Government advisors press Ofwat to help improve natural capital through PR19

Government advisors have urged Ofwat, in its 2019 price review, to help stem a slide in environmental quality by bringing on measures based on catchment management.

The recommendation to the regulator was among 16 from the Natural Capital Committee in its first annual report since it was reconstituted last January. The recommendations sought to improve natural capital – environmental assets such as clean air and water that have fundamental value to the economy.

The committee reported that natural capital remains on a declining path in England and Wales. It urged swift action by the government because enhancing natural capital “makes good practical economic sense”. Professor Dieter Helm, who chairs the committee, said: “To fail to grasp these opportunities is to condemn us to a lower sustainable economic growth rate.”

The committee’s main role is to advise the government on how to develop its 25-year plan to improve the environment – the framework within which all environmental policies should be set.

The report authors pressed the government to get on with the plan, make its goals ambitious and quantifiable, and put it on a statutory footing. According to the report: “Development of the plan has been considerably slower than both expected and desired, in part due to the referendum and Brexit…there should be a White Paper in 2017 setting out the 25 Year Environment Plan and laying the groundwork for necessary legislation in due course.” In particular, it stressed the need for “pioneer projects” to test different initiatives to be progressed rapidly and used as the key to implementation.

The committee further advised the government to act to ensure consistency between the aims of the 25 year plan and other activities/stakeholders, including agricultural policy from 2020, the private sector, the National Infrastructure Commission, local authorities, major infrastructure providers and National Parks. For instance, the report called on the government to actively promote corporate natural capital valuation, accounting and reporting.

Helm spied opportunity for the advancement of the natural capital agenda from Brexit. He said: “The challenges of delivering the objective in a 25 year environment plan are considerable, given the expected increase in population, the major house building programme and other major infrastructure developments. Critical natural capital assets are at risk and the overall picture reported by the Office for National Statistics points to a declining path.

“The government’s overall environmental objective is nevertheless achievable and Brexit provides a great opportunity to embed the objective into British law; to provide a statutory basis for the 25 Year Environment Plan; and to create a new agricultural policy and a new framework for environmental protection.”

The committee intends to publish a “How to do it” guide shortly, to assist all stakeholders in accounting for and valuing natural capital.