Recommendation 29

HM Government Acknowledged

The Green Book already mandates the consideration of climate and environmental impacts in spending. Policies are developed and assessed against how well they deliver on the Government’s policy aims such as levelling-up and Net Zero. To ensure spending packages are aligned with government priorities such as Net Zero, HM Treasury is currently reviewing the learning from previous fiscal events to assess how it can better support the government’s environmental objectives. More detail on the government’s approach to embedding net zero in all policy decisions will be set out in the Net Zero Strategy. The Treasury’s Net Zero Review Final Report will be an analytical report that uses existing data to explore the key issues and trade-offs as the UK decarbonises. Against a backdrop of significant uncertainty on technology and costs, as well as changes to the economy over the next 30 years, it will focus on the potential exposure of households, sectors and regions to the transition, and highlight factors to be taken into account in designing policy that will allocate costs over this time horizon. The Net Zero Review will not seek to retrospectively assess or apply new tests to previous government policy as this is beyond the terms of reference for the review. With regards to biodiversity, the UK is committed to playing a leading role in developing an ambitious post-2020 global framework for biodiversity to be adopted at COP15 of the Convention on Biological Diversity (CBD) next year. The UK’s overarching ambition for the Post-2020 Global Biodiversity Framework is that it should spur global action and the transformative change needed for halting and reversing global biodiversity loss; and be supported by implementation mechanisms that are commensurate with the scale of the challenge. In 2020 the Government announced a review of the UK’s fiscal framework to ensure it remains appropriate for the macroeconomic context, while ensuring the sustainability of the public finances. It remains under review and we intend to publish a new framework later this year, provided uncertainty recedes further. In line with IMF guidance and international best practice, HM Treasury is considering adopting fiscal rules related to controllable fiscal metrics. That said, unmitigated climate change and the continued degradation of the natural environment is a significant fiscal risk and the government acknowledges that we must act urgently to avoid these environmental and economic risks. Therefore we are: supporting further work by the ONS and the OBR to accurately measure and forecast broader balance sheet metrics to improve fiscal decision making, including reviewing the public sector balance sheet and risk exposures in the context of climate change and the shift to a nature positive economy; providing further funding to the ONS to improve its natural capital estimates and maximise their policy relevance; incorporating expenditures relating to biodiversity into the UK Government’s Green Financing Framework; and participating in the OECD Paris Collaborative on green budgeting, an initiative to encourage governments to incorporate climate and environmental considerations into their financial and fiscal decisions.