John McDonnell: Time to include climate change effects in fiscal forecasts
The Government's fiscal watchdog should use climate change data in its economic forecasting, John McDonnell has said.
The Shadow Chancellor pointed to research carried out for the World Wildlife Fund which estimates climate change could cost the Exchequer £75bn a year by 2050.
That is based on a series of assumptions, including wildfires, extreme heat and a catastrophic three-month drought, which alone is estimated would cost the Government £35bn.
The Bank of England already includes climate change impact in its own modelling, including forecasting the effects on insurance companies of increased claims for flooding.
In a speech to the IPPR thinktank, Mr McDonnell said tackling climate change means a "transformation of our institutions", including the Office for Budget Responsibility.
He said: "We want to ensure that the overwhelming challenge of climate change is addressed from the very centre of government. This includes the potential losses to the public finances.
"The next Labour government will therefore ask the OBR to include the impact of climate change and environmental damage in its long-term forecasts. The public deserve to know what impacts we might expect on the national purse from the degradation of our environment. Sound, responsible economic management should already be accounting for this.
"We'll make sure the OBR has the resources needed to deliver the best available modelling of the economic impacts of the environment. It will become a new centre of expertise for environmental macroeconomics."
Mr McDonnell also pledged to make the OBR more independent by having it report directly to MPs, not to the Treasury.
“Over the last few years the Office for Budget Responsibility has established itself as an independent, authoritative voice on economic analysis. The next Labour government will guarantee and reinforce that independence by making the OBR report not to the Treasury but to Parliament," he said.
“We want thorough and genuine oversight of our own fiscal plans. We want the public, whether businesses or voters, to be absolutely confident that the public finances are properly scrutinised and managed."