The government believes that economic growth is the answer to our economic and social problems. To support this, they intend to reform the planning system to make it easier to build houses and the infrastructure we need, especially for energy generation and transmission. But there will be fierce battles over the balance between building and the environment, in all its forms. And our most common tool for measuring economic growth is not helpful in assessing that balance. So, recent work by the Office of National Statistics (ONS) to measure nature is welcome.
GDP is not enough
The standard way of measuring economic growth is Gross Domestic Product (GDP). As a measure, it has many advantages. It counts everything that an economy produces, and reports that regularly in simple numbers that are easy to understand. The techniques for calculating it are well established and internationally agreed. So, we can easily see if an economy is growing or shrinking, and we can easily compare countries’ performance.
However, GDP has serious limitations. Most critically, because it does not measure the value of existing assets, it can encourage short term, and sometimes unsustainable, policies. For example, GDP only measures a forest when the trees are cut down as timber and fuel. But those trees were removing carbon from the atmosphere, helping reduce global warming. And taking exercise in forests is good for physical and mental health — it improves wellbeing and reduces the cost of the health service. Even if replanted, it will be a generation before the land is producing the same benefits.
So, prompted partly by the UN’s adoption of its Sustainable Development Goals, statisticians have been exploring ways of producing simple measures which can sit alongside GDP to provide a clearer picture of the real state of the economy. In 2022, the ONS published a plan for this work as New Beyond GDP measures for the UK.
Measuring nature
Until recently, we have not had a simple tool to measure the natural environment. To remedy this, the ONS has been developing Natural Capital Accounts, which measure the ‘stock’ of natural resources. Like a company balance sheet, they give a value to the natural resources available, including farmland, forests, rivers, and peatlands, and make it possible to judge whether those assets are growing or shrinking from year to year.
The latest report, in 2023, shows that the total asset value of all ‘ecosystem services’ in the UK is just over £1.5trillion, a sum close to the value of all the homes in the UK.The chart shows the breakdown.
Measuring the stock of natural resources is complex, and they draw on many sources, grouping the data under three broad headings:
- Cultural Services are the non-material benefits people obtain from nature, including recreation and aesthetic enjoyment. They account for nearly two-thirds of the total value of the UK’s natural capital. The biggest element of this is health: where spending time in nature provides benefits valued at £445bn in 2021, with the health benefits of trees outweighing their value as timber. They also measure the value of proximity to green spaces, which adds 1.5% to house prices, and 3% to flats.
- Provisioning Services account for nearly a third of all natural capital. This is a measure of the natural resources and the goods that the environment provides, such as timber, oil, gas, water, and renewable energy. The biggest feature here is the growth of renewable electricity, which grew by 275% over the last ten years, although the asset value of traditional resources like oil and gas remains higher.
- Regulating Services account for 7% of natural capital. These are the ways in which nature maintains environmental quality. Examples include vegetation removing pollutants from the air and trees cooling and mitigating noise pollution in urban areas. These services are crucial for maintaining the balance of natural systems and ensuring long-term sustainability. In 2021, an estimated 1.3million tonnes of air pollution were removed by nature in the UK, with an annual value of around £2.5billion.
Another important measure is land use. The proportion of UK land which is enclosed farmland has fallen by 8% since 1990. But as the chart shows, nearly a quarter of the land previously classified as mountain, moorland and heath, has been enclosed. In the last 30 years, 4% of farmland has been built on.
Conclusion
The ONS work provides clear measures to set alongside GDP when making decisions on development. It demonstrates very clearly that the costs of depleting the natural environment can sometimes outweigh the economic benefits of development. The data on health illustrates the complexity of these issues. The Accounts show that, over the last decade, expenditure on recreation and tourism fell, producing a fall in GDP, but the health benefits of recreation in nature rose by 15% in the same period.
Most people agree that we need more houses, and more energy, but we would prefer it not to be where we happen to live. There is rarely a solution which makes everyone happy. Much of the debate about local development is conducted in terms of anecdote, rather than hard evidence, and generates more heat than light. As ONS makes the data more widely available at the local level, it will become possible to make more objective decisions on the relative merits of the arguments. Inevitably, not everyone will like the outcomes, but perhaps we can hope for a more rational debate, as the government presses forward with developments which we know we will need.
A recent episode of the ONS podcast, Statistically Speaking, discusses its approach to measuring the natural environment in more detail.
