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Nature Positive fiscal policy

Essential reforms are needed to put our economy on a genuinely sustainable, secure and stable footing.

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We need essential reforms to make fiscal policy nature positive. Here are three Nature Positive fiscal policy briefings, which explain the key issues in more detail.

1. The case for public investment in nature

There is an urgent need to invest in nature’s recovery, not just to meet our own and international commitments to halt the loss of biodiversity, but also for the benefit of people and the economy. Damage to the natural environment is already slowing the UK economy, and could lead to a larger hit to GDP than from the global financial crisis or Covid-19.

Natural capital is an economic asset and a key component of national infrastructure and needs to be treated as such. Investment in natural capital and nature-based solutions bring net benefits and are cost-effective policy options. There is also a strong rationale for government intervention to invest in nature because many of the services provided by nature are public goods and information failures are often a barrier to nature investment.

2: A nature positive fiscal framework

The fiscal situation in the UK is challenging but does not need to prevent critical investment in our natural infrastructure that brings benefits for nature, people and the planet. Recognition of how previous fiscal rules have prevented essential investment in our infrastructure (including that in our natural environment) is needed to address short-termism.

Reform should focus on four areas:

  • A new Green Golden Rule that would allow government to borrow to invest in net zero and nature positive.
  • Reporting on wider measures of public sector assets and liabilities at fiscal events must include natural assets.
  • All Spending Reviews must have a natural capital action plan with associated funding.
  • Independent input and oversight of our natural capital planning by a new UK Nature Positive Committee.

3. Nature positive tax reform

Taxation can play an important role in nature’s restoration and is a powerful tool for governments to influence behaviour, promote economic growth and redistribute wealth. Environmental taxation revenue in the UK lags behind other OECD (Organisation for Economic Co-operation and Development) countries. It’s essential to rethink and redesign the tax system to incentivise the protection and restoration of nature, aligning better with our environmental goals. Greater consideration of how tax changes impact on the environment is required and new tax principles should guide reform.

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