Is Treasury fit to steward our scarce resources?
Who should decide to investigate how far are scarce resources and climate change impacting on the UK’s economic growth? Nearly a third of profit warnings issued by FTSE 350 companies in 2011 were attributed to rising resource prices. Yet a proposal by government chief economists to commission an impact assessment on UK growth was rejected by the Treasury. This might seem exactly the kind of issue worthy of independent review. But the Coalition abolished the Sustainable Development Commission in March 2011. Unhappy with the Treasury’s response, a group of industry, trade union and environmental bodies led by the Aldersgate Group is backing the government’s chief economists.
Ironically, the Treasury rejected the notion of “Treasury support at official level. ….given the limited resources we are all dealing with, we would need to be confident that we want to prioritise this work….”
The top five most exposed sectors to resource scarcity are Food Producers, Electricity, Gas Water & Multiutilities, Chemicals and Beverages. Take glass, among numerous examples, where the UK (61%) is below the EU27 glass recycling rate (65%). Yet high recycling rates preserve resources, create jobs and save energy.
The Aldersgate Group says businesses alone cannot manage the unprecedented challenges that these two megatrends present to the global economy, without the Government playing its role to understand and safeguard future prosperity.
“We recognise that resource insecurity, in many cases exacerbated by a changing climate, is already having a material impact on growth. …A 2011 EEF survey found that for 80% of senior manufacturing executives, limited access to raw materials was already a business risk and a threat to growth. For one in three companies it was their top risk. .. . If 2008 taught us anything, it is that we must deeply enhance our understanding and management of systemic risks to the UK’s economy. Government has a critical role to play in assessing the likely impacts of resource insecurity and climate change on our national economic prospects.”
Signatories of this statement strongly support the intention of BIS, FCO, DECC, DFID and Defra Government Chief Economists to commission an independent, transparent and urgent review of how these major trends could impact on the UK’s economic security, and urge the Government to take due consideration of these systemic risks to economic growth.
As John Ashton remarked in his Alternative Mansion House Speech, “The most revealing thing about these examples is not the suggestion that the Treasury sees aggressive climate policies as a threat to growth. It is legitimate for the Department most concerned with our macroeconomic condition to take its own view on such a question. What should cause concern is the implication of the [Treasury official’s] email, that “growth issues” as he called them are a matter for the Treasury and nobody else.”