* 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 a 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.

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. 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 2025  .

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 £43,467  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 gains  . 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 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.”