefly to start with. I am a very practical man. You can value all your ecosystem services, but how are you actually going to then get trees planted and permanent pasture, and take that carbon tax and use it to support land management? All parties want to see less and less spent on CAP, so how are you going to enhance this? It is all very well valuing it, but I do not quite see how, in practical terms, that is going to improve things. You are not accountants, but it may keep you employed; where does it actually deliver some enhancements to ecosystem services? In a nutshell, how do we move money around?

Chris Knight: Simplistically, you give people the right to trade in some of those ecosystem services. That is the controversial point here and will be one of the challenges that biodiversity offset trials face in the UK-that you give companies the right to trade in those and reward people for enhancing the health of ecosystems.

Q53 Neil Parish: Do you see anything of that in the White Paper or not?

Chris Knight: There is the intention to run pilots, and the pilot authorities are agreed as well now, I think, so we will be watching closely.

Q54 Neil Parish: To go on to the present CAP reform, at the moment I think nearly 64% of land has some sort of environmental scheme here in this country. One of the problems with CAP is that it is trying to deal with 27 countries where you have a lot of monocultures. Do you think that the CAP proposal will improve the environmental schemes as they are in this country at present, or could it go in the opposite direction?

Pavan Sukhdev: I think other countries in the European Union probably have more to worry about than the UK. Aspects of the proposals, such as the minimum of three different crops, are not that difficult here; it may be a bit more difficult in some of the other countries that you mentioned. For that matter, having 7% of the land allocated towards nonagricultural areas, which is mixed use-all kinds of hedgerows, hedges, forest land and so on-again does not sound extreme by any means. I feel that engaging the reform if it takes the shape that is proposed may be beneficial here, and this is where your points are on the economics. It may help to say, "Of this 64%"-if all of it is, for the sake of argument, eligible, as against half of it-"here is how much extra money-30% of the total Pillar 1 payments-will actually come into the hands of the British farmers." That could be a very powerful economic argument for saying, "Yes, let’s engage with this project," because it is kind of moving us in that direction where we are not just investing into the EU but actually getting back.

Q55 Neil Parish: Surely biodiversity is much greater than just talking about the rotation of two or three crops.

Pavan Sukhdev: Of course.

Neil Parish: That is what worries me with the present CAP reform. They are not looking deeply enough into what biodiversity is.

Pavan Sukhdev: That is true and, at the same time, why would they? In the end, it is about agricultural policy. They will to the extent that you can persuade them, or to the extent that traditional wisdom requires them to, but they will not take the more holistic, the more detailed or the more purist approach to biodiversity that someone from that part of life might take. At the same time, it is net positive; so long as one can see that they are encouraging diversity and that they are keeping the 7%-no matter how small that may sound-aside for use in ecological investment, these are incremental positives that one has to recognise and be happy about. Of course, it is not going to be the full answer, but at least these are positives and in the right direction.

Q56 Dan Rogerson: Good afternoon. The aspirations of the Government are to take forward localism and to encourage local action in terms of delivery, and that is here, at the heart of what the NEWP is calling for. What is your assessment of the way the White Paper seeks to resolve those aspirations for local decision making and local action with national priorities and the need to deliver on those national priorities?

Pavan Sukhdev: Let me be both positive and negative. It is positive in terms of the link between the local, regional and national being quite well made. There is enough material there to suggest that these explorations are worthwhile. What worries me is that there is not enough lateral interest-for instance, water policy or agricultural policy is not explicitly in the White Paper as much as it ideally ought to have been. However, notwithstanding that, I think that gives us the next area of research and effort: how do we bring all the other aspects of public policy to touch on the natural capital side? The reality is that they do. Fresh water is completely connected; flood management is completely connected; agricultural productivity, soil quality, yield and everything is completely connected with this. How do we make that connection more explicit? I think that is the challenge we have to face, and that means taking the White Paper to the next level. First, the silo connections from the local county and upward to the national level are well made. I encourage more lateralism here.

Q57 Dan Rogerson: So there is room to expand?

Pavan Sukhdev: There is room to expand, and then you will get into areas such as land use management, which then says, "Where do you take this?".

Q58 Dan Rogerson: But you think those would work, in terms of the vehicles suggested-the Local Nature Partnerships and the Nature Improvement Areas.

Pavan Sukhdev: Those can work, and they are consistent, in the sense that the Local Nature Partnership does not have to be in conflict with the Nature Improvement Areas or, for that matter, with national biodiversity management. What else that means in terms of fresh water management, land use and so on is what I think needs to be brought in.

Chris Knight: We have heard concerns from some companies about what this means for the expansion of renewables and the speed of the planning process overall. Also, with the offsetting trials, one of the real challenges is that, no matter how well you offset an impact on one place with restorational compensation elsewhere, the local situation is that you have lost what you had before. Therefore, localism presents some real challenges here as well.

Q59 Dan Rogerson: People like being able to see that being reinvested in their areas.

Chris Knight: Yes, exactly.

Q60 Dan Rogerson: Barry Gardiner has already referred to Professor Lawton’s work, and that suggested connecting landscapes into coherent ecological areas. Some of the issues raised in consultation have been about, for example, the boundaries around Nature Improvement Areas, and there have been distinctions between being in and being out. How do you think that fits with what Professor Lawton was talking about?

Chris Knight: I suppose within the context of what is happening to planning policy generally, it is an area where I think we would all appreciate more clarity. The National Planning Policy Framework (NPPF) so far does not necessarily deliver the means to achieve an ecologically coherent planning framework. Again, I think we are all looking at that with questions.

Pavan Sukhdev: The report was well intentioned, but I think what needs to be built into it is that the aims of a coherent ecological network-making sure that biodiversity is enhanced, that diversity is functioning, and that resilience, and all these aspects, are looked into-are all good intentions, but converting them into reality needs a bit more, and I think perhaps the White Paper needs to be pushed further. A lot of the recommendations of the White Paper relate to these issues; it is just a question of prioritising them, picking them and getting timelines agreed and so on. A lot of the issues that we have discussed come to the fore. The point that I believe Barry raised earlier in terms of the financing clearly is a gap, but I would see the current investment in these initiatives as being a signalling of the direction, hopefully not just the end of the direction.

Dan Rogerson: It is a start. Thank you.

Q61 Amber Rudd: Good afternoon. I would like to ask about planning, please. What does a UK planning framework need to include to ensure that the White Paper’s aims are effectively delivered?

Pavan Sukhdev: If I could take a stab at that, I would like the planning framework to have a clearer focus on the role of natural capital in different areas of the economy: the role of natural capital in fresh water management, in agricultural productivity, yield management and yield enhancement. These should be explicit in the National Planning Policy Framework. Aspects such as the economic fillip that comes out of recreation-which is huge, by the way-is sometimes explicit, as in it is paid for; some of it is implicit, as in the values received from an ecosystem by people results in our well-being, but is not recognised in our accounting systems. Therefore it has to have both the implicit and the explicit values. When we talk about tourism and recreation, to have these aspects not brought in explicitly and recognised in planning proposals is suboptimal. You have to bring these in.

Chris Knight: Again, the comment I made last time on this point was, I think, about the language we are using here, and the discussion we are having is not a discussion you would have within the local planning department. There is a real gap between the aspiration and ambition of all of us and the level of fluency within planning departments-the level of training and capacity to integrate some of these considerations into what they do on a day-to-day basis. Training was one of the gaps we noted earlier.

Q62 Mrs Glindon: Mr Knight has already referred to biodiversity offsetting across the world, but according to the White Paper, biodiversity offsetting pilots will be established to see how successful it is for developers to meet biodiversity objectives offsite. Do you think there is a danger that these biodiversity offsetting projects will compromise the ability to protect specific species and habitats?

Chris Knight: Could I have a first go at that? That was the very reason, in fact, that conservation credits, as they were called in the US, were brought into effect. There was no real way to safeguard species that were not under a protected status, even though they knew the populations were dwindling. There was no way to ensure that there was enough habitat left for a viable population size in the US. Therefore, they introduced this system of conservation credits, which essentially turned land that could be viable habitat for species with dwindling numbers into an asset. The land value in areas that could be used for conservation credits increased tenfold, if not more, in some areas. Some of the species were not particularly charismatic, but the fact that they were covered by this meant that landowners saw this as an asset rather than a liability.

Pavan Sukhdev: Your overall concern is valid. One should not take offsets as the be-all and end-all of biodiversity conservation. It is not. Very often you just have to recognise the uniqueness of particular locations, particular groups of species and particular small ecosystems and small patches. There are limits to what one can do with offsets.

Q63 Chair: Thank you very much. I do not know if either of you is particularly well briefed on peat. If you have oriental horticultural producers in North Yorkshire who have a big market for oriental products that rely on peat, there is obviously a clear economic value on that. If you have a White Paper saying that we want to reduce peat use to zero by 2030, who should win?

Pavan Sukhdev: Sorry, this probably reflects my bias: I think we should stop pulling peat out of the ground. It is as simple as that. There is a huge carbon impact of peat removal. There are all kinds of other good things that might come out of removing it, but the downside is so significant, and if everyone around the world, including Indonesia, were to take the view that they had the option of removing their peat, then God help us.

Q64 Chair: Would you agree?

Chris Knight: I think so. There is widespread recognition now that peat lands have the highest carbon sequestration rates of any land area.

Q65 Chair: Does it take 200 years to create a peat bog? Mr Sukhdev, could I just take you back? The Committee is aware of my interest in flood management schemes, like the Pickering pilot project; the difficulty you were talking about, Mr Sukhdev, of bringing together flood water management and soil management is that it takes 200 years to create a peat bog and probably 40 years to mature a tree. I know one of the witnesses we are going to introduce next is from United Utilities, which has done a lot of the work in this regard, storing water upstream to prevent flooding downstream. How can we speed up the process? The Pickering pilot project is going ahead so far as overflow is concerned, and it is very imaginative-they are actually using trees to block the water flow and shore up the water-but in terms of creating peat bog, which they are trying to do to create small dams and grow trees, the timescale makes it pretty uneconomical.

Pavan Sukhdev: It might be the case, but at the same time I will say that this is the kind of area where a wellconstructed, welldesigned payment for an environmental service, or payment for an ecosystem service programme actually makes sense. To call that a market solution is a bit tongue-in-cheek, because it is usually one buyer-the local government or the national government-and maybe just a handful of sellers for the service, but at least it is a marketbased scheme, and it is worth exploring the opportunities there because it would give people the opportunity to look at alternatives and to respond to the incentive that has come through to them.

You are quite right to point out the timeline, because this is an issue that goes beyond the White Paper and, indeed, beyond the UK. We are into timelines that are much shorter now for a real response to climate change and a real response to biodiversity. There is any amount of research today, whether it is the "Planetary Boundaries" paper by Rockström and the others in Nature, or whether there is related research that is pointing out that we do have a lot less time to respond to these changes than a lot of policy discourse and dialogue suggests.

Chair: Mr Knight, is there anything you would wish to add?

Chris Knight: I would just second that. There are lots of case studies in the UK and around the world of how these kinds of payments for environmental services schemes can work, particularly with water companies. The real challenge is the timescale in getting these groups together to agree to work together effectively. I think that is maybe another potential role of Government-to bring these groups together to accelerate that whole process of essentially agreeing how best to use certain areas of land.

Chair: We will let the record stand that it is working in Pickering, so I hope it will work elsewhere.

Q66 Barry Gardiner: Just to pick up the point that you were making, Chair, you said that timescales are critical here and, Mr Knight, when you were talking earlier about the regulatory framework, you spoke about discount rates. Of course, Lord Stern famously responded to his critics on discount rates by saying that, ultimately, it is a moral choice. Of course, when you are dealing with timescales over that sort of period-over 200 years-discount rates become very important at the point of deciding what the costeffective solution is for a particular problem. Can you just comment further on the use of discount rates and how the Treasury has to be able to incorporate appropriate discount rates, depending on the different projects that Government is considering embarking on?

Chris Knight: Perhaps I could go first, because I know Pavan has a lot to say about this.

Chair: We will spare his blushes. Mr Knight.

Chris Knight: We looked at the options that the Government has here. An obvious option is that for certain projects the Government will not use a discount rate. That the Government will not discount was one of the options. Over to you.

Pavan Sukhdev: Or use a premium rate. This issue is something that bedevils the world of academics because there is not much clarity. Lord Stern was right to point out that discounting ultimately is an ethical choice; it is a moral choice. He was also right, in my opinion, to use the rates that he used, but if one applies the same clarity of thought across to the world of biodiversity, we are not talking about a future problem; we are talking about a current problem. We are not talking about an increasing flow of goods and services with time but a declining flow of goods and services. Not only that, it is about a higher population consuming both natural goods and services. Therefore, the argument is rife for a negative discount rate-in other words, a premium. Of course, every value becomes infinite if you do that, and the question is: what is the horizon you set yourself? Is it your 40 years or 200 years, or, in my opinion, 10 years, which is more appropriate, or 12? We have to think in terms of horizons and then apply your premiums or discounts.

This will never stop, so let me just narrate a little anecdote from my experience recently at Yale University teaching a class of graduates. Most, broadly speaking, agreed with the view that I was espousing. There was one who famously disagreed and continued to do so, to the point of having the confidence to write in the exam paper that "Mr Sukhdev would say this, but I say the following".

Q67 Chair: Did he actually get an A+?

Pavan Sukhdev: He got an A. He still got an A, because at least he clarified it.

Barry Gardiner: He knew what the right opinion was; he just did not agree with it.

Chair: We always say a week is a long time in politics. Thank you very much, both of you, Mr Knight and Mr Sukhdev, for contributing so generously with your time and for being with us this afternoon. We are very grateful indeed.

Examination of Witnesses

Witnesses: Jonathan Garrett, Group Head of Sustainability, Balfour Beatty plc, Chris Matthews, Head of Sustainability, United Utilities Group plc, and Paul Allison, British Aggregates Association, gave evidence.

Q68 Chair: Can I welcome you most warmly and thank you in advance for agreeing to participate in our inquiry on the NEWP? Just for your information, as you are aware, we will probably have to break in the next half hour, at approximately 16.30 pm, for a vote. If there is only one vote, we will break for 15 minutes; if there are two it will be slightly longer, so thank you in advance for your forbearance. For the record, and perhaps starting from the right with Mr Allison, would you introduce yourselves and give your title and the company you are with?

Paul Allison: My name is Paul Allison. I run a business called Sherburn Stone Company in the north east of England in County Durham. I employ 120 people.

Q69 Chair: Whereabouts in County Durham?

Paul Allison: We are based in Sherburn Hill-it is Sherburn Stone Company. I am here on behalf of our trade association, which is the British Aggregates Association, which represents the smaller, independent quarrying companies and heavy building materials manufacturers.

Jonathan Garrett: Good afternoon, I am Jonathan Garrett; I am the Group Head of Environment at Balfour Beatty. We are at the other end of the spectrum, in terms of a company employing 50,000 people worldwide, of which 30,000 are in the UK.

Chris Matthews: Good afternoon, my name is Chris Matthews; I am Head of Sustainability at United Utilities. United Utilities is the water and wastewater services provider in the north west of England, serving some 7 million business and domestic customers.

Q70 Chair: You are all very welcome. Thank you very much indeed. Could I just ask a couple of general questions, starting perhaps with Mr Matthews? How do you believe that the NEWP and the proposals contained therein will impact on your business?

Chris Matthews: From our point of view, we see the NEWP as continuing to provide opportunities for our organisation or sector. You have already mentioned, Chair, in the last session, our Sustainable Catchment Management Programme (SCaMP), which has delivered multiple benefits by embracing a catchment management approach. It is gratifying for us to see that perhaps some of the principles that we first set out in SCaMP back in 2002–03, where we had to fight hard to receive acceptance for such a scheme, appear throughout the NEWP. It is gratifying for us to see that those principles can be built upon, and that we are seeing the regulatory environment around us embrace that. There are now over 100 similar schemes to SCaMP as part of the water industry business planning process for the current fiveyear period.

There are also some challenges and some issues within the NEWP itself. For example, there are some omissions around a focus on agricultural diffuse pollution. There is reference to nonagricultural diffuse pollution, but not agricultural diffuse pollution. That is not about us wanting to bash farmers and put more pressure on in difficult times for the farming community, because probably the yield from farming that we have seen in terms of productivity is immensely valuable to the UK. Nonetheless, farming practices perhaps should consider the impact on other sectors as well and whether something can be done to change those.

We would also look to see more data or more sound science underpinning some of the investment decisions that we would want to make in future. It relates back to some of the discussion that has just taken place about whether the valuation is needed or not, or whether regulation can drive it. I think the short answer is we need a bit of both. We very much welcome most of the White Paper.

Jonathan Garrett: I echo the points there. This is an opportunity for the infrastructure sector to go beyond what is traditionally based around protecting nature to enhancing and providing a positive input. Echoing some of the previous conversations, it is going to be a mix of opportunities and we have to try some new things. Things like biodiversity offsetting are certainly areas where we would like to contribute some of our lessons learned and see how that can work. It is not going to be the panacea, but we are all on for trying new things. One key message from me is that Government and local government are key customers when it comes to infrastructure and, hence, they have a lot of power in the procurement process. What we do not currently see is biodiversity being valued in procurement decisions when it comes to infrastructure, and that is a missed opportunity. If it is, it can drive innovation in the sector; we have certainly seen it with things like waste and carbon on highways projects. We have an opportunity to do the same with biodiversity.

Paul Allison: This is glib, but it is too early to say, I am afraid. The White Paper contains many ideas, such as ecological networks and biodiversity offsetting, that are presented as being novel, but they are in fact things that our industry has understood and implemented for many decades now. We find it somewhat galling that we are not, generally speaking, recognised for doing these things. It is symptomatic of Governments’ general approach to our industry, we feel. Your question is a very wide question; I have some things to say about some specific issues in the White Paper, but I think we will probably come to them.

Q71 Chair: That is fair enough. If I could just ask Mr Garrett first and work round, how do you rate the Government’s delivery, bearing in mind it is six months since the publication of the White Paper? It was extremely well received at the time of publication. Do you think the Government has shown sufficient commitment to delivering the broad ambitions set out in the White Paper to protect and improve the health of ecosystems?

Jonathan Garrett: It is early days, a few months on. It is good that there is that reporting; I would certainly encourage, further down the line, more reporting against some milestones. There are some very high-level policy ideas, and what we would like to see at a very practical level is getting it right down to individual contracts and how we can make it happen on individual projects. With infrastructure spending on large schemes, you have that real opportunity to try some of this stuff out. My last message here would be: let’s get started on that and go from the high-level stuff to try it on real projects.

Paul Allison: On page 14 at the start of section 2 there is the heading "Ambition", and our association would agree with every word of that, and we agree with every aspiration and ambition in this White Paper. It is sometimes difficult to see through the language for us; there are some concepts that are sensible when we think them through but are obscured slightly by the language, and that is often a barrier to people like me who are delivering things on the ground every day. Then some of the things we do are described in strange ways and it takes us a while to realise that we are actually doing them. Sorry, could you just repeat the key part of the question?

Q72 Chair: Are you happy with the way that the Government is delivering?

Paul Allison: Our feeling is that there is so much going on, particularly with localism and the National Planning Policy Framework, that perhaps this has got sidelined somewhere. We would like to see biodiversity in particular being made a more strategic commitment in the planning system. We might come to it, but we have reservations about how that will interact with the localism agenda.

Chair: I think we will come on to that. Thank you.

Chris Matthews: It is one of the roles of the Government through the NEWP to catalyse and enable action. If we are looking for evidence of response to those enablers being put into place, we are seeing it with Local Nature Partnerships and Nature Improvement Areas in the north-west, where we are involved with four Nature Improvement Areas and three Local Nature Partnerships. Also, if you look at the recently published Water White Paper, there are links between the NEWP and the Water White Paper that suggest that we are seeing a joinup and consistency that can then flow through into enablers.

We are actually sitting on the Ecosystem Markets Task Force as an organisation, and I think some of the success of whether the NEWP enables the right outcomes will be whether those entities that have been established actually deliver. There has been a case of some of them perhaps having quite a slow start but now getting going, and others have perhaps got off the ground quite quickly. I would say that the enablers are there, but it is early days.

Q73 George Eustice: Thank you. You talk very much about the language of opportunities in this White Paper, but are you concerned about any of the negative impacts, particularly some of the measures on environmental protection-concerned that this could be a constraint on development and have a negative impact on business.

Chris Matthews: There are elements within the White Paper that we do not like and elements that we think are missing. I mentioned the likes of agricultural diffuse pollution, elements linking to the National Planning Policy Framework and, perhaps, green spaces designation. When you look at the localism agenda empowering local communities to have more of a say in planning decisions, if we want to build infrastructure that will have multiple benefits to multiple communities outside that locality, that could present a barrier or a difficulty for us. We are not sure how that will manifest itself as things develop.

In terms of environmental protection, when we look at some of the regulations and directives that are driving environmental protection, some of those emanating from Europe, we are perhaps now seeing some perverse and perhaps costly outcomes. If you look at having sustainability at heart, that is meant to balance environmental, social and economic concerns. In some cases, we are perhaps doing the right thing by the environment, but is the economic cost too great? For example, we are protecting pearl mussels up in Cumbria, and there is a reduction in water abstraction in order to protect that population. We believe the alternative solution will cost us £15 million, and the question is: are the pearl mussels worth £15 million and the cost impact to customers and bills? I cannot answer that question because the data do not exist to be able to answer it, but the environmental protection measures that already exist are driving a certain set of behaviours. I would like to think the NEWP will present the opportunity for us to look at those sorts of decisions and be able to take them in a more balanced way. What we will be doing is costing all impacts and coming out with a sustainable outcome.

Q74 George Eustice: Would you say that is not necessarily the threat, because one of the key purposes of this is to try to put a value on those things, so that you can make a judgement about whether you take that action?

Chris Matthews: Exactly; that is what is needed. We need that data.

Q75 George Eustice: For instance, are Nature Improvement Areas something that concerns you?

Chris Matthews: It does not concern us. We are actually working alongside four in our region because there is a natural overlap in terms of where some of the Nature Improvement Areas are. They fall across our catchment land and, therefore, it is in our interests to engage with the stakeholders around the improvement area, because we believe we can deliver benefits on our catchment lands through that engagement and that activity. For our customers, those benefits mean that it may well support a reduction in bills; we are not having to build expensive treatment works to treat raw water because the raw water itself can be treated more naturally by actually maintaining and enhancing the catchment lands. We are looking at them as a positive vehicle rather than a negative one.

Jonathan Garrett: Because it is very much opportunity driven, one thing I would say is lots of small projects tend to spend a little bit on biodiversity and I think, "Is that money well spent? Could it be better spent if it was pooled?" I am thinking of, for example, work we do for the Environment Agency on their flood defence framework. Every project will do a little bit on biodiversity, and if you pooled some of the money that goes into that you could probably get a bigger ecological gain by putting it somewhere else. It would be better, wiser spending of the money we are spending on biodiversity, so I think there is an opportunity to look at how we are spending our money and where we are spending it.

Paul Allison: Whatever you do, do not pool the money. You get most traction out of Government spending when you give small amounts of money to small, local organisations like wildlife trusts. They do a huge amount of work for a small amount of money, much more than any arm of the state will ever do. The best thing you can possibly do is to spend small amounts of money and spread it around.

Q76 George Eustice: Does the aggregates industry have any specific concerns about the negative impacts we talked about?

Paul Allison: For years, my industry has suffered from the delusion that aggregates produced by recycling are better for the environment than aggregates produced in quarries. We have suffered from that through fiscal punishments from the Government and through regulatory punishments from the Government. It is absolute nonsense. This White Paper starts from biodiversity, and biodiversity is hugely important. We welcome beyond measure the emphasis on nature and biodiversity; we are perfectly comfortable with the protection, enhancement, conservation and management of those things.

Q77 George Eustice: Thank you. Just coming back to the proposals, and there are obviously quite a lot in there, do you feel they are practical and feasible enough to deliver an improvement in biodiversity at the moment? Coming back to the point, you might have heard earlier in the session the question: is the right way to improve biodiversity and protect habitat just clear regulation, or are we in the territory now where we do need this kind of marketisation of nature?

Paul Allison: I do not understand the marketisation of nature. I did not understand much of the evidence that was given earlier. There is a really key point, I think, and it is a very small paragraph and it is very soft, and it says something like, "Nature Improvement Areas may cross administrative boundaries." They have to cross administrative boundaries for two reasons: one is that the ecological areas are not the same as county councils, and the other is that if you make them follow administrative boundaries, which might be the easy thing to do administratively, you will find that Nature Improvement Areas and the Partnerships will be run by councils and they will hive off the money to perform their normal duties, take an administrative fee and not do the job very well. You need to make sure that councils do not run these things; they should be run by wildlife trusts or similar organisations that are run by volunteers, by local people and by some paid officers. You have to keep these things away from the councils.

Chris Matthews: I think it is a mix, to be honest. From a business point of view, if business is going to respond to market signals, you have to have a commodity that you can trade. To have a commodity that you can trade, you have to have a value, so you have to look at how we get to the point of having a value for biodiversity. I would loosely label that as monetisation, so there is a need to put a market value on biodiversity. I think you also need some elements of regulation or deregulation, possibly, whether that is incentives or taxation.

If you look at the landfill tax as an environmental tax, that has driven an industry, and I would argue that it is driving very positive environmental outcomes. However, sometimes you need to balance tradeoffs, and there may well be a role for Government or Government agencies to balance those tradeoffs, because if you take land in the Lake District, for example, what is the best use of that land? Is it as water catchment? Is it for farming? Is it for tourism and leisure? How do we determine which is the best use? Ideally, it might be multiple uses, but that does not always come together. You also may well look to enable it through the planning system. I used an example before, but planning is an important enabler and, as an industry, we are currently not a statutory consultee in the planning system, yet you cannot have sustainable development without looking at infrastructure requirements that support that development. That seems to be a gap.

The final point I would make is that you also need encouragement for businesses. When you mention the word biodiversity, for a number of business leaders and boardrooms the shutters go up. It is a complicated subject and, dare I say, it is, "There is that green lobby talking about a topic." Actually, what you need to do is ensure the businesses see this as, in the words of business, either a risk or an opportunity. Therefore, taking from the natural environment or ecosystems might threaten the success of that business in the future, so there is a business case in the making to take action. When I look at the NEWP and what it is setting out to achieve in terms of outcomes, which I think are clear, it is a mix of enablers and solutions that will get us there.

Q78 George Eustice: Do you think there should be a timetable or some key milestones included in that, so that things actually happen?

Chris Matthews: I think it gives focus. For me, since interest has grown in the natural environment, we have had an explosion of groups, interested parties, documents and the like, and the danger is it becomes very confusing. Some form of timetable and plan can help manage our way through what could potentially become quite a complicated arena.

Jonathan Garrett: My points would echo Mr Matthews’. I still think you need regulation for protecting certain species; you definitely cannot get away from that. If you want to create some innovation and new ways of doing things, businesses need to be incentivised to do it. If it is a way of how you differentiate winning work or getting that next job, you are going to be looking for those creative opportunities. If we, as a business, are known for creating more biodiversity, that it is a really positive thing to pursue; that is a really laudable aim. When we talk to our business development teams, that is getting them thinking this is an important issue. It is not a compliance piece; it is an opportunity, and it is taking it from a risk to an opportunity.

Q79 George Eustice: Do you think there is a case for some kind of timetable in terms of delivery on these objectives?

Jonathan Garrett: You are talking to a contractor who is always used to delivering on projects, but you have to have some milestones, otherwise things will not happen and there is nothing to hold people to account.

Q80 George Eustice: Finally, Mr Allison, I know you expressed in your written evidence and earlier that there is a frustration that your industry was not really mentioned in the White Paper, and your industry does a lot in this area. Are there any key things you would just like to point out now for the record, in terms of the things that you have already been doing?

Paul Allison: I can take you to any one of the quarries that I operate and, I am guessing, pretty much any of the quarries that members of our organisation operate. They became more biodiverse places the day that we started working on those sites as greenfield sites. I have a quarry-I do not want to say where it is, and the reason will become obvious-that started in 1972 and it was a monoculture field. It is now home to at least three protected species-significant, charismatic, protected species. One of the reasons why people like me get frustrated is that every few years we have reviews of mineral planning conditions at our sites. Of course, when protected species are found, that gives us a huge problem because we are then prevented from doing what we were doing in the way that we were doing it.

Q81 Mrs Glindon: I have a question inspired by one of the panel members: some of the questions and concerns that you have raised are clearly about environment and economics-how they go together and how some of the issues in the White Paper will be resolved, and how the information was gathered. Would it be practical and sensible for the Government to include some kind of insistence that they engage economic environmentalists who could come to grips with some of these serious questions and help to formulate the answers that would help people move forward?

Chris Matthews: I think that environmental economists are going to be very important to us in this regard, if you are looking to make a balanced decision that brings together environmental, economic and social considerations, and tries to drive towards the right outcome. I do not think we have enough people who are able to do that at the moment, and it is a skill set that I think is missing, but one which we need now, rather than having to put it through the system in terms of academic training and the like. I think it is needed as much to drive the behaviours that we need to see and to unlock some of the potential within the White Paper. I mentioned monetisation earlier, so how do we actually calculate the value of fish? The point was raised in the previous discussion about whether we need to or not. I would be of the view that we probably do need to get it somewhere down the line because, if we do not, we end up driving out behaviours that could have a disproportionate impact on customers’ bills in our case and, when we have times when affordability really does matter, is it right that there is environmental good but social disbenefit? One of the ways of being able to make that case or that argument is to have environmental economists and others helping us get that balance right.

Q82 Amber Rudd: We touched a bit on this earlier. I am sure you are all aware that there is less money about. Do you consider the lack of funding streams to establish projects as a key stumbling block to delivering some of these White Paper projects?

Paul Allison: I think the barriers to the delivery of a more biodiverse country are perhaps not the funding.

Amber Rudd: Not the funding?

Paul Allison: Not the funding. I think there are other things that prevent people like me doing more than we do and things that prevent people like me making what we do accessible to the general public.

Q83 Chair: Do you want to say what they are?

Paul Allison: Yes, as far as accessibility is concerned, public liability is the big one. I have a huge problem with making my sites accessible to the general public. If they trip over, they will sue me, and the others will pinch the fence. Public liability is a problem.

As far as accessibility is concerned, we must not lose sight of the fact there are a lot of green spaces in the UK, perhaps dramatically less so in urban areas. However, people like watching the telly and they like to watch the telly with their dinner on their knee, and there is a behavioural thing here. There is a section of the White Paper that deals with the health benefits of people getting out into green spaces. We all know that is true. We have all known that is true since we were children because it is just obvious, but it is a behavioural problem that needs to be addressed, not an opportunity problem. I live in the north Pennines; as far as crossing administrative boundaries is concerned, the north Pennines area of outstanding natural beauty is a shining example.

Chair: Teesdale.

Paul Allison: Yes, I live in Weardale. We are less than an hour’s drive from the urban centres of the north-east. We have wonderful fells and open access on the fells; you can walk anywhere you want and there is a fantastic network of bridleways and footpaths in the dales and the valleys, and nobody comes. Everybody stays at home and watches the telly, so there is a behavioural problem here and I do not see that the Government is going to solve this-although it is good for its own sake-by increasing the amount of natural environment, the quality and area of the natural environment. People need to change what they like doing.

Q84 Amber Rudd: I agree with that. I do not know whether the other gentlemen have any points they want to make about the lack of funding.

Jonathan Garrett: I would say, on the funding, certainly for the Nature Improvement Areas, as a restoration piece that does seem on the low side. You will be very much limited there, so I think for restoration I would say funding was a concern.

Chris Matthews: Certainly, it does not help that there is a lack of funding, but I think if the right market mechanisms are in place, the organisations will respond positively. If organisations can see that there is risk or opportunity, you would expect them to respond positively. 15 years ago, the low-carbon sector did not exist and now it does; it is worth whatever millions of pounds, and has all the growth potential attached to it. The funding enables the activity to begin, and maybe there could be more to help that happen, but I also would not discount the power of the market if actually it is positioned and explained in the right way-if we can get over that barrier of communication and understanding.

Q85 Amber Rudd: Are regulatory issues a burden?

Chris Matthews: You can have good regulation.

Amber Rudd: Yes, you can, indeed.

Chris Matthews: I mentioned the landfill tax before, and I think that is an example of good regulation in this area. Of course, you can also have bad regulation as well, so if we can eliminate the bad and have more of the good, I am sure we can see the right outcomes.

Paul Allison: I have described the barriers to public access, but not to the things that stop people like me doing more than we do. Our own money is what we put in these things, and at the moment not many of us are making any money. I supply heavy building materials to the civil engineering industry in the north-east of England; it is not much fun at the moment and it has not been for some time. We do not have very much money left over, but what I think would work is giving those small organisations that I mentioned earlier small amounts of funding. There are organisations where I live, and I am going to mention some because they should be mentioned on a national level: the Weardale Community Supported Agriculture organisation and the Harehope Quarry Project. These are really small organisations that get people closely in touch with nature, and if you give them £10,000 each, they will pay you back a hundredfold.

Jonathan Garrett: I just want to add a point, going back to opportunity-it does not cost a huge amount of money. When you are doing work on a construction site, you will have to do certain things anyway. It is how you do it, with a bit of ecology thinking behind it, to make the opportunity. In the submission we provided, there is an example of a care home. We did some work on a care home that has zero biodiversity value. But when the project or construction manager thinks about ecology and how they can make a positive impact on the site, with a little bit of advice from an ecologist he can go a long way and create some new habitat and make it better. Everyone thinks it is lots of heavy funding; it is just doing something a little bit differently. We are already there with excavators on site: you can create balancing points for flood defence, and create that habitat for newts rather than spending our money on lots of newt fencing. You can do habitat creation; you can do some positive things. We have some examples of it, but it does not happen on all the projects because it does not get driven by the customer-they do not value that-so it does not tend to get done. There are lots of examples where there are good project managers who know that it is the right thing to do.

Q86 Neil Parish: I want to talk now a bit about the White Paper and joinedup Government thinking. Does the White Paper make a sufficiently robust case for embedding the value of environmental services more firmly in economic assessment of policy across all Government Departments? Will this have an impact on your business? That is quite a wide question.

Chris Matthews: I think I can only respond from the water sector point of view. I mentioned earlier how they acknowledged within the Water White Paper, published last month, how important the natural environment is throughout the Paper. In fact, most of the Water White Paper makes reference to the importance of sustainable behaviours, whether that is abstraction, returning water to the natural environment or how we carry out our operations. If I look at the Water White Paper and ask whether the natural environment has been factored into it, my answer is yes.

Q87 Neil Parish: In a good way, or not?

Chris Matthews: Generally speaking, in a good way. There are other areas of the Water White Paper that are probably more contentious and probably are not for this Committee. In terms of looking at whether we have sustainable abstraction, for example, I think we would say that the abstraction trading elements of that Paper are moving us in the right direction. However, we would also point out that sometimes some of that additional headroom within our abstraction licence is not readily available for anyone else to use, because if we have an outage or a drought, or there is a need for other contingencies, we need to use that. There may well be a risk that some people see capacity as being available when in fact it is not.

Chair: Thank you for your evidence.

Prepared 5th March 2012