The new mandatory BNG regime is a product of Part 6 of the Environment Act 2021 (which amends the Town & Country Planning Act 1990, the TCPA) and seven associated statutory instruments, as supplemented by an array of DEFRA guidance and DLUHC's Planning Practice Guidance on BNG (the PPG). 

In summary, the new regime requires new development to deliver at least a 10% net gain (the biodiversity gain objective) on the site's pre-development biodiversity value (calculated on the basis of a statutory metric tool and, as an anti-avoidance measure, discounting activities after certain dates that lowered the pre-development biodiversity value) by either providing one or a combination of onsite BNG, offsite BNG or statutory credits.  The primary mechanism for this in the town and country planning regime will be the submission and approval of a biodiversity gain plan to discharge a mandatory pre-commencement condition on each new planning permission.  (For phased development there will be an overall biodiversity gain plan to be approved before any development can begin and a phase biodiversity gain plan to be approved before each phase can begin).

Whilst this is a post-permission requirement and development will not be able to commence until the biodiversity gain plan has been approved, the new BNG regime introduces minimum BNG information requirements for planning applications subject to BNG, including the submission of a completed biodiversity metric calculation.  This is to enable local planning authorities to consider each application's proposed strategy to meet BNG.  

In practice, BNG will need to be something that applicants consider pre-application because of the BNG hierarchy that local authorities will take account of when considering biodiversity gain plans – this provides for onsite BNG first, followed by offsite BNG (known as biodiversity units) and, lastly, statutory credits (known as biodiversity credits).

Underpinning all of this is a system of legal commitments (where BNG land must be secured as such for a minimum of 30 years) and registration administered by Natural England.

Mandatory BNG applies to all TCPA applications in England from 12 February 2024 apart from applications for retrospective planning permission and development the subject of the exemptions and transitional arrangements set out across the legislation.

We set out the exemptions and transitional arrangements below, although it should be noted that in practice the distinction does not matter and is not particularly meaningful anyway.  (There is, for example, a temporary exemption which will have a far shorter lifespan than the transitional arrangements which, conversely, may end up being applicable to some sites for many years).

The exemptions to mandatory BNG have been deliberately limited and cover the following development:

(1) The exemptions

• Small (non-major) development – temporary exemption until 2 April 2024 (reflecting the phased introduction of mandatory BNG for TCPA applications)
• Householder development
• De minimis development – defined as development which impacts less than 25 sqm of non-priority habitat or 5m of linear habitat (e.g. hedgerows)
• Self/custom build development – provided there are no more than 9 dwellings and the site is no larger than 0.5 hectares
• Development of a biodiversity gain site – an exemption to avoid BNG being required on a BNG site
• Development related to the high speed railway network
• Development granted permission under a development order – e.g. permitted development, which is notable in the context of the Government's plans to further expand permitted development rights
• Urgent Crown development

The majority of these exemptions are contained in regulations, which the Secretary of State is required to review and report on every 5 years.

(2) The transitional arrangements

The transitional arrangements mean that mandatory BNG does not apply to the following TCPA applications:

• Any planning applications made before 12 February 2024
• Any section 73 applications where the original planning permission was granted before 12 February 2024; and
• Any section 73 applications where the planning application for the original planning permission was made before 12 February 2024

The transitional arrangements therefore encompass some future section 73 applications and, as such, are likely to have a long tail for some sites.

On the face of it, mandatory BNG looks like an uncompromising bolt-on to the TCPA process, applying to all applications for planning permission going forwards subject to the limited exemptions and transitional arrangements set out above.  But the exemptions and transitional arrangements are not quite as limited as they initially seem and there is perhaps more flexibility built into the system than first appears with the Secretary of State having the power to change a number of key elements, including the list of exemptions and the biodiversity metric itself.  

Consequently, there is scope for the Government to tweak things that are not working as it goes along and we can certainly expect the system to evolve over time regardless.  At the same time, since this is a completely new regime, the Government does need to allow sufficient time for it to properly bed in before pulling any such levers.

All of this goes to the broader question of stakeholder readiness and the expertise required for the new system to function properly (particularly given the technical nature of the biodiversity metric).  Are all applicants and local planning authorities sufficiently geared up for mandatory BNG?  What about Natural England, who has a key role to play in the new regime, both administering the system of registration and selling statutory credits?

There are also some broader questions in the context of the determination of planning applications subject to mandatory BNG.  

Firstly, given that mandatory BNG is the subject of a pre-commencement condition, can it be a ground for refusal in the determination of an application?  The PPG advises that it would "generally be inappropriate… to refuse an application on the grounds that the biodiversity gain objective will not be met".  Of course, this is not the same as saying that it could never be a reason for refusal and no doubt this is a point that will be tested in due course.

Secondly, there is the question of the interaction of mandatory BNG with existing BNG local plan policies.  The PPG advises that it "would be inappropriate for decision makers to continue to give weight to aspects of existing local policies related to biodiversity gains which are inconsistent with the statutory framework for biodiversity net gain" but that "a policy which required a gain greater than 10% on an area wide basis or for an allocation may still be relevant as the statutory biodiversity gain objective is for at least a 10% gain".   A complicating factor with this advice is that any existing policy version of BNG is almost certainly not calculated in the same way as mandatory BNG due to the updated metric tool that the latter uses.

Undoubtedly the new mandatory BNG regime is an ambitious add-on to the TCPA process that presents opportunities and challenges alike, not least because it is reliant on a new market to rapidly evolve from its "Big Bang" – namely the biodiversity units market.

Since statutory credit prices are designed to be prohibitively expensive to reflect their last resort status, the new regime is ultimately dependent on a properly functioning biodiversity units market to avoid undue reliance on statutory credits and the viability challenges that this is likely to create for development unable to fully meet the 10% BNG requirement via onsite provision.  However, unlike the statutory credits system, the biodiversity units market is not within the Government's control.  This is, of course, where there are opportunities for third party landowners to create biodiversity units for sale to developers (either by bespoke habitat creation for a particular development or as part of a habitat bank).

For landowners the provision of biodiversity units is a 30 year plus commitment and part of the challenge here will be the pricing of biodiversity units.  The economic forces of demand and supply aside, there is the potential for statutory credit pricing to feed-back into the units market in an unintended way, i.e. for the Government's deliberately expensive credit pricing to pull the price of biodiversity units upwards.  The Government has attempted to pre-empt this by advising that "statutory credit prices are not guideline prices for off-site biodiversity units".  Nonetheless there must be risk that this is exactly what they end up being.

As with many aspects of the new regime, we will have to wait and see what happens in practice, i.e. how the new system evolves from its Big Bang moment.