Through the incredible initiative of Netflix in commissioning Kevin Spacey’s remake of “House of Cards” and broadcasting that so that people could watch the

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entire series as they might watch a boxed set at home, without having to wait for the next instalment, a commercial broadcaster has demonstrated that it is possible to pay for very high-quality content through a subscription service. We must acknowledge the fact that television is changing, and therefore the role of the BBC and the nature of the licence fee will inevitably change with that.

The director-general has set out a number of initiatives for the BBC to improve the breadth of the iPlayer, the period of time during which people can continue to watch programmes for free, and the ability to preview programmes through the iPlayer. Another interesting initiative is the creation of what he called BBC Store, whereby people can access programmes in the BBC back catalogue digitally through the iPlayer and pay a fee to do that. In the same way as they might pay to buy a DVD of programming that they were particularly interested in, they will be able to pay a subscription to watch it through BBC Store instead. This creates very interesting and exciting commercial opportunities for the BBC and raises some fair questions. If the BBC is allowed to develop more commercial properties and allowed to make more money from its back catalogue, how is this money used in the organisation? Can this be offset against future demands for a freeze or reduction of the licence fee if it is decided that that is the best way to go forward?

The BBC is also developing for music and radio an interesting platform called Playlister, which will help people to find music played on BBC radio stations and in BBC programming, identify it and add it to their playlist through Spotify, Deezer or whichever platform they use. This creates an interesting way for people to interact with BBC broadcast content and continue to consume it through whichever channel they choose.

This opens up an interesting debate about the way people consume the BBC outside the live environment. If people increasingly use the BBC through these online platforms, they create their own bundles of programming and content that they want to see. They prioritise the things that they want to consume. They effectively become their own director-general. They are their own editor-in-chief of BBC content. They will see that there is a great deal of content that they are happy to use and a great deal that they will not use. This may provoke a debate about the future of the licence fee.

Should there be a licence fee that covers a core service—core programming and the sort of channels that we would expect to see in a free channel bundle? There may be other programming and services that should be accessed through a subscription, so there would be a core BBC, plus extra services that people choose to opt into through extra channels. That should be part of the debate as we move towards the charter renewal process in 2016 and consider the future licence fee.

We know that people are changing the way that they consume media. We know that they want it on demand on mobile devices. A licence fee linked to a physical television set in a room is clearly no longer suitable, so how do we decide how the BBC should be funded? Should that be, as my hon. Friend the Member for Maldon (Mr Whittingdale) suggested, through general taxation? I am uneasy about that, because the BBC would tend to become even more like a Government Department than it is already. The idea of some sort of

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fee collected through the way in which people consume BBC output, perhaps linked to what they consume, is an interesting idea and should be part of the discussions.

Alec Shelbrooke: Does my hon. Friend believe that if the licence fee were replaced by a grant through central Government, the BBC would be under any more influence from Government than it was in 2003 in the case of the 45-minute dossier, when a Government who were not happy with reports from the BBC, which turned out to be accurate, tried to impose and did indeed impose their will on the BBC?

Damian Collins: I do not believe that that pressure would exist then any more than it does now. The BBC will come to negotiate the licence fee settlement. If it is like the last few settlements, there will be downward pressure on that or an idea that the BBC should take on other services that it should pay for, as it did when taking on the World Service through the most recent licence fee negotiations. That will be part of the debate, and there will be a robust debate between the Government and the BBC.

The BBC must be independent of Government, but it must accept that it effectively receives public money so there deserves to be some scrutiny of it. Criticisms that have been made of the scrutiny of the way the BBC uses public money have not been robust enough and are valid. Additional scrutiny through the National Audit Office may well be the best way to go. Throughout the debate legitimate questions have been asked about the BBC Trust. While I was a member of the Culture, Media and Sport Committee I thought that was particularly evident during the Savile affair and the session that the Committee held with George Entwistle.

The relationship between the director-general and the chairman of the Trust is more akin to the relationship between the chief executive of a company and the chairman of the company, but the chairman of the Trust behaved, certainly through the Savile crisis and its aftermath, like the chairman of the board of the BBC, a member of the organisation. I do not criticise Chris Patten for that. I think he did what anyone would have had to do in that situation—a senior figure who could speak for the organisation had to take charge at that difficult time, and he did that. But that is not the same as being the chairman of the body that exists to scrutinise the BBC—to be chairman of its own regulator. It raises questions about whether the current chairman of the Trust should be seen more as the chairman of a board of governors and whether there should be a new body that is more independent and that has more of an independent voice, whose members are perhaps selected with broader consent from the public, but is clearly a separate regulatory body.

If it is not possible to achieve that, the debate will surely come as to whether the BBC should be regulated by Ofcom as all other broadcasters are, and treated as any other broadcaster, with the current chairman of the Trust being the chairman of the board of governors, representing the viewers’ voice within the organisation. That must be a legitimate part of the debate on the future of the BBC.

If we had a blank piece of paper and if we could recreate the entire broadcast landscape of this country, we might not create the BBC as it is now, but we must

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recognise that it is a global media brand of enormous importance, it is an ambassador for this country around the world, it produces some iconic programming, it is chosen repeatedly by the nation as its preferred viewing platform for major national events, both state events and sporting events, and it is something that we should celebrate. However, there are genuine questions about the way in which it raises its finance, linked to how people consume its services and to the way it is governed, and those should form part of the debate as we come closer to charter renewal.

7.26 pm

Helen Goodman (Bishop Auckland) (Lab): The BBC is an important national institution and I congratulate the hon. Member for Vale of Glamorgan (Alun Cairns) on securing this debate which has, as other hon. Members have said, come at a timely moment. Obviously, the BBC has special funding arrangements. The licence fee is unavoidable for anybody who wants to watch television. As a consequence, or perhaps in recognition of its very high status, 96% of the public use the BBC in an average week.

However, as other hon. Members have said, a series of scandals have rocked the BBC in the past few years. The most serious was clearly the Savile scandal. It looks now as if perhaps 500 people were victims of this man, and the initial horrors have been followed by wrong editorial decisions. Then there were serious financial problems—£100 million squandered on the digital initiative, and massive executive pay-offs. It was not just the sums of money, but the mismanagement of the agreement to these pay-offs that was criticised. Those massive pay-offs were partly caused by the fact that there was excessive pay at the top of the management of the organisation.

We on the Labour Benches believe that the BBC must get a grip. My right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman) has said that

“it is odd that though the BBC rightly sees itself as different from commercial broadcasters—in terms of how it is regulated and treated in terms of market share . . . they argue that it’s the market pure and simple which should dictate their pay.”

She went on to say that

“they cannot have it both ways.”

The consensus across the House today is that the BBC cannot have it both ways. Hon. Members also referred to the editorial errors in the case of the “Newsnight” descriptions of Lord McAlpine, and the hon. Member for Congleton (Fiona Bruce) spoke about North Korea. I thought she was going to talk about the questionable practices in the documentary about North Korea, which also raised concerns among many people.

All those episodes seem to me to show that the BBC’s management needs to be improved. They also show that its governance has failed, because the Trust did not fulfil its role of defending the licence fee payer. In this situation, we are presented with the question, “What is to be done?” Some hon. Members believe that the model has failed and the licence fee should be abandoned. The Secretary of State has said that she believes that the National Audit Office should have further powers and rights to go through the BBC’s accounts. I hope that she will say a little more about that when she responds to the debate. In particular, I hope that she will explain

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how she would achieve that while avoiding either the reality or the perception that politicians are interfering with the BBC.

The Chair of the Select Committee, the hon. Member for Maldon (Mr Whittingdale), made it clear that he believes that the BBC should be considerably smaller and that there is a question mark over whether it can continue to be financed through the licence fee. My right hon. Friend the Member for Dulwich and West Norwood (Dame Tessa Jowell) proposed a new model for a mutual BBC, whereas my hon. Friend the Member for Rhondda (Chris Bryant) and the hon. Members for Manchester, Withington (Mr Leech) and for Dartford (Gareth Johnson) all seemed far more supportive of the status quo and the current model—

Chris Bryant: No.

Helen Goodman: I will give way, if my hon. Friend would like to intervene.

Chris Bryant: I am sorry, but I am not all that supportive of the current model. I think that the role of the chairman of the Trust and that of the director-general have to be very clearly delineated and separated, which I do not think they are at present.

Helen Goodman: I beg my hon. Friend’s pardon, although I must say that is a rather detailed point, compared with the radical proposals coming from the Government side of the House.

When we consider the future of the BBC, it is interesting to look at what the director-general said last week in a major speech. He said that he wanted to see public service at the heart of the BBC and promised leaner management and further cuts of £100 million. It is true that some of the recent mistakes have been phenomenally costly, so a “right first time” culture would be incredibly helpful. He spoke at length about the possibilities for the BBC of technical innovations, including improvements to iPlayer, a BBC store and iPlayer radio.

The director-general also spoke about the significant contribution the BBC not only makes now, but can make in future, to the creative industries generally in this country. I think that is something we would all applaud. The fact that we put a 25% quota on the BBC to commission externally has turned out to be an extremely useful way of promoting and supporting other creative industries, and indeed exports, in this country. His proposals for a partnership with the British Library and a digital space with other institutions were extremely positive, as were his proposals for increasing the number of apprenticeships and the amount of education for young people in new technology. He mentioned something that I think we have all agreed with over the course of today’s debate: the importance of seeing more investigative news reporting. He also wants to strengthen the BBC’s global news presence, which will be facilitated through the incorporation of the World Service.

Although the director-general made a number of important statements about the BBC’s content and the possibilities for technology, he said less about the management. That has been a major concern in this debate and I think that it would be helpful if the BBC paid significantly more attention to it. In addition to the issue of top pay, we will obviously look at governance

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in the process of royal charter renewal. Rather than leaping to some new model, I think that it would be more helpful to have a proper royal charter process that includes consulting the public. As my right hon. Friend said, the fact that the governance arrangements did not work in the Savile episode, for example, does not prove that the model is broken; it demonstrates that the individuals did not fulfil their roles as well as they could have done. I urge caution before we tear up the current model and move into a whole new world—I am pleased to see the Secretary of State nodding in agreement.

It is also worth considering the future of the BBC in relation to the other large media organisations and the importance of maintaining media plurality in this country. The position of Her Majesty’s Opposition is that we should of course include the BBC in the overall understanding of the shares when measuring media markets, but that does not mean that we should apply the same remedies to the BBC as to other media organisations, and that is because of the different governance arrangements. I am not saying that those arrangements or transparency—the point made by the hon. Member for Vale of Glamorgan—cannot be improved, because I am sure that they can, but I think that all Members of the House must acknowledge that the BBC has a very different place from the private commercial operators.

Chris Heaton-Harris (Daventry) (Con): I think that the hon. Lady is right up to a point, but surely we should also be looking forward when it comes to governance issues. Many of our local newspapers across the country are dying because they cannot monetise their online provision. In the United States, however, many local newspapers are thriving because they can monetise their online provision, and that is because they do not have a very big BBC online presence providing that content. I think that we need to look very carefully at that when we talk about media plurality.

Helen Goodman: The hon. Gentleman makes a good point. It is a long-standing concern that the BBC should not use its privileged position to compete unfairly with other market operators. Local newspapers have claimed that stories are taken from them and that they are not paid for them properly, which obviously is something we need to address if we are to have plurality at both local and national level.

When we are looking at transparency and public accountability, I think that it is worth thinking about ways in which the public can be involved in commissioning. The best job in television must be that of commissioning editor. I think that a more open approach to the public on commissioning would be extremely welcome. The director-general says that he wants the public to feel that they are the owners of the BBC and that it is theirs, and we say amen to that, but we do not want it to be a piece of rhetoric; we want it to be a piece of reality.

Hon. Members also spoke about the management and culture of the organisation. Clearly, the need to be more conscious of value-for-money issues is still essential. Only last month senior executives gave evidence to the Public Accounts Committee, and it was clear on that occasion that there is still some way to go. We would also like to see more women in the BBC, both behind the scenes and on air. My hon. Friend the Member for

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Hayes and Harlington (John McDonnell) spoke about the serious cases of bullying that the National Union of Journalists has highlighted to us. One of the things that the NUJ has said—it is a good and reasonable point—is that the BBC should have an independent, external process for handling bullying or harassment cases. Doing everything in-house does not give members of staff the confidence that they need in the system.

I want to raise an important point about standards. There is a clear watershed on television; the content is suitable for children earlier in the evening and suitable for adults later. My impression is that the BBC does not operate radio to the same standards and that, from time to time on Radio 1 and Radio 2, there are songs, lyrics and language that are really not suitable for children. We cannot expect families always to put children into a silo of separate channels—that is not how people lead their lives, and the BBC must take that into account.

I felt that the criticisms made about BBC bias by some hon. Members, in particular the hon. Member for Hornchurch and Upminster (Dame Angela Watkinson), were a little unfair. We can all think of occasions when we have been enraged by what we have heard on the BBC, but feeling extreme irritation sometimes does not mean that there is bias overall.

We want to tackle the issue of top pay and strengthen accountability, but we must acknowledge that three quarters of the population believe that the BBC maintains high standards. The most important guarantee of that is continued editorial independence. Although I completely understand that the BBC must evolve with changes in technology, in the end what we look for from it are values and commitment to truth and independence.

I end on a personal note. My mother is Danish. During the Nazi occupation of Denmark in world war two, the Danish relied completely on the BBC to get the truth. Those high standards of editorial independence and truthfulness are as relevant today, and will be as relevant in 10 years’ time, as 70 years ago. Those standards are what we want from the BBC.

7.42 pm

The Secretary of State for Culture, Media and Sport (Maria Miller): I thank my hon. Friends the Members for Vale of Glamorgan (Alun Cairns), for Winchester (Steve Brine) and for Hornchurch and Upminster (Dame Angela Watkinson) for securing this debate. It is difficult to do justice to the wide range of issues that have been raised.

What I will not do is prematurely sound the starting gun for the next charter renewal, which will deal with many of the strategic issues raised today; people would not expect me to prejudge those issues. However, I will join my hon. Friend the Member for Dartford (Gareth Johnson), who struck the right tone in paying tribute to the majority of BBC staff, who produce world-class content. I particularly thank staff at the Salford offices, whom I met recently at our party conference. We should not confuse the poor judgment of some of the management —the failure of the few—with the world-class programming produced by the many. I also pay tribute to my hon. Friend the Member for Congleton (Fiona Bruce), who referred so movingly to the World Service.

What is clear is that the BBC asks for special treatment, and it gets that—a £3 billion a year levy. It is an extremely important institution nationally and across

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the globe, as we have heard in today’s extremely good debate. The BBC is synonymous with Britain, which is perhaps why it is so damaging for it to have been plagued by one scandal after another.

Many issues have contributed to making the past 12 months an annus horribilis for the BBC—from Savile to McAlpine and the failed digital media initiative to exorbitant severance payments. To say that as a nation we have been disappointed is an understatement. What we all want and expect from the BBC, now and in future, is relatively uncontroversial: a BBC focused on producing programming of the highest quality, setting the highest standards of behaviour and respect throughout its organisation and having an independence beyond question. However, we also expect it to be accountable to the public, who pay for it, for how it spends licence fee money. It is absolutely to be expected that both the public and this House should react when those standards are not met and that the BBC Trust and management should not only act effectively to address the issues of real public concern that have arisen, but be seen to do so.

My hon. Friend the Member for Manchester, Withington (Mr Leech) said that it was difficult to please everyone—that is something, coming from a Liberal Democrat. He also said, absolutely rightly, that the BBC should concentrate on what it does best, which is high-quality programming. I totally agree.

I had a little less sympathy for the hon. Member for Rhondda (Chris Bryant).

Chris Bryant: You always do.

Maria Miller: The hon. Gentleman is probably right. Perhaps I will get right what the hon. Member for Bishop Auckland (Helen Goodman) got wrong, or perhaps neither of us can understand what the hon. Gentleman said, but I think he said that only the BBC could do cutting-edge comedy. I would like to see him argue that while watching episodes of “Peep Show” or “8 Out of 10 Cats” on Channel 4. I do not think he has got that right.

Chris Bryant: Will the Secretary of State give way?

Maria Miller: If the hon. Gentleman will forgive me, I really want to move on.

The Pollard review and the MacQuarrie report both concluded that a lack of clarity and accountability in editorial decision making created an environment of uncertainty in which such errors could be made. Dame Janet Smith’s inquiry has yet to report, but I expect the BBC to act swiftly in response to its findings. As the Chair of the Culture, Media and Sport Committee said absolutely rightly, with a sagacity that I always expect from him in debates such as this, the culture that pervades is critical. Importantly, the BBC has already instituted some changes to reform its management culture—for example, through its Respect at Work review and changes to its own whistleblowing policies.

However, it is crystal clear that more has to be done. The events surrounding the Savile report on “Newsnight”, the failed digital media initiative and the remuneration of senior executives all seem to share a common theme: confusion around where the roles and responsibilities of

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the executive stop and those of the BBC Trust start. That is where I part company from the right hon. Member for Dulwich and West Norwood (Dame Tessa Jowell), who is not in her place. She seemed to focus on the people rather than the processes. There are issues around the ambiguity over the chain of command within the BBC, whether editorially or financially. That has had serious consequences for the corporation itself, and more importantly for licence fee payers, whom all of us in the Chamber represent.

The issue must be addressed, and it is no good waiting until a new charter in 2017 to act. The right hon. Lady floated the idea of mutualisation. It is right that she should have such ideas; as she reminded us, she was one of the architects of the current situation. Perhaps it is attractive to think in the abstract about changing structures, but I believe that here and now we have to make what we have got work. It is important that we get in place the right management who have the right judgment but also have the right governance structures to ensure that we can be proud of what the BBC is doing and are not concerned about how it is being run.

It was right that following the catalogue of failures that we have all talked about the BBC Trust and the BBC’s executive announced a comprehensive review of the BBC’s internal governance system and structures and the culture surrounding them. They are re-examining the relationship between the Trust and the executive with the aim of simplifying it and providing better, clearer oversight of the way our licence fee is spent. The review will build on the work that has already been done by the BBC’s new executive team to simplify the organisation, reducing not only the head count of senior management but the number of boards and committees to help get to a position of more transparency over the lines of accountability. As every Member of this House would expect, I will continue to keep the BBC’s structures and effectiveness under close review to make sure that it has effectively addressed these very serious and unacceptable problems.

Importantly, the BBC has already agreed in principle to changes to its relationship with the National Audit Office. I want this relationship to be strong and open while clearly protecting the BBC’s editorial independence. I note that the hon. Member for Bishop Auckland has concerns about this. She will know from what I have said and what has been agreed in principle that there are no proposed changes to the role of Government and Ministers in what has been put forward. However, this requires the Public Accounts Committee to act responsibly in what it does. I am sure that she will be able to discuss any concerns about this with the Chairman of the Committee, the right hon. Member for Barking (Margaret Hodge). The hon. Lady is right that the PAC has to act responsibly in how it looks at the BBC, as it does, I believe, in all its business. Concerns have been raised about whether such changes could threaten the independence of the BBC, editorially and managerially, but the existing management agreement is absolutely clear, that while the NAO is entitled to review any BBC decision, it is not entitled to

“question the merits of any editorial or creative judgment which is made by or on behalf of the BBC”.

That is a direct quote from the agreement that is in place. Nothing that I have suggested would change that, and I am clear that this important safeguard will be maintained.

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Chris Heaton-Harris: I serve on the Public Accounts Committee. In terms of how the NAO and the PAC dealt with executive pay, I like to think that that issue would not have come to light had the NAO not had the access that it now has under the agreement that we struck, which has proved to be of great public benefit.

Maria Miller: My hon. Friend is right. I am referring to some of the issues to do with the ability to intervene on things in a timely manner. I think particularly of the Entwistle payment, where we had to wait, I think, three months before it was able to be investigated. Those sorts of things do not help when we are trying to rebuild trust in the BBC.

So yes, lessons have to be learned from the last 12 months—some of the most turbulent times in the organisation’s existence—but we must also look to the future. We need to consider a whole host of issues that have been raised, such as convergence, which my hon. Friend the Member for Folkestone and Hythe (Damian Collins) raised, and the importance of the BBC’s independence in the future. I could go into a whole range of things, but I would like particularly to focus on the BBC’s vital role in our creative industries, which are a growing part of our economy. At a time when we are all focused on growing the economy and prosperity for the future, the BBC’s figures demonstrating that for every £1 spent on it through the licence fee there is £2 of value added in the economy is a good story to be telling for jobs, expenditure in the economy and economic opportunities. This represents the BBC generating some £8 billion of economic value for the UK.

As my hon. Friend the Member for Dartford explained extremely eloquently, the impact of the BBC goes far beyond the economic. My hon. Friend the Member for Vale of Glamorgan mentioned the BBC’s role in public health and the part that it played, extremely effectively, in raising awareness of AIDS. He asked whether the BBC could do further work on child safety online. That is an extremely interesting area. The BBC has already announced—I think in February—Share Take Care, which is an initial piece of work in that area; perhaps more will be done.

I pay tribute to my hon. Friend the Member for Congleton for her contribution, in which she spoke incredibly powerfully about the BBC’s role in taking concepts of democracy and human rights around the world. I would like to touch on the impact that the BBC can have on the international stage in representing us and playing a key role in how we are perceived as a nation. As well as stimulating the interests of businesses and tourists alike, through the work of the BBC we are spreading Britain’s reach and enhancing our reputation as a nation. In a recent survey of about 900 business leaders in the United States, India and Australia, nearly two thirds of respondents said that the BBC was the main way in which they found out about the UK, and over half said that they were more likely to do business with the UK because of what they knew about the BBC. That is extremely powerful, and important to understand. Therefore, when the BBC fails to adhere to the standards we expect, and does so repeatedly, the potential for damage is great and goes well beyond our shores. That is perhaps another reason why this debate has been so heated at times. As a brand and as a business, the BBC has an important and powerful role

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in helping us to preserve what is great about our nation and taking to a wider audience what Britain stands for today.

The BBC also has an important role to play in helping to preserve the culture and languages of our nations. In Cardiff, the BBC has built a drama production village in Roath that is now the BBC’s biggest drama centre in the UK, home to “Doctor Who” and “Casualty”. BBC Scotland’s presence on the banks of the Clyde has an equally positive impact. In terms of Welsh language broadcasting, in which my hon. Friend the Member for Vale of Glamorgan has a keen interest and about which we have many conversations, the BBC became S4C’s major funder in April this year. The BBC has an existing statutory obligation to provide at least 10 hours of programming a week, at a cost of roughly £20 million per year, and BBC Cymru content is regularly at the top of S4C’s viewing figures. This can be in the form of “Pobol y Cwm” or rugby coverage, the latter of which draws over 100,000 viewers, possibly confirming a stereotype about rugby being such a part of Welsh DNA—something that I can certainly agree with. I was extremely pleased with the recent spending review settlement in which the Government were able to confirm our support for minority-language broadcasting, maintaining S4C’s Exchequer funding at its current level and investing a further £1 million in MG Alba, north of the border. It is important that we are doing this given its significance to our minority languages in this country.

A number of right hon. and hon. Members raised the issue of local radio. My hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke) and I agree on many things, but on this we may have to disagree slightly. I will read Hansard to make sure that I clearly understood what he said. As regards digital radio, we have to be consumer-led, and that is the approach we have taken. It is important that we respond to consumer demand in that field. I am sure that he and I will continue to discuss the issue.

Alec Shelbrooke: To clarify, digital radio is an important platform, but a public service broadcaster must make sure that it can reach everybody, so if people cannot get digital radio we must make sure they can receive it on analogue.

Maria Miller: My hon. Friend makes an important point that this is about responding to the consumer. We are on common ground. Decisions have to be made at some point and we need to make sure that we take the consumer with us.

My hon. Friend the Member for Congleton addressed the role of local radio, particularly in Cheshire. She has campaigned hard and I do not have much to add at this stage. I hope she gets the answers she needs and that BBC Radio Manchester and BBC Radio Stoke pay heed to and focus on her powerful arguments.

The BBC has been and continues to be a creative and cultural powerhouse. It is totally unacceptable that recent scandals have overshadowed that. We need the BBC to learn from its mistakes, pick itself up, dust itself off and restore public confidence. The BBC Trust and executive must look to learn from the past and to build a BBC for the future that sets the highest possible standards in absolutely everything it does. We would expect nothing less.

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8.1 pm

Alun Cairns: In the limited time available to respond to the debate, I pay tribute to every Member who has spoken. I do not have time to go through them all, but I pay particular tribute to the Secretary of State and the Opposition spokesperson, the hon. Member for Bishop Auckland (Helen Goodman), who stayed throughout the whole debate, as well as to my hon. Friend the Member for Maldon (Mr Whittingdale), whose interventions and speech were extremely helpful. I hope that this debate will be significant for the Culture, Media and Sport Committee report, which we look forward to with great interest.

A whole range of issues have been raised and I will try to bring them together. Many focused on structure, transparency and the licence fee, and we have also focused on public service broadcasting and what comes from it. On transparency, I pay tribute to the Secretary of State, who has achieved an agreement with the BBC and the National Audit Office. We have been calling for that greater transparency for some time. It was resisted for a considerable period and featured in my 10-minute rule Bill last November. It seems that significant progress is being made and we look forward to the NAO’s reports. The director-general’s response to me last Friday suggests that it is happy to consider grater transparency, which may well mean the publication of invoices.

The structure is an important issue and I disagreed with much of what the hon. Member for Rhondda (Chris Bryant) said, other than one point, namely that all too often the BBC Trust and executive management appear to be one and the same and there needs to be a distinct separation. The BBC Trust needs to be the champion of the licence fee payer rather than the defender of the status quo against any criticism of it.

This is a useful time to start asking what we want from the future of public service broadcasting. Do we want the BBC to chase viewing figures and potentially compete with what the market can deliver, or do we want it to broadcast unique programmes that can appeal to wider audiences for whom the market will struggle to provide through the income it generates?

In conclusion, I ask the Secretary of State to take up my suggestion for the BBC to play a significant part in communicating with, and educating and informing, parents and children on online protection. That fits perfectly with the BBC’s unique status as well as its mission statements, and I hope that that is one positive that will come from this debate.

Question put and agreed to.


That this House has considered the future of the BBC.

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Natural Capital (England and Wales)

8.4 pm

Mr Graham Stuart (Beverley and Holderness) (Con): I beg to move,

That this House welcomes the Natural Capital Committee’s first annual State of Natural Capital report; and urges the Government to adopt the report’s recommendations and to take concerted action to embed the value of natural capital in the national accounts and policy-making processes as early as possible.

I declare my interest as chairman of the GLOBE International board and refer the House to my declaration of interests.

May I start by congratulating the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Camborne and Redruth (George Eustice) on his appointment, which gives hope to the independent-minded everywhere? I also thank the Backbench Business Committee, chaired by the hon. Member for North East Derbyshire (Natascha Engel), for granting this debate. Thanks are also due to the sponsors of the motion, representing all three main parties, including the former Secretary of State, my right hon. Friend the Member for Meriden (Mrs Spelman). I pay tribute to her and my hon. Friend the Member for Newbury (Richard Benyon) for the role they played in steering the White Paper through Government.

I am pleased to see that the shadow Minister with responsibility for the natural environment, the hon. Member for Brent North (Barry Gardiner), will be responding on behalf of the Opposition. Only a few weeks ago, it was he who persuaded the Backbench Business Committee to grant this debate, so it is gratifying to see that his efforts have been rewarded with such a swift promotion.

Today’s debate was inspired by the first report by the natural capital committee, chaired by Professor Dieter Helm. The report provides a framework—and a call to arms—for the Government to place a value on natural capital. Natural capital is the stock of resources derived from the environment in addition to geological resources such as fossil fuels and mineral deposits. These goods and services include material and non-material benefits such as crops, timber, water, climate regulation, natural hazard protection, soil function, mental health benefits from contact with nature, and biodiversity.

Without an economic price, too often natural capital has been treated as if it is of no value, yet it is a fundamental component of every country’s portfolio of wealth. For example, the UK has treated North sea oil purely as an income flow, with no allowance made for the fact that its use today depletes a national asset that cannot be replaced. By using it, we are, in effect, eating into our capital reserves, and it is right that we should acknowledge that when compiling our national accounts.

A private company is judged by both its income and its balance sheet, but most countries compile only an income statement showing their GDP and know very little about their national balance sheet on which it all depends. Even the income measure itself—GDP—fails properly to represent natural capital. Forestry provides a good example of this. Timber resources are counted in national accounts, but the other services forests provide, such as carbon retention and air filtration, are simply ignored. This all matters deeply.

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Caroline Lucas (Brighton, Pavilion) (Green): I congratulate the hon. Gentleman on securing this important debate. Oscar Wilde famously spoke of those who know the price of everything and the value of nothing. If valuing nature in the way suggested will halt the current decline of our precious wildlife and habitats, it is to be welcomed, but does the hon. Gentleman agree that we need very strong safeguards, including in the planning system, to ensure that by putting a pound sign on priceless ecosystems such as ancient woodlands we do not inadvertently open the door to their destruction?

Mr Stuart: I am grateful to the hon. Lady for her intervention and she is right to sound a warning note. This whole area is embryonic and it needs to be treated very carefully to make sure that we do not end up with the exact opposite outcomes to those we seek by introducing such thinking in the first place.

In setting up the NCC, the Government said that their ambition was that this should be the first generation to leave behind a superior natural environment to the one it inherited. During the 20th century we placed unprecedented demands on global ecosystems. World population grew by a factor of four. Carbon and sulphur dioxide emissions increased by a factor of 10. Fish catch escalated by a multiple of 35. This has had serious consequences.

In 2011, the first UK national ecosystem assessment found that one third of the UK’s ecosystem services were declining. It showed that if the UK’s ecosystems were protected and enhanced, they could add at least an extra £30 billion to the UK economy. By contrast, neglect and loss of ecosystem services may cost as much as £20 billion a year to the economy. As the NCC report says:

“The risk is that rather than underpinning future growth and prosperity, degraded natural capital assets will act as a break on progress and development.”

The situation is worse in many places overseas. The World Bank estimates that in 2008, the costs of natural capital loss could have been as high as 5% of national income in Brazil, 8% in India and 9% in China. It found that the UK’s natural capital losses stood at just over 2% of national income, although that number is almost certainly incomplete.

The NCC report concludes:

“Until this is addressed, our national accounts will continue to provide erroneous signals about future economic prospects.”

To that end, the NCC recommends that the work being undertaken by the Office for National Statistics to embed natural capital in the UK’s environmental accounts should be given the “greatest possible support” right across Government.

The NCC’s report also recommends that the Government should initiate a programme to provide high-quality evidence on the economic value of changes in natural capital to inform cost-benefit analyses. Let us consider land use change. That may involve alterations in agricultural outputs, which have market prices, but it may also lead to changes in other factors which do not, including outdoor recreation, carbon storage and water quality. The best way to compare changes in such vastly different goods and services is to compare them in common, monetary terms. Developing a system that can achieve that reliably will not be straightforward.

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There has been recent progress in this area. The Government’s 2011 natural environment White Paper made a welcome commitment fully to include natural capital in the UK environment accounts, with the first changes coming into effect this year. On the international stage, the adoption by the UN Statistical Commission of the system for environmental economic accounts has been a major step forward.

The prize is considerable. Measuring and accounting for changes in natural capital assets, and improving the valuation of those changes, would help to support better economic decision making. It would improve the delivery of major public policy goals, such as food and energy security, climate change mitigation and adaptation, and public health and well-being. In saying that, it is crucial that natural capital accounting is explained as a way of providing detailed information for better management of the economy. That needs to be done in a way that is coherent internationally but that resonates at home with a public who are concerned about seeing the more immediate benefits of economic growth.

This is not some doom-laden call for us to trade off economic growth for environmental protection. Pre-Victorian England was a low-carbon economy, but it did not deliver too much by way of prosperity. Rather, this is about demonstrating that better policy can result from integrating the value of natural capital into decision making, especially in a world whose population is rising inexorably.

That applies to Government and the world of business. The NCC report calls on the Government to work with leading companies, accounting bodies, landowners and managers to develop and test guidance on best practice in corporate natural capital accounting. As the chief financial officer of Unilever, Jean-Marc Huët, has said:

“The current financial reporting model only tells half the story about a business’s true performance and potential. The numbers say little of its reliance and impact on natural capital, factors that will increasingly influence competitiveness in a resource-scarce world.”

The NCC report is therefore an important document at all levels of policy making: national, local and commercial.

It was particularly welcome that the publication of the NCC report coincided with the launch earlier this year of the GLOBE International natural capital initiative. That is an international policy process driven by national parliamentarians, with the aim of incorporating the valuation of natural capital into policy and economic decision making.

In June this year, legislators from 20 countries participated in the first GLOBE natural capital legislation summit in the Bundestag. The summit considered the international context of the forthcoming UN post-2015 sustainable development goals, and how natural capital accounting should be addressed as a specific goal as well as a cross-cutting theme that affects the delivery of all development goals. For those who are living on less than $2 a day, half of all GDP comes from the environment and its biodiversity. It was therefore encouraging that goal 9 of the recent report of the high-level panel of eminent persons on the post-2015 development agenda, which was co-chaired by my right hon. Friend the Prime Minister, emphasised the importance of the sustainable management of natural resource assets to poverty eradication.

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The GLOBE summit in June called on Governments everywhere fully to incorporate the value of natural capital into national accounting frameworks by 2020. It saw the publication of the first GLOBE natural capital legislation study, which reviewed the measures that eight countries, including the UK, are taking to integrate natural capital into policy and economic decision making. Unquestionably, there is a long way to go before natural capital is incorporated in national and corporate accounting across the world. However, the GLOBE study shows that the direction of travel is clear and that the eight countries covered, including the UK, are leading the way.

Embedding the concept of natural capital could mark a milestone on the road towards a more nuanced and complete understanding of our nation’s resources and the impact of our management of them. I congratulate the Government on the letter sent by the Secretary of State for Environment, Food and Rural Affairs and the former Economic Secretary to the Treasury, my hon. Friend the Member for Bromsgrove (Sajid Javid) in response to the report. I welcome its statement that

“The measurement, valuation and good management of our natural capital is crucial if we are to achieve sustainable economic growth and enhanced wellbeing in future.”

However, is that to be the only response from the Government, other than in this debate? My Select Committee insists on a formal Government response to each recommendation that is made in each of its reports. Surely these annual reports deserve just as serious and thorough a response.

Do the Government agree that there is a need for a framework with which to define and measure natural capital? If so, do they think that progress is being made quickly enough? Will they set up a risk register for natural capital, as is recommended in the NCC report, and if so, when? Will they give the Office for National Statistics the “greatest possible support” in its efforts to incorporate natural capital into the nation’s accounts, as recommended by the NCC?

The valuation of natural capital goes to the heart of the biggest question facing humanity: can we adjust our behaviour so as to live within the constraints of living on one planet? Can we live in balance with the natural world, or will we insist on testing its limits?

8.16 pm

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): I congratulate the hon. Member for Beverley and Holderness (Mr Stuart) on securing the debate and on his opening remarks. I also pay tribute to the work of the natural capital committee.

It is a pleasure to take part in this debate on the state of natural capital in England and Wales. I am always delighted to discuss the natural capital and resources of my country. On the face of it, the NCC report makes sensible recommendations, with which I am sure the new Welsh natural resources body, Natural Resources Wales, and the people of Wales would agree. My party would certainly agree with

“Genuinely embedding the value of natural capital into the fabric of economic decision-making”.

I question the sincerity of the UK Government’s welcome for the recommendations, given their fascination with marketising, monetising and privatising everything

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in their path. It is bizarre that they have seemingly been converted to the value of natural capital to the economy and human well-being. Only last year, they tried to sell the English forests and they are currently aiming to stimulate the market for water resources and embarking on a potentially unsafe and destructive dash for shale gas.

Any discussion of the natural resources and natural capital in Wales must concentrate on the fact that the powers over this important area are still hoarded at Westminster in the centralist grip of the British state. Wales should be able sustainably to exploit its natural and mineral resources for the greatest possible environmental, social and economic gain. However, the National Assembly for Wales has limited powers over natural resources and energy generation. The people of my country are thus unable fully to benefit financially from the exploitation, extraction or transfer of natural resources. Such financial benefits could be used to create a stronger Wales that is more economically self-sufficient. Responsibility for the planning, licensing and oversight of all resource extraction, exploitation and transfer in Wales should therefore be devolved. Some aspects of environment and natural resource policy are devolved to Wales, but the crucial ones are not. Today, the Westminster Government are threatening a grab for Welsh natural resources in the form of shale gas exploitation, water extraction and energy production, all without Wales being in control or her people fairly compensated.

Water is a highly emotive issue in Wales, and the flooding of the Tryweryn valley to provide a reservoir for Liverpool Corporation casts a long shadow over the modern history and politics of Wales. Many still see that as the catalyst for Welsh political self-realisation, and it spurred on a generation to secure an element of home rule, convincing them that Westminster would never truly work for Wales. That culminated in the struggle for a national assembly at the end of the last century, and the process carries on today. It is safe to assume that I would not be here today representing Plaid Cymru were it not for the episodes in Tryweryn. Only last night on S4C, there was a terrific programme about the fight against the potential flooding of the Gwendraeth valley in my constituency, and the battle of Llangyndeyrn, in which the local community heroically fought against Swansea Corporation’s attempt to flood prime agricultural land to provide water for Swansea.

Wales is currently not in full control of its resources. The Crown Estate and energy planning above 50 MW remain the preserve of the British state, meaning that we are unable truly to have ownership in any sense or fully to benefit from our natural capital. That is why Plaid Cymru has been making the case for those areas to be devolved as part of the cross-party UK Government Commission on Devolution in Wales. Polling carried out by the commission—the most detailed ever undertaken in Wales since devolution—revealed that an overwhelming 70% of the people of Wales want full devolution on energy policy. Any political party that ignores that does so at its peril.

Surely the people of Wales, at the bottom of the economic table for the nations and regions of the UK, should be fairly compensated for the natural capital that our land holds. All around us we see Welsh natural resources plundered without economic gain for its people. Current plans for fracking, and more recent attempts at

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“stimulating” the market in water, present a real threat to the natural capital of Wales. The water of Wales may not match Scotland’s oil in terms of wealth, but it is a resource with value and the people of Wales should receive a fair return. Although the upcoming Water Bill intends to leave Dwr Cymru—or Welsh Water—intact, Severn Trent Water cuts a swathe into Welsh territory, and could mean that the water of Wales is extracted for vast profit in future. With Gulf state sovereign wealth funds looking to buy Severn Trent Water and clearly seeing it as an investment opportunity for the future, Wales and its people should not be left at a disadvantage.

Full territorial integrity should be recognised, and it should be for the people of Wales to decide what happens to the water of Wales through our democratic institution, the National Assembly for Wales. It is therefore crucial that full control of water is devolved to Wales. It is a continuing disgrace that the Labour Government cynically blocked full devolution of water policy in the Government of Wales Act 2006, leaving the power of veto with London Ministers. Full control over water would finally end the grossly unfair system enshrined in the Water Act 1973, and perpetuated by the 2006 Act, in which water was lent to Severn Trent Water at a scandalously low rate of 5p a year for 999 years and the Secretary of State for Wales was empowered to overrule the National Assembly for Wales on matters of Welsh water supplies to England.

Plaid Cymru has put forward the case for the devolution of the Crown Estate to Wales so that our natural resources are secured for the benefit of the people of Wales. Last year the Crown Estate in Wales more than doubled its surplus from £2.5 million to £6.5 million. The Crown Estate is also set for a multi-million pound windfall from the development of wind farms on Crown land and on the sea bed around Wales. That should be going to the Welsh Government to help fund Welsh public services and invest in Welsh infrastructure.

The Westminster parties are concerned with helping those who seek to extract maximum profit from natural capital and resource, in spite of recommendations contained in reports such as that featured in today’s motion. Only Plaid Cymru puts Wales first and fights to ensure that the people of Wales control and benefit from their own natural resources.

8.23 pm

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

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

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

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

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

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

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

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

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

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

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

One approach to compensation would involve the offsetting of losses, recognising the irreplaceability of some wild species and habitats. There is a significant opportunity to demonstrate that with the proposed high-speed railway. As there is an inevitable loss of green space to build the new line, it should be possible to create a significant offset for the loss of that natural capital. Not everything can be replaced. Ancient woodlands along the line of route will be lost for ever—more’s the pity—but new woodlands could be planted to buffer those at risk of being eroded and address the fragmentation of woodlands, which makes it difficult for species to migrate and sustain themselves. There could be a significant restoration of damaged natural capital. For example, we could restore the Tame valley, a polluted river valley on the

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east side of Birmingham that follows the spur of the new line into Birmingham city centre. Plans to deliver such natural capital regeneration have been drawn up by Arup, the engineers, and a professor of geography from Birmingham university—I commend them to my hon. Friend the Minister. Offsetting is a tool that could do a great deal to bring that vision about.

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

8.34 pm

Joan Walley (Stoke-on-Trent North) (Lab): It is absolutely right for Parliament to be debating the first annual state of natural capital report, and for the chair of the all-party group for GLOBE UK, the hon. Member for Beverley and Holderness (Mr Stuart), to be leading the debate in Parliament. GLOBE has shown true leadership, both in the UK and internationally, in getting natural capital on to the agenda, and it is vital that the Government now take a lead. I congratulate the hon. Gentleman on securing this welcome debate. Given the way parliamentarians work, it is important that our constituents have an opportunity to have their voice, on how they protect nature, represented here in Parliament. For all those reasons, I value this debate.

As the right hon. Member for Meriden (Mrs Spelman) pointed out, there is a conundrum. The natural capital committee’s work is a centrepiece of the natural environment White Paper. The extent to which the NCC informs policy is a key test of the White Paper’s ability to truly achieve the step change in how we value nature as a society. As Chair of the Environmental Audit Committee, a key issue for me is whether the Treasury is central to that process. I believe that it should be. The right hon. Lady set out how the NCC was established in May 2012 as an independent advisory body to Government, reporting to the economic affairs committee of the Cabinet Office, which is chaired by the Chancellor. In an ideal world, a Treasury Minister would be sitting side by side with the Department for Environment, Food and Rural Affairs Minister to answer the debate, because this is a cross-cutting issue. We are intent on drawing to the Government’s attention that it is no good DEFRA having ownership of the agenda; it has to be reflected in each and every Department of Government. This is one challenge that Parliament faces.

Caroline Lucas: I completely agree with the direction in which the hon. Lady is going, but does she agree that one of the NCC’s crucial recommendations is the need

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for changes to the Treasury’s perhaps ironically named green book to allow decisions to take into account natural capital, even where robust valuations are not likely to be available? Does she agree that that is crucial? Unless the green book is amended in that way, with exactly the kind of integration she is talking about, economic and environmental concerns simply will not happen.

Joan Walley: As always, the hon. Lady anticipates what I am about to say. This has been a long-standing matter of concern both to myself and to the Environmental Audit Committee, which I chair. It is vital that the mechanism for integrating natural capital values into policy in the UK is reflected in the green book. I understand, as far as the green book is concerned, that a review is currently in progress.

Mr Graham Stuart: The hon. Lady is absolutely right to mention the lack of representation on the Treasury Bench by a Minister from the Treasury. My right hon. Friend the Member for Meriden (Mrs Spelman) identified correctly the importance of having the Chancellor at the head of this process, so it is essential that we have a Treasury Minister on the Front Bench, too.

Joan Walley: There is agreement on this on all sides of the House. If policy decisions from the Treasury lock us in to investment for many years to come, we will be prevented from including the true value of natural capital in how those decisions are reached. Parliament has to find a way of having shared responsibility reflected in the Chamber. I hope the commitment, which I am sure we will hear from the Minister when he comes to reply, will be reflected in the Treasury, and that the Secretary of State for Environment, Food and Rural Affairs understands that the debate is about the economy not just in rural areas, but in each and every part of regeneration policy.

Neil Carmichael (Stroud) (Con): I am a member of the Environmental Audit Committee, of which the hon. Lady is the Chair. Does she agree on the importance of incorporating this discussion in the debate on green finance, on which we will be doing a report shortly? Does she also agree that it is pivotal that we link up with the Treasury, DEFRA and all other Departments, because this needs to be a joined-up process?

Joan Walley: I absolutely agree. Certainly on green finance, this needs to be embedded at the heart of not just the Treasury, but the Department for Business, Innovation and Skills. When the right hon. Member for Meriden, who was instrumental in setting up the NCC, gave evidence before our Committee, she absolutely understood the importance of the Treasury and Cabinet Office taking on this agenda. I do not know how closely she is watching how the Government are following through on her work, but it is vital that the Minister picks up those responsibilities, which were put on the drawing board when the NCC was established, and follows up on all of this.

The green book, which is under review, provides a good starting point for the cost-benefit analysis, but it does not include natural capital within its cost-benefit guidance, and it is important that capital stocks, including natural capital, be included in the review as potential

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constraints alongside the social cost-benefit analysis. What discussions has the Minister had with the Treasury on that? I know that the Woodland Trust, in particular, shares our view.

The NCC contains many recommendations. As GLOBE said, one of the key questions is: what should the Government be doing? I would like them to commit to incorporating the value of natural capital in international accounting and policy-making processes by 2020 at the very latest. Will the Minister comment? In that regard, the work of the Office for National Statistics is critical, and certainly my Select Committee will be taking evidence on that and looking to see what progress is being made.

It is not just about what we do nationally, however; it is about what happens internationally, as we heard just now. The Government need to take up the NCC’s report at the international level. I think of the work on the sustainable development goals, which, as we heard from the hon. Member for Beverley and Holderness, followed the Rio+20 conference in Brazil last summer. Securing appropriate recognition of natural capital accounting within the United Nations is important. As we have heard, so far the post-2015 high-level panel has emphasised the importance of the sustainable management of natural resource assets with regard to poverty eradication. It is important, however, that the Government go one step further. As the Government take the sustainable development goals further, will the Minister ensure that all capital accounting, including of the natural environment, is addressed as a specific goal?

Progress at the UN can be made only if we make corresponding progress nationally, and here I wish to flag up the role of business, because this is not just about what the Government do; as many Members have said, it is about what business does as well, and many businesses accept that the global economy is entering a new era.

The Prince’s Charities “Accounting for Sustainability” report was prepared in the run-up to the Rio conference and made a positive impact on the discussions that took place there the summer before last. In it, His Royal Highness the Prince of Wales said:

“There was a time when we could say that there was either a complete lack of knowledge, or at least room for doubt, about the consequences for our planet of our actions. That time has gone. We now know all too clearly what we are actually doing and that we need to do something about it urgently. Better accounting must be part of that process.”

In that report, and in the report that we are debating this evening, the business case is made for the integration of environmental and social information. Chief finance officers across industry are recognising that ethical breaches can collapse a company in no time. Work already under way by leading companies is reinforcing the natural capital committee’s recommendation for more work with leading companies’ accounting bodies, landowners and managers to develop and test guidance on best practice in corporate natural accounting. Will the Minister tell us how the Department for Business, Innovation and Skills is dealing with those issues?

From the perspective of the Environmental Audit Committee, given our current inquiry into fossil fuel subsidies, it is pertinent that the Government should pay particular attention to the NCC’s recommendation for a review of the extent to which natural capital is being effectively priced and, in particular, for an examination

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of the scope for reducing perverse subsidies. What dialogue is the Minister having with the Department of Energy and Climate Change on that issue?

The ways in which the Government take up the initial recommendations will depend entirely on the pressure that exists at local level. Whatever the Government do will go further if there is support for their actions locally. I commend a recent report from the Royal Society for the Protection of Birds that was launched here in Parliament last week. It sought to find out how connected to nature the children of the UK were, in an innovative three-year research project to establish a clear definition of connection to nature and, more importantly, a method for measuring it. The research highlights a wide range of benefits for children, society and the environment.

We all accept that nature is in trouble. Indeed, we had a debate in Westminster Hall last week on wildlife crime. The hon. Member for Richmond Park (Zac Goldsmith) pointed out that the more we understand about wildlife, the better we can value and protect it. So it matters a great deal if we, as a nation, do not understand how much trouble nature is in. With 60% of our species in decline, the protection of wildlife must begin at home, in our childhood. The research study examined a representative sample of young people. In it, the desirable score relating to being in touch with nature was 1.5, but that score was achieved by only 21% of children. There were big differences between boys and girls, between different parts of the country and, in particular, between urban and rural areas.

I happen to think that this matter needs to be addressed by the Government. We urgently need to amend our education legislation to make the teaching of sustainable development a duty. Many people agree with me on that, including educationists and practitioners who run field centres. The national curriculum can no longer overlook an understanding of the natural world. If the Government were to take on board that sentiment, it would chime with the direction of travel of the natural capital committee’s recommendations, and I ask the Minister to consider this possibility and to take up the matter with Ministers in the Department for Education.

Finally, there is a need for a long-term policy framework that supports and incentivises organisations, including financial institutions, to value and report on natural capital. Arguably, however, the committee’s report is a statement of intent rather than a clearly defined route map. At this stage, it is much more about generalities and intentions than about clear recommendations. As the committee moves on from its first report, it needs to be much more direct and much more forward, and it needs to build on its clear set of principles by making specific recommendations—advice on offsetting, for example.

When the Government come to review the natural capital committee in 2014, I hope that they will take some of those issues on board. The natural environment White Paper sets out an ambitious vision for nature and our natural capital assets. Genuinely embedding the value of natural capital into the fabric of economic decision-making is crucial to achieving that vision. The Government must now build on the work of the natural capital committee.

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8.50 pm

Roger Williams (Brecon and Radnorshire) (LD): I, too, congratulate my hon. Friend the Member for Beverley and Holderness (Mr Stuart) on securing this evening’s debate. I thank the right hon. Member for Meriden (Mrs Spelman) for speaking so knowledgeably about this issue; she was responsible for seeing much of what we are discussing tonight come to fruition.

The coalition agreement stated:

“The Government believes that we need to protect the environment for future generations, make our economy more environmentally sustainable, and improve our quality of life and well-being.”

Following on from that, the Government published the White Paper, “The Natural Choice: securing the value of nature”, a recommendation from which led to the setting up of the natural capital committee to provide independent advice to the Government on these important matters.

It was done against the background of a previous century in which the world population had increased by 50%; there was a fortyfold increase in industrial output; and an increase of 16 times in the amount of energy used, greatly increasing emissions from sulphur and carbon. The natural capital was obviously put at risk by such a great increase in activity, and no policies were in place to ensure that it could be sustained and maintained.

Let me draw a comparison between us getting to grips with the concept of natural capital now and what happened at the first Rio conference when the issue of sustainability was first put forward. It was difficult at that time to get people to understand what was really meant by that concept, and I think we are still wrestling a little with it at the moment. Sometimes the interpretation of sustainability is used to promote a particular argument or project that we might wish to advance.

I was in a little chapel in Bryn Pont in Pontfaen in my constituency last night, where the Breconshire young farmers were having their harvest festival. They took the service themselves, being wonderfully able people. As I listened, I was thinking that, because of their role in land management and land ownership, they will be the people on whom much of this responsibility will fall. I wondered how they would grasp this concept of natural capital.

I am sure that the people in the committee who wrote the report are very able and that they followed fully the academic rigour and, indeed, the financial accuracy necessary for such reports. However, I think that the committee has a little way to go when it comes to explaining the subject to other people. It will be advising the Government on policy, but unless people understand and can align themselves with that policy, it will be extraordinarily difficult for them to deal with it. For example, the report offers the following:

“Definition of natural capital asset: Define the component of natural capital under consideration, the temporal and spatial scales being considered and the relationship between the natural capital asset and the services it provides, directly or in conjunction with other assets”.

I am not sure how that can be translated into user-friendly language. What I am sure of is that a great deal of work will be required to enable people to associate themselves with the project.

We have been given an example of the way in which natural capital can be used to assess the effect of a particular development, and then to offset it by replicating

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an environment or ecosystem that may have been damaged by that development. I think that the concept has a great deal to offer. I know that the Secretary of State for Environment, Food and Rural Affairs is particularly interested in using offsetting to allow economic development to take place in areas where it has been problematic in the past, and I attended a debate in Westminster Hall during which the Under-Secretary of State for Communities and Local Government, the hon. Member for Grantham and Stamford (Nick Boles)—who is responsible for planning—spoke about developments in national parks and how they could be facilitated. However, I think that we must approach the process with considerable caution, because it is sometimes almost impossible to replicate ecosystems that have been damaged by development. It may work in some instances, but in others the environment will be so pristine that it will be impossible to replicate it elsewhere.

Mention has been made of the value of children and young people who have experience of the countryside and take part in activities there. On Saturday night I attended the first showing in Wales of a film called “Project Wild Thing”, which explained how we could encourage young people and give them opportunities to make the most of their experience in the countryside. There is also a National Trust programme entitled “50 things to do before you are 11¾”. I shall be sending a copy to my grandson, who has already undertaken one or two of the recommended activities. If we ensure that our natural capital can be maintained, it will greatly benefit the development and health of our children.

Joan Walley: Does the hon. Gentleman agree that it is important for all Members to do their utmost to arrange screenings of “Project Wild Thing”, which was launched by the Royal Society for the Protection of Birds in the House of Commons last week?

Roger Williams: I certainly do. It is a very inspiring film. People will interpret it in many different ways, but I am sure that every way in which it is interpreted, and implemented, will enable children to benefit from it.

I think that the development of the concept of natural capital will be of considerable use to the Government when they are setting policy. However, one Member said that while it was some use if implemented nationally, it would be of greater use if implemented internationally.

Some 12 of the 13 recommendations in the Committee’s first report are process recommendations—they are about the way this should be approached—but the 13th recommendation is about agriculture. It recommends that the common agricultural policy should be radically reformed and that as much of the pillar 1 money as possible should be moved to pillar 2. I think that many of us would agree with that, but it depends on what the pillar 2 projects are. Also, it would be entirely inappropriate for policies to be implemented in this country while we have a single market that would put our farmers at a disadvantage to those on the continent.

There is a graph in the report showing the wheat yields in this country. They have increased from about 1 tonne an acre to about 3 tonnes or more. Sadly, however— and chillingly in some respects—there have been reductions in wheat yields in this country in the last two years. For those two years we will be net importers of wheat, whereas we have been a wheat exporter in the past.

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We talk about farmers delivering public services. I think the greatest service the farming community can deliver is a sustainable supply of food at an affordable price. There is therefore a balance to be struck between food being produced by farming and the protection of the environment.

This concept will be very useful and very informative for the Government in delivering their policies, but we need to show that the public understand the concept as well, and are able to engage with it.

9.2 pm

Zac Goldsmith (Richmond Park) (Con): I thank the Backbench Business Committee for finding time for a debate on this very important issue, and I congratulate the hon. Member for Brent North (Barry Gardiner) and my hon. Friend the Member for Beverley and Holderness (Mr Stuart) on having secured these valuable couple of hours. It is a real pleasure to follow the speakers who have already contributed, and I agreed with so much of what was said that I have been radically cutting back on the points I wish to make in order to avoid boring the House to death. I will, however, make a few general remarks.

The conservationist John Aspinall died a few years ago. Before he died, he wrote a letter in which he said:

“Nature is the bank upon which all cheques are drawn.”

It is a simple and utterly unarguable observation. Everything we have is ultimately provided by the natural world— by ecosystems—but in modern society, with all its extraordinary cleverness and genius, we have never bothered developing the tools for valuing the very thing on which we all depend.

We are nothing without the natural world, yet concern for nature is seen, at a stretch, as a luxury add-on. That thinking permeates across the board. How many times have we heard our Chancellors caution that the economy must always be prioritised above the environment, as if somehow the two can be separated—as if we can flourish economically without that annoying thing called the environment? It is an extraordinary flaw in modern thinking.

That flaw is, perhaps, understandable for our recent ancestors. They may have seen the world as simply too big to pollute—they may have thought the oceans were so deep that it did not matter how much we threw in them, and that there was so much forest that it did not matter how much of it we cut down. There is an explanation for the madness of previous generations, therefore, but not of today’s. With 15 of the world’s biggest fisheries collapsed or on the brink of collapse, with the world forest map visibly shrinking every year, with fresh water shortages affecting well over 100 countries, and with human trash clogging up our oceans—visible now even from satellite—it is obvious even to a child that we are going to hit a wall.

Reconciling the market with the environment is a prerequisite for our survival as a species. It is our defining challenge. This slightly nerdy debate we are having about valuing natural capital is a central part of that.

In practical terms, valuing natural capital is about putting a value on the free services provided by the environment, and not just valuing nature after it has been cashed in. My right hon. Friend the Member for Meriden (Mrs Spelman) gave an excellent speech on the value of pollinators to British agriculture, in which she

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said that the cost would be £400 million a year were they to stop doing their valuable work. The benefits that wetlands provide to water quality are estimated at about £1.5 billion per year. Other examples of natural capital include the value of natural flood plains in terms of flood defences. The UK national ecosystem assessment in 2011 calculated that if the UK’s ecosystems were properly protected and enhanced, they could add an extra £30 billion to the UK economy. The assessment also warned that:

“Neglect and the loss of ecosystem services may cost as much as £20 billion to the economy per year”.

Even now, at this early stage, we can see practical examples of what happens when natural systems are valued. We have heard about some examples, but I wish to give a couple more. Old flood defences on the Humber estuary have been re-engineered to allow controlled flooding in order to prevent further flooding of towns and land downstream. The scheme has created 440 hectares of valuable new wetland habitat and provides about £400,000 each year in flood protection benefits. That is a straightforward example of what valuing natural capital means. In Cornwall, South West Water has found that paying farmers to reduce the amount of pollutants from their land entering rivers provides benefits that, I am told, are 65 times more than the initial cost. So the farmers benefit, the environment benefits and the water companies benefit—this really is win, win, win.

I wish to mention one other example from slightly further afield—since we are talking about the world and not just this country, I am sure that I will be allowed to do so. Vietnam has had a policy on payment for forest services since 2008, through which hydro plants, water companies and tourism companies must pay for the use of forest services. So, for example, more than $2 million is paid each year for the protection of the 276,000 hectares of forest in the Quang Nam province, of which 85% goes directly to local residents. The hydro companies protect their capital investments, because the trees prevent siltation and erosion, which ultimately shortens the life of their investment; the water companies have steady supplies of clean water; tourism flourishes; and local people have jobs and security. Again, everyone wins; the policy is a beautiful example of what this slightly abstract thing we are discussing means on the ground.

I want to acknowledge the work of Dieter Helm and the independent natural capital committee, and of my right hon. Friend the Member for Meriden, who showed real, direct commitment in her time in office and has, without doubt, moved this issue on profoundly. However, this thinking needs to become much more mainstream in government and much more embedded in the decision-making process. We can all agree that we have a long way to go on that. To see that, we need only consider the Government’s impact assessment for the first 31 marine conservation zones, which calculated the costs to industry—about £1,000 per year—but failed to quantify the wider benefits of improving the health of the ecosystems. It did not look at how the zones added to the value of tourism and the fact that a healthy marine environment creates seafood. Those things were left out of the calculations.

Unless the work of the NCC begins to have a real impact on decisions made across government, it can only ever be an abstract or academic exercise. I am not

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yet convinced that the key Departments have properly bought in to this. Only a few weeks ago, a number of senior civil servants from the Department for Business, Innovation and Skills appeared before the Environmental Audit Committee. I asked them at the end of our session, while things were still being collected and recorded, whether any of them had met up with anyone from the NCC. Not only had they not done so, but I think we can safely assume from the response we got that they did not even know what the NCC was. Would it not be wonderful if next time we debated this issue—I mean this as no disrespect to the great Minister we have on the Front Bench today—the Benches were packed and we were talking directly to the Chancellor? That would be a whole new ball game.

On paper, I think that the UK is providing real leadership —that is not in doubt—and I know that other countries are watching our progress. My one request to the Minister is to persuade us, and anyone watching this debate, that the Government as a whole really are ready for the challenge and really have incorporated this thinking across all the Departments.

9.9 pm

Sir Andrew Stunell (Hazel Grove) (LD): I want to make just a few brief comments. I add my congratulations to the right hon. Member for Meriden (Mrs Spelman) on all the work she did as Secretary of State in the Department for Environment, Food and Rural Affairs. As I was a Minister in the Department for Communities and Local Government at the same time, I particularly commend her initiative in setting up a regular breakfast meeting of green Ministers across Government, which gave an opportunity for some of the cross-fertilisation of ideas that the hon. Member for Stoke-on-Trent North (Joan Walley) requested. I hope that the Minister can assure us that those cross-governmental ministerial links are being maintained. That is an important part of ensuring that the intention is translated into reality.

I also commend the natural capital committee for its work and the focus it is bringing to this matter. I want, however, to pick up the point about how the governance will be managed. It is good that the committee is reporting to the economic affairs committee of the Cabinet, one of the most senior in the Government and one that is chaired by the Chancellor. As the hon. Member for Richmond Park (Zac Goldsmith) said, however, the meaning and context of that do not necessarily penetrate far into the civil service machine.

If there had not been a request from hon. Members to the Backbench Business Committee, the subject would not have come before Parliament to be debated and discussed at all. Will the Minister give us some idea of how he believes the Government will manage the governance of the process? Will they ensure that when recommendations are made those involved are given serious professional support by the civil service in making presentations to the economic affairs committee and that the recommendations do not come in as item 13 on a busy day but get some serious consideration with proper ministerial input?

There is no doubt that to do what has been asserted in the natural environment White Paper and subsequently by the natural capital committee does not require merely that an existing Government process should carry on while just being slightly better. Doing that needs a fundamental and complete shift in Government thinking,

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and that is not likely to be delivered by an external committee reporting to a Cabinet committee. It requires clear ministerial direction and, as the hon. Member for Stoke-on-Trent North said, that is needed across Departments of every type and shape.

I hope that the Minister can give us those assurances. I know for a fact that the Government’s intentions are excellent. We have laid some good foundations, but if we want some good outcomes I believe that getting the governance right will prove to be the key to success.

9.12 pm

Barry Gardiner (Brent North) (Lab): I refer Members to my declaration in the Register of Members’ Financial Interests.

I would normally congratulate the hon. Member for Beverley and Holderness (Mr Stuart) on securing the debate, but of course he spilled the beans and said that I was the one, when I was on the Back Benches, who went before the Backbench Business Committee. I congratulate him instead on his excellent speech. I also want to take this opportunity, which is the first I have had, to welcome the Minister to his new role and to pay tribute to his predecessor, the hon. Member for Newbury (Richard Benyon), who was not only unfailingly courteous but totally committed to this agenda.

Every society is defined by two things: what it creates and what it refuses to destroy. The only thing that sets us apart from our natural environment is our ability to reflect on our own place within it, but for all our cleverness we remain dependent on the extraordinary bounty that nature provides. The food and water that sustain us, the air that we breathe, the raw materials that we use as fuel and clothing or to construct our homes are only the most obvious of nature’s benefits. Equally important are the processes and services that purify our water, break down our waste, pollinate our crops and provide us with recreation and aesthetic or spiritual fulfilment. We have the right to use and enjoy the benefits of that natural capital, but that right gives us no licence to prevent our children from exercising a similar and equal use and enjoyment in the future.

It is one of the imperative responsibilities of Government to be good stewards of the present and even better guardians of the future, yet the facts show how far we are from being good stewards. In the UK our native flora and fauna have been in decline for over 50 years. Agricultural intensification in the 1970s is often pointed to as a key turning point, but the truth is that for more than 200 years, as we chopped down our forests and used coal to drive the world’s first industrial revolution, we moved from a pastoral agrarian society to an advanced city-based economy that has failed to value biodiversity. In that time hundreds of species of plant and animal have been lost from our country. We need a radically different approach not just to halt, but to reverse that decline.

One of the great advances in these two centuries is the progress we have made in classical economics. When Adam Smith wrote “The Wealth of Nations” or even when Karl Marx wrote “Das Kapital”, they understood capital to mean simply plant, machinery and money. But we have come to understand that there is such a thing as human, social and intellectual capital. We have come to realise that a well-functioning judicial system or an excellent education system are just as much a part

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of the wealth of a nation as its roads, its ports or its factories. The irony is that economists and economies have not yet caught up with the most important capital of all—natural capital. Virtually every other form of capital is derived in some way from natural capital and we can define it as the benefits that accrue to human society from the different species of life that inhabit the natural world.

The right hon. Member for Meriden (Mrs Spelman), to whom I pay tribute, spoke about pollination services. I remember that in 2006, when I was Minister with responsibility for biodiversity, I put £6 million into the Department’s budget submission for research into diseases in honey bees. When it came to agreeing DEFRA’s budget, the Treasury was not impressed. It insisted that times were hard and that with my £6 million it could create a new community hospital for people’s diseases, rather than worrying about bee diseases. I of course told the Treasury officials that I would be happy to cut the £6 million, but I asked them if they were aware that it would cost them £194 million a year. I explained that a recent National Audit Office report had pointed out that diseases in the honey bee population had reduced the pollination services that bees were able to carry out. This had reduced the yield from our arable crops, which in turn had reduced the revenue paid to the Exchequer by £200 million a year. The Treasury gave us the £6 million.

The thing about Treasury officials is that they are simple beasts. They do not want to know about the environment or ecosystem services, but show them a way to save money and they become entirely reasonable. Classical economics values things in a very simple way. Take forests, for example. Classical economics simply adds the sale price of the timber that can be harvested and the alternative use to which the land may be put and says that this is the value of the forest. What utter nonsense. The true value of a forest lies in far more than that. Forests stop soil erosion. They prevent flooding by absorbing moisture and they control climate, often regulating local as well as global weather patterns. They are a source of medicines and food and they have recreational and aesthetic value, and all that is before we even begin to consider sequestration.

In the millennium ecosystem assessment, 1,360 of the world’s top scientists showed that classical economics captured only one third of the actual value of the services that forests provide. The same is true for rivers, reefs, salt marshes, mangroves and all other natural ecosystems. We fail to factor their actual economic value into our policies and decision making, but because most of the other services that they provide are not bought or sold in markets, they are not normally taken into account, so the forests, reefs and rivers are lost or degraded.

Another important consideration is that those wider benefits, although immensely valuable, do not accrue to an individual property owner. The benefits are experienced by the community at large. They are regarded as free goods by the wider community and the wider economy. In classical economics such free goods are called externalities, and because they are not directly captured by the landowner they do not feature directly in the landowner’s decision of how and whether to dispose of them.

We use nature because it is valuable, but we abuse it because it is free. A nation’s GDP certainly increases every time money changes hands, but a growing GDP

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does not always create wealth. Many economic activities actually deplete wealth. The irony is that nations count that depletion as income, whereas they should see it as liquidation of capital. In fact, the TEEB—The Economics of Ecosystems and Biodiversity—report, edited by Pavan Sukhdev, has already shown that at current rates of decline the cumulative loss of ecosystem services from 2000 until 2050 will be equivalent to losing 7% of global GDP. Here is the challenge: how do we explain to those focused on GDP growth that they would make better economic decisions if they properly accounted for the very real value of natural capital?

Miss Anne McIntosh (Thirsk and Malton) (Con): I bow to the considerable knowledge of the hon. Gentleman, who has just left the Environment, Food and Rural Affairs Committee. This Government have been very clear, as indeed were his Government, about wanting to put natural capital at the heart of their economic thinking. With regard to climate change that is very obvious, but in some Departments it is less so, so how do we value the natural capital input?

Barry Gardiner: The hon. Lady, whose chairmanship of the Select Committee is redoubtable, is absolutely right that that is clear in certain Departments but not in others. The way we value the input, as a number of Members have already indicated, is precisely the way contained in the natural capital committee’s first report to Parliament. The first thing we have to do—I will move on to this in more detail a little later—is to get each Department to create an inventory stating what capital it owns, what capital it affects and what capital it influences. Once we get Departments to look at it in that way, they can feed that into the Treasury so that better cost-benefit analysis is done and better economic decisions and policies are made.

Some of our political colleagues act as if they are still living in the 19th century. They believe that economic prosperity and environmental protection are destined to be in conflict with each other, but in fact the opposite is true. In 2011 the green economy made up just 6% of the economy, but it accounted for 30% of all growth.

Those on the economic right fall into the trap of thinking that the environment is the enemy of growth, but it is not. Their conclusion is that we must sacrifice the environment in order to achieve growth. But for those of us on the economic left there is an equivalent trap. Some on the left actually seem to agree with the economic right. Their claim is simply put the other way around: that economic growth is the enemy of the environment. Their conclusion is that we must sacrifice growth to achieve environmental protection. Both are wrong, of course, and they are wrong because they are locked into the same language of economic growth and environmental protection. They have failed to move into the new paradigm of economic wealth and environmental sustainability. There is a reason for that: the new paradigm requires a proper understanding of the value of natural capital, and not just an understanding of it, but a proper accounting of it.

What competent business would fail to carry out a proper inventory of its assets? Yet that is precisely what we as a country have done. We have not looked at the

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stocks and flows of natural capital and properly assessed them. In the UK we are beginning to introduce a fundamental change in environmental policy. Instead of focusing on individual species or habitats, we are pioneering an approach based on whole ecosystems. We commissioned the UK’s national ecosystem assessment, which has established that 30% of the UK’s ecosystems are in decline and that many others are only just holding their own against an increasingly hostile background of rising population, consumption and pollution. However, the Government have not yet taken the important step of instructing all Departments to create an inventory of the natural capital assets they own, utilise and affect. The Minister should speak to his colleagues in Government to ensure that that happens.

Quantifying the problem is the beginning of a solution. In the national ecosystem assessment, we have begun to put a value on the contribution of ecosystem goods and services to human well-being. The market has long known how to exploit the benefits of nature, whether by dumping waste at sea or chopping down rainforests with no thought for the wider damage that it was doing. But now, the most progressive businesses are beginning to understand the importance of sustainable supply chains. They are beginning to see the business imperative to reduce their own corporate risk profile and are now seeing genuine advantage in being net positive for the environment.

The establishment of the natural capital committee in response to the United Nations convention to combat desertification conference of the parties in Nagoya in 2010 is a significant and positive move on the part of the Government. I welcome it. I pay tribute to the right hon. Member for Meriden for how she steered the issue through Government. She also established that the committee should report to the economic sub-committee of the Cabinet. Her officials had put to her that it should report to her as Secretary of State, but she decided that it should report elsewhere, knowing full well that a Secretary of State for Environment, Food and Rural Affairs was perhaps less powerful than the Chancellor of the Exchequer. She played a significant role in ensuring that the natural capital committee had the prospect of real success and traction. My hon. Friend the Member for Stoke-on-Trent North (Joan Walley) was entirely right to say that we should also have had a Treasury Minister on the Front Bench this evening.

Mr Graham Stuart: The hon. Gentleman no doubt anticipates what I am about to say. He agrees that there should have been a Treasury Minister on the Front Bench tonight. It would also have been extremely helpful if Her Majesty’s Opposition had managed to get a shadow Treasury Minister, who are a great deal less busy than actual Treasury Ministers, to join us.

Barry Gardiner: I heartily endorse that. I will ensure that all these remarks are conveyed to my colleagues on the shadow Treasury Front Bench. I give the hon. Gentleman the commitment that they will get copies of my speech.

Having a Treasury Minister here would have truly shown that the Government were not just paying lip service to the idea of natural capital but were listening to the recommendations of the natural capital committee—

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namely, that the Government should establish a framework to measure and account better for changes in natural capital assets, and to improve the valuation of those changes and how they are fed into policy decisions.

The natural capital committee points out that the Government need to establish a risk register for natural capital assets that will clearly identify potential resource constraints or tipping points that may arise from the further degradation of our biodiversity. It insists that the implications for business supply chains from the loss of key natural resources must become a fundamental part of national economic planning. It recommends that the Office for National Statistics should include natural capital fully in the UK’s environmental accounts and that we should be working with business to develop guidance on corporate natural capital accounting.

I pay particular tribute to the work conducted by the Prince of Wales’s accounting for sustainability project. A4S has worked with strategic corporate partners to identify $72 trillion of resources and environmental services that classically have been omitted from corporate balance sheets around the globe, to enable those businesses better to understand the risks to their own supply chains and ultimately their future sustainability unless they change their business model for one that respects and properly values natural capital.

The Government should follow the prince’s initiative in involving business in accounting for natural capital. Will the Minister say whether he agrees with the suggestion of asking companies to prepare annual corporate sustainability reports for shareholders as part of their reporting cycle, in line with the business-led corporate sustainability reporting coalition’s recommendations?

Let me say this loud and clear: some things are beyond price. Some values cannot be monetised. It is not just that the aesthetic and spiritual values of a mountain are difficult to quantify; we should not even try. We must recognise that those values should not be traded in any market. They are not directly comparable and we must not attempt to compare them on a like-for-like basis in any cost-benefit analysis. However, to recognise that is not to accede to the demands of the fundamentalists of both right and left that we should not sensibly ascribe a value to the mountain for the tourism benefits that it generates or the watershed services that it provides. These are real economic values and we conduct our policy decision making in wilful and deliberate ignorance if we ignore them. This is not to commoditise nature; it is to ensure that the true value of nature is not ignored and treated as a free good by those who for decades have peddled a false theory of value that has allowed them to trash the environment with impunity.

The proper valuation of our natural capital is a means to its better protection, not a tariff sheet of charges for its destruction. The Secretary of State recently made several remarks that are deeply worrying because they have implied precisely the opposite. In his speech to the Association of National Park Authorities last month, he suggested that the protection of our finest countryside could be traded away to the highest bidder. This is quite simply a disgrace, and an ignorant one at that. Anyone with the slightest understanding of biodiversity offsetting knows that there is a hierarchy of principles that it must follow, foremost among which is that offsetting cannot downgrade or amend the existing levels of protection for biodiversity. The Secretary of State, by his ignorant,

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unscientific and dogma-driven approach, has shown himself to be incapable of leading the Government’s important work on natural capital and has probably done more to undermine the undoubted benefits that could flow from a proper system of biodiversity offsetting than any of the open-toed-sandal anti-development campaigners whom he so clearly despises .

I am delighted that the hon. Member for Beverley and Holderness mentioned the work of the UN Statistical Commission on the system of environmental economic accounting. The UN has adopted SEEA as a new international accounting standard. It is important for the Minister to indicate to the House the Government’s commitment to develop the SEEA proposals and incorporate natural capital fully into their accounting framework by 2020.

I am also delighted that the hon. Gentleman mentioned the work of GLOBE International and its excellent natural capital initiative. I had the honour of chairing the national capital legislation summit that he mentioned which took place in the Bundestag this summer. I agree with the importance that he placed on incorporating natural capital into the first 2015 sustainable development goals. I should like to put on record my thanks and appreciation for the support of the German Government, who have consistently, and with great vision, understood the importance of this work in tackling global poverty as well as in addressing issues of climate change and biodiversity.

It has long been a fundamental principle that the polluter should pay. All too often, though, the polluter has got away with it because nobody has been able to answer the question, “How much?” In the UK we have set up the natural capital committee to ensure that the market and the non-market values of the public goods that nature provides are taken into account in all policy decision making. Our goal must be to incorporate these values into the standard Treasury method of cost-benefit analysis, our purpose being to stop those who seek to exploit the goods and services that nature provides by diminishing her continued ability to provide the essential ecosystem services and public goods that the rest of society needs.

The state of natural capital in the UK is at a critical point. Thirty per cent. of it is in decline, and action now is essential. The natural capital committee has produced an important report, but the Government must listen to what it says and implement its recommendations.

9.33 pm

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (George Eustice): I thank my hon. Friend the Member for Beverley and Holderness (Mr Stuart) for bringing this motion to the House. He has consistently championed the cause of the environment, and he made a number of incredibly important points in his speech. Like many others, I acknowledge the work done by my right hon. Friend the Member for Meriden (Mrs Spelman). It is important to recognise that a lot of the work we are doing now stemmed from the natural environment White Paper. After having been elected, one of the first things I did early in this Parliament was to attend the launch of that document at Kew. I remember it well. It was a very important piece of work, and she is to be commended for it.

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To prove that there can be some cross-party consensus on this issue, I acknowledge the work that the hon. Member for Brent North (Barry Gardiner) has done through his chairmanship of the all-party group on biodiversity and his consistent interest in its potential. However, I must take a little issue with his strong criticism of the Secretary of State. I can vouch for the fact that my right hon. Friend believes passionately in these issues, of which he is a real champion. He regularly speaks to Dieter Helm, the chairman of the natural capital committee. I therefore do not agree with the hon. Gentleman’s criticism on that front, but perhaps we can come back to that later.

As every Member who has spoken has said, the state of natural capital is a crucial issue and the scale of the problem is great. Recent studies, such as the national ecosystem assessment and the “State of Nature” report prepared by the Royal Society for the Protection of Birds and others, drew on the excellent work of experts and volunteers across the country. They have reinforced the Government’s view about the worrying trends in the state of our natural assets.

We are constantly learning more about the complex mutual dependencies that underpin our vital ecosystems, but we are also finding evidence that shows that these intricate systems are, indeed, under threat. As many Members have said, 30% of the UK’s ecosystems are in decline. The numbers of specialist farmland birds, for example, have plummeted.

Although the overall condition of the natural environment is a cause for concern, we should also acknowledge that there have been some significant success stories that demonstrate what can be achieved when there is a will to do so. For example, environmental legislation has helped to transform many of our watercourses, and rivers that were once notoriously polluted now sustain a variety of wildlife. Of course, although these successes are heartening, important aspects of our natural environment are still in decline. The status quo is therefore not acceptable and a concerted effort on the part of Government and society is necessary to turn things around.

As part of their efforts to halt and reverse degradation of our natural environment, this Government have pledged to improve their understanding and measurement of England’s natural capital. It is, therefore, extremely encouraging to hear that the Government’s commitment to advancing the natural capital agenda is shared by Members from across the political spectrum.

A number of Members, including the hon. Member for Stoke-on-Trent North (Joan Walley), have said that a Treasury Minister should be present instead of me. All I can say is that I am passionate about this issue and I am here to represent the Government. It is usually only one Minister who responds to this type of debate. Members have said that they would have preferred a Treasury Minister to be present and I will not take that personally, but I am afraid that tonight you’ve got me. It is important to note that the Treasury is heavily involved in this issue. The response to the NCC’s first report was co-signed by the Secretary of State and the then Economic Secretary, my hon. Friend the Member for Bromsgrove (Sajid Javid).

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A number of Members have asked what we are doing to get the principles into the green book. I have three points to make in response to that important question. First, following the publication of the natural environment White Paper in June 2011, the Treasury and the Department for Environment, Food and Rural Affairs published in 2012 supplementary green book guidance on accounting, so consideration has already been given to including environmental impacts in cost-benefit analyses by Government Departments.

Secondly, I reassure Members that the NCC is currently in discussions with the Treasury and DEFRA about developing the green book so that we can take further steps. Thirdly, DEFRA has commissioned a baseline evaluation study to review how well recent impact assessments across government take into account environmental impacts. We are, therefore, taking a number of steps.

Mr Graham Stuart: I wonder whether the Minister took note of my point about the Government response—the letter. He has just laid out how the Government are responding in a serious way, but will he undertake that when the next state of natural capital report is published in nearly a year, it will receive as full a response as that which we would expect for a Select Committee report?

George Eustice: I hope my hon. Friend will find that the remainder of my speech will pick up on a lot of the themes of the 13 recommendations made by the NCC report.

Mr Stuart: I recognise that my hon. Friend is new to his post and that he is in a difficult position, but it really would be helpful if he could commit on the record to provide a full response to next year’s report. This debate was called not by the Government, but by the Backbench Business Committee, and we cannot rely on a debate such as this to ensure that the Government are held to account on something so important.

George Eustice: I take on board my hon. Friend’s point. Lord de Mauley leads on this element of the Department’s portfolio and I speak on it in the House of Commons. I will discuss the point that my hon. Friend has made with him.

It is not surprising that there is a consensus that natural capital matters. It underpins fundamental aspects of all our lives. We rely on natural capital for the air that we breathe, the food that we eat and the water that we drink. It is also a crucial source of energy and well-being. It will play a central role in mitigating the potential impacts of climate change. It may even provide the key to scientific and technological innovations. It is the foundation on which our economy is built. My hon. Friend the Member for Richmond Park (Zac Goldsmith) gave a fabulous quotation from John Aspinall:

“Nature is the bank upon which all cheques are drawn.”

That is very true.

Despite its importance, we have taken natural capital for granted. For too long, the value of our natural capital has been disregarded and, as a consequence, degraded. In the past 50 years, in spite of growing environmental awareness, many of the pressures on the natural environment have accelerated. Short-term, short-sighted economic gains have been prioritised. Too often, that has come at the expense of the natural environment.

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It is clear that if the habit of eroding our natural capital assets is allowed to continue, it will ultimately, as my right hon. Friend the Member for Meriden said, be at the expense of future generations and their economic well-being. If economic growth is not sustainable, frankly, it will not be sustained. If we do not actively attempt to understand the true value of natural capital, we will continue to set its value, wrongly, at zero.

Many people in the UK already place a value on nature. Members may well have heard enough about the BBC for one day, but the growth in popularity of programmes such as the BBC’s “Countryfile” demonstrates that we are a nation that cares passionately about the natural environment. The widespread appreciation of nature’s intrinsic value, the importance of which many Members have highlighted, is demonstrated by the large memberships of groups such as the RSPB and the wildlife trusts. To those who say that unless we put a monetary value on something, it is not valued, I say that that is not the way that the public see it. They see a great intrinsic value in our natural environment.

Valuing our natural assets in terms of their worth to the economy in pounds and pence is a challenging exercise. We will have to involve the dedicated efforts of world experts to come up with the right calculations. However, it is important that we do not see valuing nature as just a dry, academic exercise that is performed by accountants. The natural capital agenda must, and will, have a practical application that will lead to real outcomes in our natural environment. If we want to protect nature, we need to make better decisions about how we use it. Those decisions will be better informed when we have properly measured and valued our natural capital.

That is why the Government set up the natural capital committee in 2012. In doing so, we were acting as a global leader. We now lead the way by having an independent group of experts that reports on where our natural assets are being used unsustainably. Ultimately, the committee will advise the Government on how we can prioritise action to address the most pressing risks to our natural capital. That advice will better enable the Government to fulfil their vision, first set out in the natural environment White Paper of 2011, of being

“the first generation to leave the natural environment in a better state than it inherited.”

With that vision in mind, I read with interest the committee’s first state of natural capital report, which was published in April this year. It set out a framework for how the committee would deliver its ambitious work programme. The report highlighted just how high the stakes are for the environment and the economy in work that the committee is doing. The committee argued powerfully that the environment and the economy are not rival priorities that have to be traded off against each other, but that environmental and economic interests can and must be aligned. The report set out how that beneficial alignment can be realised.

Although we have enough data to be confident that our natural assets, for the main part, are being degraded, we do not measure directly changes in their extent or quality on a widespread basis and we do not account for them in national or business accounts. It is therefore not currently possible to identify systematically which natural capital assets are being used unsustainably, but the work of the committee aims to get a better handle on that.

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The committee’s first report not only set out the need for a framework to measure and value our natural assets, but contained a number of recommendations to help get that framework in place. When the report was published, the committee promised to follow up in its second and third reports—due in early 2014 and 2015 respectively—with more specific advice about where assets are at risk of not being used sustainably, and what needs to be done about it.

The Government support the analysis set out in the NCC’s first state of natural capital report, as detailed in the joint letter that my hon. Friend the Member for Beverley and Holderness referred to from the Environment Secretary and the Economic Secretary to the Treasury. The letter stated:

“We welcome the report’s conclusions and we look forward to working with the Committee as they and others advance this agenda.”

I can report that good progress has been made on the recommendations contained in the report, by both the Government and the NCC. For example, in order to determine whether we are on a sustainable path, the NCC has commenced two pieces of work to help understand which assets are in decline—and to what extent—as well as which are most at risk. The NCC will report on its initial findings in its next report. We are interested to see how that might inform other Government policies, such as biodiversity offsetting, which a number of hon. Members—including my right hon. Friend the Member for Meriden—have mentioned.

On national and corporate accounting, which was mentioned by the hon. Member for Brent North, good progress is being made. On national natural capital accounting, the NCC is working closely with the ONS and DEFRA to implement the road map to 2020 that the ONS published in December 2012, setting out its timetable for producing natural capital accounts. On the corporate side, the NCC is engaging with a series of major businesses and landowners. It is about to undertake a series of pilot projects with a selection of those businesses in order to trial natural capital accounting in a real-world context and see whether it is an effective tool for encouraging businesses to operate on a more sustainable basis.

Let me touch on some of the points that my hon. Friend the Member for Beverley and Holderness raised at the end of his contribution. He asked for a response to each of the 13 recommendations, and as I have said, I will take his comments back to my noble Friend Lord de Mauley. A lot of those recommendations are being taken forward by the NCC, and many others are addressed in the good “Accounting for the value of nature in the UK” report by the ONS.

A number of Members asked whether we believe that the framework should be developed, and the Government agree that it should be. That is a task for the NCC, which is working further on that. Importantly, the committee is not doing just a single one-off report that is then placed in the Government’s hands; it is continuing to work on many of these elements. Many hon. Members raised the importance of developing a risk register, and I confirm that the second report from the committee will look further at a risk register and at highlighting those areas where we use our natural environment in an unsustainable way. The next report will contain the first steps in that direction.

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In conclusion, we are very much looking forward to the NCC’s second report, due to be published in spring 2014, and to the more specific recommendations we expect it to contain. We are particularly interested in what it might have to say about a proposal for a long-term strategic plan to ensure the preservation and recovery of natural capital in this country.

Mr Speaker: For a brief wind-up of the debate, I call Mr Graham Stuart.

9.49 pm

Mr Graham Stuart: Thank you, as ever, for your strictures, Mr Speaker.

It has been a great pleasure to take part in the debate. We have heard high-quality speeches from hon. Members on both sides of the House. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) followed my speech and showed a strong understanding of the key issues. My right hon. Friend the Member for Meriden (Mrs Spelman), in so many ways the architect of the current situation, spoke of offsetting and of the economic importance of humble bees and pollinators. The hon. Member for Stoke-on-Trent North (Joan Walley) mentioned the green book—the Minister did not mention that, but perhaps we will hear more from him about it in due course—and the role of natural capital in the sustainable development goals. She also referred to other Departments and asked whether the Minister is in touch with them.

My hon. Friend the Member for Brecon and Radnorshire (Roger Williams) put his finger on one of the most important challenges that we face. For the most part, we are a group of the usual suspects, talking about natural capital late at night. In the Tea Room earlier, a colleague said, “In eight years in this place, I have never looked at the title of the debate and not known what it was about—until now. Well done, Graham, you’ve got a debate I don’t understand.” My hon. Friend correctly identified the importance not only of the Breconshire young farmers, but of communicating properly with them so they understand what on earth we are talking about. If we do not achieve that, in a few years, the same group of usual suspects will be discussing the topic without wider resonance.

Joan Walley: Does the hon. Gentleman agree that that is one reason why there should be a measure to include the subject in education legislation?

Mr Stuart: I feared the hon. Lady would try to nail me personally on that—I spend my time chairing the Select Committee on Education resisting the forcible

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addition of financial education and a plethora of other subjects into the national curriculum—but I will bear her remarks in mind and see whether I can reconsider my almost-ideological response.

My hon. Friend the Member for Richmond Park (Zac Goldsmith) made a powerful speech. He said that reconciling the market with the environment is essential to our survival—one of a few memorable quotes from the debate. He also asked whether the Government as a whole are ready for the challenge, which neatly summed up a question included in many speeches.

My right hon. Friend the Member for Hazel Grove (Sir Andrew Stunell), using his experience of Government machinery, focused laser-like on questioning whether the machinery is in place to ensure that natural capital debates are not a minority sport that take place late at night in the Chamber, and that they begin to influence Government policy in all Departments.

Because of my history with the hon. Member for Brent North (Barry Gardiner), it hurts me to say that he made a barnstorming and powerful speech. He spoke of not only halting but reversing environmental loss. He spoke with both passion and knowledge and managed to convey them succinctly and effectively. He said that people in the Treasury could be reasonable as long as we speak to them in their language. He gave us two quotes. First, he said that we use nature because it is valuable, but abuse it because it is free, which goes to the heart of the debate. Secondly, in defence of that approach, he said that promoting the concept of natural capital was not to commoditise nature, but to ensure its protection.

We heard an excellent speech from the Minister, who, as he said, has been interested in natural capital for a long time—he was at the launch of the White Paper a few years ago. He and the other Ministers in his Department have a great challenge, but there is a wider challenge across the Government. That is the central issue. My hon. Friend the Member for Richmond Park made the point that, in future, we need Treasury Ministers and colleagues who do not habitually focus on this policy on the Treasury Bench in such debates. I am delighted to see my hon. Friend the Minister of State, Cabinet Office, the hon. Member for Ruislip, Northwood and Pinner (Mr Hurd), who is the Minister for civil society there as he, too, has long taken an interest in natural capital.

With that, I draw the debate to a close.

Question put and agreed to.


That this House welcomes the Natural Capital Committee’s first annual State of Natural Capital report; and urges the Government to adopt the report’s recommendations and to take concerted action to embed the value of natural capital in the national accounts and policy-making processes as early as possible.