Treasury failing to take long-term environmental costs into account, MPs say

The Treasury has been lambasted by MPs for failing to adequately factor in long-term sustainability risks into its decisions, with the carbon capture and storage (CCS) and zero-carbon homes policies specifically cited as detrimental to both the economy and investor confidence.

The Environmental Audit Committee (EAC) has criticised the Treasury following a major investigation concurred with a recent High Court allegation that its approach puts short-term priorities ahead of long-term sustainability.

The EAC is particularly concerned by a perceived lack of environmental leadership considering the Treasury’s prominent role over Government spending, taxation policy and regulation. The Treasury is accused of failing to encourage departments to work collaboratively on issues such as air quality, decarbonisation, and resource efficiency.

According to the EAC, the Treasury must ensure Spending Reviews provide strong incentives for departmental partnerships on environmental matters, increase decision-making accountability, and incorporate new evidence on long-term sustainability risks and benefits into policy decisions.

EAC Chair Mary Creagh MP said: “The Treasury is highly influential and uniquely placed to ensure the whole of Government works to promote sustainability. But we have seen considerable evidence that it fails to do this. The Treasury tends not to take full account of the long-term environmental costs and benefits of decisions which would reduce costs for taxpayers and consumers in the long run.”

‘Riding roughshod’

The Treasury recently provided evidence at an EAC hearing, where departmental ministers defended the Government’s decision to scrap energy initiatives such as the zero-carbon homes initiative and the CCS competition. Speaking at the time, the department’s Financial Secretary insisted that past decisions were made in the interest of environmental and economic sustainability.

However, the EAC’s latest report finds the Treasury guilty of changing or cancelling several long-established projects at short notice, with little or no consultation with relevant businesses and industries.

The decision to cancel the long-running CCS competition, which the EAC found could cost the UK an additional £30bn to meet its 2050 carbon targets, was described as “devastating” by businesses who were left in “shock” by the way the Treasury handled the situation. The EAC criticises the Treasury for failing to quantify all the costs and benefits of delaying CCS deployment before it cancelled the competition.

The zero-carbon homes policy scrappage also came as a surprise and in some cases angered many in the construction industry, the EAC states, because the Government had worked towards implementing the policy for more than a decade. The decision harms the development of new markets for innovative energy-saving products and risks rising long-term costs to the economy, EAC states.

Creagh continued: “On the CCS competition and zero-carbon homes we saw the Treasury riding roughshod over departments, cancelling long-established environmental programmes at short notice with no consultation, costing businesses and the taxpayer tens of millions of pounds. With a week to go until the next Autumn Statement, we hope our inquiry will be a wake-up call to the Treasury.”

‘Highly damaging’

The Treasury announced last summer it would be scrapping regulations on house building, including a planned increase in on-site energy efficiency standards, in order to streamline development. The Government’s decision was heavily criticised by industry and politicians, who stressed it would likely add to long-term housing costs through a reduction in energy efficiency.

Departmental ministers refuted this claim in September, insisting that contrary to widespread belief, the initiative would not have incentivised energy efficiency. Ministers stressed that the Treasury is approaching the upcoming Autumn Statement from a “position of strength” in terms of energy policy, citing the Government’s annual support of renewables is set to double over the current parliament.

Responding to today’s EAC report, UK-GBC campaign and policy director John Alker said: “The Committee is absolutely right to highlight the damaging effects of the ill-conceived deregulation we have seen from the Treasury in recent years.

“The scrapping of Zero Carbon Homes was an example of politically motivated policy-making. It showed not only an irresponsible disregard for the steps we need to take to tackle climate change, but also overlooked the years of investment and preparation made by thousands of companies across the construction supply chain. This volatility in the policy landscape is highly damaging to industry, jobs and investor confidence.”

The decision to scrap the CCS scheme was previously said to have been taken under the narrative of “reducing the costs for businesses” when in fact businesses were in favour of environmental commitments. This view was challenged by the Energy Environment and Agriculture Deputy Director, who recently told the EAC that the costs involved in these schemes could have added “many billions” to consumer bills.

Accusations against the Treasury regarding long-term sustainability commitments recently extended to the courtroom. During evidence last month, the High Court heard that the Treasury had deliberately blocked plans to bring UK air pollution within legal limits as part of an “entire approach driven by cost”, and that Defra’s original plans for a more extensive network of Clean Air Zones in more than a dozen UK cities had been watered down, on cost grounds, to five in addition to London. 

George Ogleby

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