The Treasury needs to be reformed as it does not adequately take into account climate change and resource security risks, according to Liberal Democrat MPs and thinkers.
In the third pamphlet following those from Conservative and Labour MPs and thinkers, the Liberal Democrats argue for changes to the way the most powerful Government department operates to enable proper consideration of long-term economic risks to the UK economy.
It highlights that short-term analyses and overly generous discount rates characteristic of current Treasury practice are failing to take account of the impacts of climate change and other long-term threats to economic security.
Three possible ways to reform the Treasury are considered:
- Breaking up the Treasury: creating a finance ministry to ensure the health of public finances, and extending the power of the Department of Business, Innovation and Skills to control longer term economic strategy
- Changing the Treasury: giving the Treasury a clear objective in its business plan to ensure a low carbon economy, championed by a junior minister and adopting a longer term budget horizon – reviewing the way it accounts for the costs and benefits of environmental policies and becoming more transparent about its analysis of environmental issues
- Making the Treasury more accountable: setting up a new office for environmental responsibility to review the suitability of current policies for environmental impacts like climate change, water and air pollution, with the Chancellor expected to report against the Treasury’s environmental objectives.
The pamphlet does not suggest which of these it prefers, but considers them to be options that can be debated further.
Former special adviser to former Energy and Climate Change Secretary and vice chair of the Liberal Democrat’s Federal Policy Committee Duncan Brack said: “The Treasury has a crucial role to play in the UK’s transition to a sustainable, low carbon and resource efficient economy, but at present its role is almost entirely negative. This welcome pamphlet sets out the options for reforming the Treasury which should be debated as a matter of urgency.”