Environment Agency After Dinner

Speech delivered on Mon 5th Nov 2007

It is a great pleasure to speak to you all tonight at the Natural History Museum.

You are a serious lot, so I wanted to talk seriously tonight about three issues.

The first is what we have learned from the summer floods.

The second is how our Government - whatever the party - needs to respond to climate change, which is the greatest challenge of our times.

And the third is how business should react: is climate change policy as the Confederation of British Industry sometimes says a threat to our competitiveness or an opportunity?

Lessons of the floods

The floods in Yorkshire and the West Midlands last summer should have raised the alarm. We need to do much more - and quickly - to head off the impact of rapid climate change.

There are doubts about whether our existing risk-mapping of river and coastal flood risks is good enough. Look at the one in one hundred year events in Cheltenham, for example, that turned into two in three year events.

We clearly need to look again at those risks in the light of the deteriorating outlook for climate change. But we also need to assess and map the risk of surface water flooding due to the overwhelming of drains.

Some enlightened water companies like Severn Water know whether their drains and sewers can cope with sudden downpours.

But that does not seem to be the universal story across the country. We know that new drains are meant to be built to one in thirty year standards. But what of old systems where the statutory right to connect up new developments has been exercised? And indeed, what is the real capacity of many of our old nineteenth century combined waste water and storm water systems?

Ofwat and the water companies will have to recognise that major investment is necessary to improve storm water capacity.

The alternative is enormous and rising costs and an increase in the number of homes that will be simply uninsurable. The insurers are patient, but their patience will run out.

We may also have to reconsider the statutory right to connect to the sewerage system, and allow the water company to impose fair costs on developers for the necessary upgrading. Given many nineteenth century City sewerage systems are already creaking, we urgently need to improve our capacity to drain away downpours.

And I have long thought that it is bizarre, for example, that householders in one part of the country should pay in their water rates for infrastructure improvements necessary for development in another. Hampshire water rate payers are funding the Thames Gateway: why?

Above all, there has to be an over-arching strategic overview of flood risk, and in my view the baton has to be taken up by the Environment Agency. That was also the view of the Government's response to the consultation in 2004 called "Making Space for Water".

But nothing happened. And it should. Time is running short. Without a clear overview, this summer's events will be repeated time and again.

In that strategic overview, we also need to consider the key importance of protecting critical infrastructure to provide fresh water and electricity.

We came perilously close to a shut down of major facilities and a substantial public health risk this summer. In Hull, one of the problems was reportedly that pumping stations themselves were not proof against flooding.

Joined-up government

Turning from this summer's experience, there is also the issue of joined-up government on climate change. With the best will in the world, the Government's efforts on climate change look as if they were designed by a management consultant who had spent too long in a spaghetti factory.

It's an anarchic mess. One hand does not know what the other is up to. Ministers are singing from different departmental hymn sheets: so what is new? What is new is that climate change is a threat like no other.

We need to get our act together - and fast.

For starters, there is no clear lead from the top. Gordon Brown has made matters worse by downgrading the main instrument needed to ensure joined-up government, namely the cabinet committee on energy and the environment.

It is now a sub-committee of the economic committee chaired by the Chancellor, rather than a full committee chaired by the Prime Minister.

This government is all over the place. Let me give you some examples of actions from a Government that says it is committed to tackling climate change as the greatest threat of our time.

The Department of Communities and Local Government is planning 108,000 homes in flood plains in the South East alone.

The Department of Transport has scrapped road freight tolling plans and is planning airport expansion by projecting past trends.

The Department of Business Enterprise and Regulatory Reform has ditched Operating and Financial Reviews for big companies on their environmental impact.

The Treasury has cut green taxes from 3.6 per cent of gdp in 1999 to 2.7 per cent last year.

The Home Office has just installed an energy-intensive cooling system, and thinks nothing about leaving its lights on all night.

And when Defra had to make budget cuts, it cut the flood budget. And the Ministry of Defence cut the Met Office's climate change work.

Even the Department for International Development is not fully on message, as its funding still goes to fossil fuel burning power plants.

Not surprisingly, Britain's carbon emissions are rising.

How on earth can a government facing all possible ways on this issue claim to have any serious response to the greatest policy challenge of our time?

We desperately need joined-up government led firmly from the top. Instead, we have a succession of contradictory policies from an array of individual baronies. And it shows.

Maybe the climate change bill will concentrate minds. I hope so.

It will need its holes plugged such as its disregard for aviation and shipping, and for other green house gases than carbon dioxide, and for carbon budgets that miraculously go beyond the normal length of a parliament.

But targets are no substitute for action. And on action, the Government is shambolic. The key need is for purposeful joined-up government.

Competitive threat or opportunity?

Now I want briefly to turn to my third theme, which is the role of business.

We hear often that business could be threatened by an over-zealous application of measures to cut carbon emissions.

A gung-ho climate change levy or emissions trading scheme could simply drive emitting activities into jurisdictions with fewer scruples about climate change.

Well, there is not much evidence of that so far. But there is plenty of evidence of the opposite.

Businesses that try to pretend that climate change is not happening will go the way of the dinosaurs on display in this building.

Take General Motors and Ford. Their market capitalisation has shrunk compared with players like Honda and Toyota that have invested in hybrid technologies.

There is another and better road: not denying climate change but adjusting to its realities.

There are real business opportunities here. GE launched its Ecomagination brand recently, and has seen revenues from environmental products soar by more than half. B&Q had a similar experience. Climate Change Capital has raised a big new fund to invest in companies at the cutting edge of new technologies and trading.

Some of the new technologies are taking off and making good money: Vestas with wind turbines for example.

Of course, if we are going to re-engineer ourselves into a low carbon society the change will be every bit as dramatic as past revolutions like the steam and the electric age. It will touch every business process and product, and every business model and strategy.

And there will be big giant-killing changes, just as there were with the IT boom. Remember IBM? Well, big blue is now an also-ran in an industry of Intel, Microsoft and Google. Don't assume that today's giants will adjust. They may die, victims of new businesses with a better capacity to change.

The agenda now has to be green growth, and I deny absolutely that we have to make a choice between any growth at all and sustainability. The link between growth and energy consumption is breaking down.

Let's say we triple the cost of energy over the period to 2050 when we need to cut our carbon emissions. On one calculation, that knocks 4 per cent off gross domestic product over time so that we reach 2050 living standards two years later. A small price for a healthier world.

By moving first, we can grab the opportunities that will come as an early mover and early adopter. Don't ask whether we can afford to green our economy, but whether we can afford not to do so.

Time is of the essence, which is why it is so crucial that business is involved actively and imaginatively in pushing the boundaries of change.

Business needs a lead from policy-makers and Government. Government needs to be co-ordinated and purposeful. And business needs to ride with change, not resist it. For the next twenty years, we need to ensure that the business of Britain is green business.