The introduction of BNG was phased, first applying to most commercial and large residential developments after February 12, 2024 pursuant to Schedule 7A of the Town and Country Planning Act 1990; and then extending to small residential developments after April 2, 2024.
So, it is early days for everyone concerned with BNG and certainly far too soon to say whether the regime is likely to be successful in delivering improvements to habitats and nature. Even so, there are a few early signs, perhaps to be expected, of teething problems with the BNG regime and some aspects which are going to require more attention from policymakers at DEFRA and HM Treasury (HMT).
Local Planning Authorities Capacity and Delays
Significant changes to planning or environmental law often create demanding extra responsibilities for local planning authorities (LPAs), and BNG is no exception.
In addition to time-consuming and complex assessments of planning applications, Biodiversity Gain Plans and Habitat Management and Monitoring Plans, the new regime is likely to result in LPA’s needing to commit more resources to preparing s106 agreements for the delivery of offsite biodiversity net gain.
The administrative overload on LPAs is highly likely to lead to significant delays to planning applications. Developers would be wise to take this into account in their development planning.
It is possible that some of this expenditure may be recouped by charging the developer various fees relating to BNG (see below).
BNG Monitoring Fees
The BNG regime gives local authorities the opportunity to charge fees for their BNG related services relating to BNG, including a monitoring fee to cover the cost of monitoring the development over the lifetime of the BNG obligation (at least 30 years).
LPAs will have to give some thought to the number of inspections they will carry out to monitor the effectiveness of the BNG scheme, but assuming it is every 5 years or so, the monitoring fee will have to cover the costs of multiple visits by ecologists which may not be insignificant, especially for larger development sites.
There is some concern amongst developers that monitoring fees could be very costly.
Tax issues
The tax implications for landowners relating to BNG seem to have been treated by policymakers as something of an afterthought. Plans are afoot for next year’s Finance Act to make changes relating to inheritance tax (IHT), but clarifications are also needed to the income tax and capital gains tax (CGT) position and for guidance on accounting for payments related to future habitat creation, so landowners who wish to support BNG will not be disincentivised by possible tax charges. Quite why this was not addressed by HMT prior to the implementation of the new regime is unclear.
Anecdotal information suggests that a lot of landowners are waiting for the implementation of the Finance Act 2025 before taking a closer look at the opportunities presented by BNG. Hence, implementing the new regime this Spring without such tax clarification was perhaps somewhat precipitate — we may have lost a year when we should have been starting to reverse the alarming loss of biodiversity.
Stacking
BNG ought to have been designed to complement other sources of financial reward and incentive for landowners wishing to improve habitats. However, the interrelation of BNG with other payments to landowners and farmers — stacking — seems to have been another policy afterthought. It also requires attention by HMT.
Noted agriculture tax expert, Stephen Poole, speaking to Capital Law, commented that:
Whilst BNG stacks quite well with nutrient neutrality credits, it does not currently stack with Woodland Carbon Code Credits and Peatland Carbon Code Credits. This means that a landowner is faced with a stark choice — they can go for such credits or BNG, but they can’t go for both. In addition, BNG does not generally stack with Forestry Commission Woodland Creation Grants, and the interrelation of BNG and farm payments is a “complete mess”.”
Our upcoming joint blog with Stephen Poole will cover the BNG Metric in more detail. The Metric is fundamental to the effective working of the BNG regime, but it is far from perfect and capable of delivering unintended results which disincentivise rather than encourage the creation of valuable habitats.
In summary, whilst the novel nature and bold thinking behind BNG is to be applauded, there are a few matters which just a few weeks after the introduction of the new regime are in need of attention from policymakers — including, more funding for LPAs, and allowing BNG to stack with the full suite of credits and grants available to landowners to further incentivise the urgent improvement of habitats across the country.
We will continue to keep clients up to date as the new BNG regime becomes more established. We provide BNG advice to landowners, LPAs, and developers, as well as to entities wishing to become a ‘responsible body’ for the purposes of BNG. For further information please get in touch.
