Report highlights risks to effectiveness of BNG legislation

Construction workers with sunrise in background

There are risks to the long-term effectiveness of the government’s new Biodiversity Net Gain (BNG) policy, launched in February, according to a 17 May National Audit Office (NAO) report.

The independent public spending watchdog’s document assessed whether Defra and Natural England have made good and effective progress implementing statutory BNG, a policy incorporated in the legislation of Defra’s 2021 Environment Act. The new rules – which are unique to England – require development to have a measurably positive impact on biodiversity compared to what was there before,1 seemingly the first time a government has introduced statutory BNG as a national legal requirement.

Developers must improve the habitats they harm by a net 10%, ideally on-site. When on-site gains are not enough to meet the 10% requirement, off-site gains can be created by the developer elsewhere or purchased through a new private market for biodiversity units.

BNG is being implemented in three stages, with major developments in scope from February 2024; small developments from April 2024; and nationally significant developments from November 2025.2

Stakeholders support the scheme, but had concerns about its implementation prior to launch. These concerns included uncertainty about the launch and preparation costs.

The government provided either £26,807 or £43,4674 to each local authority to help them prepare in each of the two years proceeding launch. Local authorities had discretion to spend the money: for instance, on recruiting and training new ecologists, procuring new software, and processing legal work. However, Defra acknowledged mixed readiness among local authorities at launch.

There are risks to local authorities carrying out effective compliance and enforcement for statutory BNG. Local authorities have discretion in how they enforce planning regulations. Defra did not give local authorities additional money specifically to monitor or enforce on-site gains4. However, government expects that local authorities can also generate income from BNG legal agreements, which can fund monitoring and enforcement work.

Defra is still developing its governance arrangements for BNG and intends to make Natural England responsible for important elements of the policy. But in developing these new arrangements, Defra does not intend to provide central monitoring of how well on-and off-site biodiversity gains are being enforced by local authorities.

Natural England and Defra also lack all the relevant information they need to effectively evaluate the regime and determine whether it’s a success. For instance, they currently do not have a comprehensive source of information of habitat enhancement taking place on site. Defra is exploring what information might be available from local authority reporting against the statutory biodiversity duty, although this will only be available at five-yearly intervals.

Defra is relying on a private sector market for biodiversity units emerging but does not know how rapidly it can scale up or satisfy demand. Where private markets fail to provide enough off-site credits, Defra will step in as a provider of last resort, with the money raised ring-fenced for government mandated improvements to UK biodiversity. Presently, Defra does not have a legally compliant mechanism to spend income from statutory credit sales to enhance biodiversity.

Overall, the government expects BNG to provide a small contribution to separate, national biodiversity targets. Defra’s 2019 impact assessment suggested that BNG, as designed, could be expected to deliver genuine net gain, or at least no net loss.

The NAO recommends that government establishes a mechanism for spending income from the sales of statutory biodiversity credits. It also says that local authorities should have sufficient and timely funding certainty to allow for longer-term planning regarding their role in locally agreeing and enforcing the scheme.

Gareth Davies, head of NAO, commented:

“The statutory biodiversity net gain scheme is the first national scheme of its kind to build requirements for enhancing biodiversity into planning approval. However, it was launched with risks to the long-term effectiveness of the policy.

“These include uncertainty about whether the fledgling market for biodiversity units scales up to satisfy developers’ demand, risks to enforcement and gaps in its information.

“Defra must address these issues, including by plugging gaps in its information so that it can effectively evaluate the scheme’s success.”

Responding to the publication of the NAO report, IEMA Director Policy & Public Affairs, Ben Goodwin commented: “Getting Biodiversity Net Gain right across different development types and sizes is critical, but it is a long-term endeavour and will require iteration to achieve the best outcomes. The conclusions of the National Audit Office’s report are consistent with this.

“Thinking about the health of the natural environment and its relationship with development more widely, we urgently need a framework in place that can marry-up disparate policy interventions on planning and environmental impact assessment reform, alongside BNG itself.”

[1] Defra and Natural England use habitat as a proxy for biodiversity.
[2] Major development includes residential developments with 10 or more dwellings, or where the site area is greater than 0.5 hectares. Small site development includes residential development where the number of dwellings is, for example, between 1 and 9, or if unknown the site area is less than 0.5 hectares. Nationally significant infrastructure projects are major infrastructure developments (such as power stations) that bypass normal local planning requirements.
[3] Local authorities with estimated demand up to 500 applications within the scope of statutory BNG were allocated £26,807 each in 2023-24, and those with estimated demand of 501 applications or more were allocated £43,467.
[4] Defra does not fund local authorities to engage with the off-site market in their local area because local authorities can generate income from legal agreements with biodiversity ‘gain site’ providers, which can also fund monitoring and enforcement work more generally.