Sort out your budget - Environment watchdog warns Government

Parliamentary Commissioner for the Environment Simon Upton. Photo / Mark Mitchell.

The Government's top environment watchdog says Government Budgets are not doing enough to look after the environment.

Parliamentary Commissioner for the Environment Simon Upton has pointed the finger at the way governments put together their yearly Budgets, saying the annual budget cycle creates too much short-term thinking.

"The benefits that arise from protecting and conserving the environment – or trying to recover some of the damage we've caused – unfold over long time frames.

"This makes the natural environment difficult to slot into an annual Budget process dominated by decisions orientated towards short-term outcomes," Upton said.

Upton recommended improving Budget processes so they better valued the environment and called for a review of the way cost–benefit analysis is applied to new spending to make sure the wellbeing of future generations was weighed against present-day priorities.

Upton could be in luck, with Finance Minister Grant Robertson set to announce an update to the Government's long-running work programme on funding climate change initiatives on Wednesday, when he publishes the Budget Policy Statement.

Upton's key recommendations include updating Treasury's Living Standards Framework - which is the bedrock of the Wellbeing Budget process - so that it reflects long-term indicators for the environment.

Green Party finance spokeswoman Chlöe Swarbrick said Upton had "rightly applied a critical eye to the Living Standards Framework.

"This framework does need to be pulled apart and put back together as many times as is necessary until it not reflects wellbeing but provides a pathway to delivering it across generations," she said.

Another recommendation was to update Treasury's CBAx model, which it uses for cost-benefit analysis of some (not all) budget bids.

The CBAx as it currently stood uses a standard discount rate of 5 per cent to work out the value of something in the future in the present day.

Upton said the current discount rate failed to correctly account for environmental spending, which often had benefits that "frequently accrue over longer time frames".

This means that the value of environmental spending is often not being adequately weighted against more short-term budget bids.

Upton said CBAx post-Wellbeing Budgets assessed current wellbeing but it did not link to long-term things like capital stocks or resilience.

This means the tool fails to grapple with the future benefits of current spending.

Instead, Upton argued, "future impacts of a policy intervention are made wholly on the basis of the prevailing societal preferences of the current generation and assumptions around the expected future flows of wellbeing generated from an uncertain stock of natural capital".

"Failing to consider wellbeing from the perspective of future generations likely to be impacted is a serious deficiency of CBA," he said.

The report also suggested using new environmental values in cost-benefit analysis, developing a new tool to score the impacts of budget initiatives, as well as improving communication of environmental information throughout the budget process, including to ministers.

The commissioner is an independent officer of Parliament. He reports back to Parliament on whether the Government is adequately safeguarding the environment.

On Wednesday, Treasury will publish its latest economic and fiscal forecasts, and Robertson will outline his priorities for the next budget.

Swarbrick said the Greens "support the areas the PCE and his team have identified for improvement".

"We have been pushing for much of this for over 30 years, including when the Government's wellbeing measures were first developed. Our commitment to making sure Budget decisions deliver long-term action on climate change and protecting nature is why we're so keen on seeing the framework done right," she said.