A cross‑party committee of MPs has launched an inquiry into the role of the Treasury in shaping the UK’s approach to climate change, biodiversity loss and wider sustainability.
The Environmental Audit Committee (EAC) said it will examine how decisions taken by the Treasury influence spending, to investigate whether those processes help or hinder delivery of the UK’s statutory environmental obligations.
Without funding being used correctly, EAC chair Toby Perkins warned that adaption to the changing climate and the net zero transition will “falter” .
The inquiry, which invites written evidence until 21 May, sets out a wide-ranging programme of questions for Treasury officials and other witnesses.
Questions to be raised include how fiscal rules and spending constraints affect investment in climate and environmental measures, whether Treasury frameworks such as the Green Book properly capture climate and natural capital values and how environmental duties are applied in practice.
Concerns from the built environment sector have been raised recently regarding the industry’s role in climate resilience building and nature recovery.
The current government has pushed through the Planning and Infrastructure Act, which gained Royal Assent at the end of last year, and removed certain red tape surrounding environmental responsibilities of new housing and infrastructure development.
In November last year, both the EAC and Natural England separately defied the Government’s stance that nature recovery is a blocker of growth for the UK.
The EAC released its critical report, titled Environmental sustainability and housing growth, in November last year. It followed an inquiry conducted by the committee looking at how the government can meet its ambition of building 1.5M homes while also committing to improve the natural environment and reverse nature’s decline in the UK.
The report challenged the government’s “lazy narrative that nature is a blocker to housing delivery” and instead states that a healthy environment should not be a luxury but “a necessity for resilient towns and neighbourhoods”.
It did also identify several key blockers that have created this narrative in the system.
The report stated there is “a lack of cross-government policy alignment and co-ordination, fragmented data systems, and a dearth of ecological, planning and construction skills”.
“These are major obstacles for the government while it is striving to deliver the twin aims of housing growth and nature recovery,” it continued.
“We believe that the government can achieve the house building target and meet its environmental, nature and climate change targets, if it addresses the issues we identify and gives serious consideration to our recommended solutions.”
The committee will now test whether the Treasury treats action on climate and nature as economic risk reduction and as a contributor to long‑term productivity and growth. It will ask witnesses how the department assesses the economic benefits of nature recovery and climate adaptation and whether measures beyond GDP, such as natural capital, play a real role in Treasury decision making.
The EAC will further probe how the Treasury accounts for the future costs of climate change and environmental degradation, questioning how these risks feature in Government’s broader economic resilience planning.
This includes whether sustainability forms part of the approach to national security and “securonomics”.
The role of financial regulators and public finance bodies, including the Bank of England, the Prudential Regulation Authority and the Financial Conduct Authority, in identifying and managing climate and nature‑related financial risks will also be examined.
The committee will further scrutinise how the Treasury works with other departments to ensure a co‑ordinated transition to a low‑carbon and nature‑positive economy, asking whether funding proposals support adaptation, resilience and Biodiversity Net Gain (BNG). It will also consider whether Treasury tax and spending policies hinder climate objectives and what plans exist for changes in tax revenues as the economy heads towards net zero and decarbonisation
The inquiry will also ask the government to account for progress on implementing the Dasgupta Review, a 2021 independent assessment into the economics of biodiversity, including whether ministers plan a timetable for adopting its recommendations and embedding its principles in economic policy.
Previously, Treasury officials have defended the use of appraisal tools and funding mechanisms to establish frameworks and public finance schemes. The EAC inquiry will aim to test whether those frameworks need updating to better reflect environmental risks and opportunities.
Treasury ministers, senior officials, economic and environmental experts, regulators and representatives of devolved governments are likely to give oral evidence during the inquiry.
Perkins said: “Decisions made in the Treasury have an extraordinary influence on the environment. Without funding and support from the economic heart of government, major initiatives such as species protection, adaption to a changing climate, and the net zero transition will falter.
“Our new inquiry will explore how this department, so influential across government, is considering the environment in its overall approach and choices.
“For instance: how do fiscal rules and spending limits impact investment in tackling climate change? Do ministers recognise the contribution of environmental policy towards growing the UK economy, and appreciate the risks to our economic system if we fail to act? Are there cases where Treasury decisions might undermine its environmental aims?”
He added: “Our inquiry is a vital opportunity to ask these and many more questions, to hold Treasury ministers to account for their enormous influence on the future of our precious environment.”
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