Risks to the long-term effectiveness of the biodiversity net gain scheme

1 Scope of the National Audit Office (NAO) report in brief.
2 Managing the risks of BNG implementation
3 A unique national legal requirement
4 Preparation and governance
5 Evaluation and assessment
6 Comment from NAO
7 Conclusions of the National Audit Office (NAO) report in brief
8 Download links and about the NAO
9 Related articles on Designing Buildings

[edit] Scope of the National Audit Office (NAO) report in brief.

The report examines the progress Defra and Natural England have made in implementing statutory BNG, and whether they have done so in a way that maximises benefits and effectively manages risks. We have produced it in response to a request from the Environmental Audit Committee to contribute to its inquiry into the role of natural capital in the green economy. It covers:

Government’s approach to implementing statutory BNG, and how it expects the policy to contribute to its biodiversity objectives
How the government designed and launched statutory BNG
Key risks the government will need to manage as it seeks to maximise the value statutory BNG can provide
Recommendations aimed at supporting Defra and Natural England to maximise value and manage risks to statutory BNG as policy implementation becomes business as usual

[edit] Managing the risks of BNG implementation

The Department for Environment, Food and Rural Affairs (Defra) launched a novel and complex biodiversity scheme without having all elements in place to ensure its long-term success.

Defra needs to manage a range of risks including whether a new biodiversity market emerges, and whether compliance and enforcement by local authorities will be effective. Defra is still developing a way to spend money it receives from developers on biodiversity; and also how to judge whether its policy is working.

There are risks to the long-term effectiveness of a new policy, launched by the government in February, to make sure developers in England protect or improve biodiversity on land they are developing, according to the new National Audit Office (NAO) report.

The independent public spending watchdog’s latest report assessed whether Defra and Natural England have made good and effective progress implementing statutory biodiversity net gain.

[edit] A unique national legal requirement

Statutory biodiversity net gain (BNG) was legislated for as part of Defra’s 2021 Environment Act. The new rules – which are unique to England – require development to have a measurably positive impact (‘net gain’) on biodiversity compared to what was there before.1 This is 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 20253.

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

[edit] Preparation and governance

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.

[edit] Evaluation and assessment

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.

[edit] Comment from NAO

Gareth Davies, head of NAO said:

“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.”

[edit] Conclusions of the National Audit Office (NAO) report in brief

In November 2021 Defra publicly committed to launch statutory BNG within two years. It worked quickly, developing a novel policy through an existing and complex planning system, and statutory BNG was launched in February 2024. However, in prioritising launching the policy it accepted some significant risks to effectiveness which it must now manage as the policy moves from implementation to business as usual.

Defra launched its policy before having all the elements in place that it needs to ensure statutory BNG is a success in the long term. Although it considered that the arrangements it had in place at launch were sufficient, it has a long way to go before it can be confident that damage to biodiversity through development will not be understated and that the benefits of biodiversity enhancements will actually be delivered. For its market-led approach to work, Defra needs the market to scale up to meet demand, and for statutory biodiversity credits to deliver biodiversity when the market fails to do so.

Local authorities manage many aspects of statutory BNG through the planning process, including ensuring compliance and enforcement. For now, there is doubt about whether local authorities will be able to discharge these duties effectively. In addition, it is not clear whether Defra will have sufficiently granular monitoring data to assess policy performance. Without these, Defra will not have assurance that its statutory BNG policy is delivering biodiversity outcomes and value for money for taxpayers.

[edit] Download links and about the NAO

Publication details: ISBN: 978-1-78604-550-8 [Buy a hard copy of this report]. HC: 729, 2023-24

The National Audit Office (NAO) scrutinises public spending for Parliament and is independent of government and the civil service. It helps Parliament hold government to account and it uses its insights to help people who manage and govern public bodies improve public services.

The Comptroller and Auditor General (C&AG), Gareth Davies, is an Officer of the House of Commons and leads the NAO. The NAO audits the financial accounts of departments and other public bodies. It also examines and reports on the value for money of how public money has been spent.

In 2022, the NAO's work led to a positive financial impact through reduced costs, improved service delivery, or other benefits to citizens, of £572 million.

This article is based on the Press Release 'Risks to the long-term effectiveness of new biodiversity net gain scheme' dated May 17, 2024, and the updates from Implementing statutory biodiversity net gain webpage as of May 20, 2024.