Natural Capital Committee’s end of term report

The UK Government has published the final report of the Natural Capital Committee before it closes at the end of November 2020. It records all of the work that the Committee has undertaken over its two terms from 2012 to 2020.

The NCC was set up nine years ago to provide independent advice to Government on the state of England’s natural capital.

Recommendations from the NCC:

The 25 Year Environment Plan and essential statutory framework

  • The 25 YEP and all future Environmental Improvement Plans (EIP) should require legally binding interim targets which are clearly linked to the legally binding long-term targets. Without statutory interim targets, it is likely that the ten 25 YEP goals and future EIPs will become aspirational and risk long-term targets being missed because, for example, the government may prioritise other short-term public expenditure items.
  • The NCC does not consider the OEP being accountable to government to be a credible position; the OEP should be accountable to Parliament. Other similar regulatory bodies, such as the Office for National Statistics (ONS) or the Audit Commission are accountable to Parliament. The OEP should be fully independent from the organisations it is responsible for; its budget and appointments should be decided by Parliament.
  • The NCC notes that all Ministers of the Crown will have to ensure ‘due regard’ to the five environmental principles. The wording of the clause should be strengthened to ‘act in accordance with’ before the Environment Bill is re-introduced into Parliament.
  • The NCC advises that government should replace biodiversity net gain in the Environment Bill with environmental net gain. Only an environmental net gain approach which applies to all development covered by the Town and Country Planning system, all nationally significant infrastructure projects and the marine environment will ensure that aggregate natural capital is maintained and enhanced.
  • The NCC advises that public funding for agriculture should be focused on the delivery of environmental public goods, and explicitly not on the subsidy of profits through the private production of food. There should be no presumption that historic levels of funding or the current distribution of these are correct; in some cases they might need to rise, in others fall.
  • The NCC advises that if current evidence is not sufficient to support a legally binding target for soils through the Environment Bill legislative framework, then government should set a shadow target for soils in the interim, in line with the ambition to ensure soils are sustainably managed by 2030.

Natural capital asset based framework for measuring environmental progress

  • The NCC advises that Defra should ensure that the proposed natural capital and ecosystem assessment pilot, and any subsequent fully developed baseline exercise focuses on identifying and measuring the extent and condition of all natural capital assets across England, as per the NCC’s detailed advice – not just habitats – and should incorporate a substantial citizen science component. The baseline assessment should be repeated every five years to enable a periodic understanding of the trends in England’s natural capital assets. The Treasury should ensure that the baseline assessment is properly funded at the next Spending Review – there are huge economic opportunities to be realised from understanding the state of England’s natural assets. The OEP will be unable to carry out its 25 YEP scrutiny function effectively without a natural capital asset baseline.
  • The development of corporate natural capital accounts is fundamental for securing the government’s environmental objectives. These accounts enable natural assets to be measured in the context of company profits, providing a powerful ‘self-interest’ incentive for organisations/corporate investors to maintain and enhance natural assets. Without such an incentive, it is unlikely that any substantial environmental improvement will be achieved. Defra should urgently take forward the corporate accounts template developed by the NCC, working with the Department for Business, Energy and Industrial Strategy (BEIS) to encourage private sector production of corporate natural capital accounts which require provisions to be made for the maintenance of natural capital, notably by engaging with the Taskforce for Nature-related Financial Disclosures initiative/accounting bodies to consider future revisions to accounting standards to include natural capital.
  • A full set of national accounts for the extent and condition of natural assets is needed which will enable the state of these assets, as well as the values derived from them, to be recorded and reported on a more detailed level, which is relevant for decision making and policy development. These so called ‘bottom-up’ accounts can be aided by a natural capital baseline assessment and should enable further refinement of the ‘wealth accounts’. The NCC advises that the next iteration of the ONS national accounts should work towards/include a national balance sheet of the value of natural assets, estimates of the depreciation of those assets (where this occurs) and a redefinition of the way in which income and savings are measured in national accounts.

Further embedding natural capital into public and private decision making

  • The government should consider how the OEP could work in collaboration with the Regulatory Policy Committee (RPC) to assess how well the Green Book natural capital guidance has been considered in policy impact assessments. The RPC should ‘Red Flag’ impact assessments that will result in significant losses of natural capital.
  • All publicly funded infrastructure projects and programmes, infrastructure providers and public bodies should be required to invest in maintaining and enhancing natural capital. Such projects should also have a net environment gain requirement placed upon them. The NCC recommends that all infrastructure projects should take full account of natural capital by including it in the project appraisal process as per the Green Book guidelines.

Read the full report.