National Audit Office report on the implementation of biodiversity net gain

On 17 May, the National Audit Office (NAO) published a report examining the progress Defra and Natural England have made on the implementation of biodiversity net gain (BNG) in response to a request from the Environmental Audit Committee.

The report looks backwards assessing the implementation of BNG and its contributions to the biodiversity objectives and considers risks to the long-term effectiveness of BNG policy. The NAO makes recommendations to support Defra and Natural England to maximise value and manage risks to the implementation of BNG policy as it becomes business as usual.

Developers in England are now required to provide BNG of at least 10%, with the exception of large infrastructure projects which will be subject to the BNG regime from November 2025.

Risks to delivery of the long-term BNG benefits

The overall thrust of the NAO report is that there is still work to be done, against the backdrop of a shortfall in resources.

The NAO report raises some significant risks that the government will need to manage to achieve its biodiversity objectives.

The NAO flag that Defra is relying on a market for BNG units emerging, which remains uncertain. Defra does not intend on monitoring or influencing this market, which the NAO warns is a significant risk. For our part we consider this snapshot in time is not reflective of the emerging market. The BNG register records five BNG sites already and in our experience many landowners are seeking opportunities to realise the natural capital potential of their land for BNG purposes.

The report also raises the concern that demand for certain habitat types may not be served properly, harming the overall biodiversity objective. There is likely to be some geographic variation in the offsite market which may disadvantage some LPAs seeking to raise income from legal agreements.

Local authorities are responsible for operating the planning system locally through which the government has implemented statutory BNG. A key concern to the overall biodiversity objective is the capacity and capability of Local Planning Authority’s (LPAs) and their lack of resources to monitor and enforce statutory BNG. The report states that sufficient and timely funding is needed for LPAs who have not yet received any additional money. Compounding this resourcing crisis ecologists, who are central to the successful implementation of the objectives, are in short supply at a time when there is unprecedented demand for their expertise.

The BNG regime makes government the BNG provider of last resort, with developers purchasing statutory biodiversity credits. In this respect the report identifies another hurdle for Defra being that there is no mechanism to spend income raised from statutory credit sales that is legal and consistent with HM Treasury rules on managing public money.

The NAO suggests that Defra needs to actively monitor the effectiveness of LPAs and responsible bodies in applying BNG policy. While LPAs can source information on offsite gains and ‘significant’ onsite gains which require registration on the NE statutory register, there is no comprehensive source of information in respect of onsite gains.

A major challenge for Defra is monitoring regional engagement with BNG policy, as some LPAs may be more effective than others in compliance and enforcement. Where some LPAs are struggling, NAO recommends that Defra targets support to them.

The monitoring is essential to charting the success of the government’s biodiversity objective. Defra and Natural England are encouraged to obtain more accurate data to review the policy’s impact and application over time.

Recommendations

NAO sets out various recommendations aimed at supporting Defra and Natural England to maximise value and manage risks to statutory BNG, including the following:

• Implementing a legal mechanism for Defra to spend income from the proceeds of statutory credits sales;
• Making arrangements for understanding and addressing risks to the long-term success of BNG;
• Providing funding certainty for LPAs;
• Determining how it will monitor the effectiveness of compliance by LPAs and responsible bodies;
• Monitoring the emerging biodiversity market to ensure it meets demand; and
• Publishing information annually on what statutory BNG has delivered so far toward national biodiversity targets.

The NAO report highlights that there is some further work needed by Defra to ensure BNG meets its policy objectives. However, given this is the first time any government worldwide has introduced BNG as a national legal requirement, this is perhaps unsurprising.

At Michelmores, we can provide expert assistance to clients navigating the complex and novel landscape of BNG.