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Outlook: The real cost of economic growth

GROWTH is good, or so most economic policy debate assumes. Growth, that is, measured by conventional statistics for gross domestic product. But thanks to the environmental lobby - not to mention common sense, on a hot day when the pall of pollution has hung visibly over Britain's cities - it is well understood that this conventional sort of growth does not fully measure economic well-being.

With its second go at producing environmental accounts, the Office for National Statistics has gone another step on the way to developing measures of the economy that do take account of the costs of conventional growth such as the impact of pollution on health or the depletion of North Sea resources. The figures are pretty sobering. One essay in the new publication, although with a clear health warning about the assumptions that need to be made to arrive at a total, estimates that the economic cost of selected environmental damage amounted to 4.1 per cent of GDP, or Ecu67m per inhabitant, in 1990. This was much better than the Netherlands but much worse than Germany, suggesting that such costs do depend on policy choices.

Looking in more detail at the sources of pollution, the figures show that the UK record on pollution has improved very little during the past decade. Emissions of greenhouse gases have barely changed since 1987. The electricity generators have done theit bit but the rise in car useage has presumably negated this. Where we have had more success is in reducing acid rain emissions - the result of fitting anti-pollution kit on power stations and moving away from coal burning.

The catch is that pollution by other industries - notably transport - and by households has either not improved or has actually worsened. The debate, by focusing on power generation, has made the easy reductions in greenhouse emissions. But it is, of course, one aspect of the decision the Government has to make now about the switch from coal to gas. Thanks to the environmental accounts, we can see that there is a clear trade- off between miners' jobs and national economic welfare, and even estimate that the wider economic costs of greenhouse gas pollution are higher than they might seem at first blush.

The other uncomfortable policy conclusion is that the next step is to reduce pollution by the rest of industry and by households. There will be no more significant reductions without getting deliveries off the roads and onto trains, and persuading people out of their cars. Luckily for the Deputy Prime Minister, John Prescott, yesterday's figures will give him the evidence he needs to make the price of private motoring reflect the economic cost - if he is brave enough to make us pay it.