Councils seeking to establish biodiversity net gain (BNG) offset funds may fall foul of the Community Infrastructure Levy Regulations (CIL Regulations) and the new statutory BNG regime. Two recent planning appeal cases (APP/T0355/W/24/3342112 and APP/T0355/W/24/3344592) in the Royal Borough of Windsor & Maidenhead (the Council) highlight the difficulty with Council-owned BNG offset funds.

Both appeals concerned development which would adversely impact biodiversity. While both developments were exempted from a statutory requirement to demonstrate a 10% biodiversity net gain, they were subject to, among other things:

• local policy requirement to enhance biodiversity; and
• the national policy requirement to provide net gains for biodiversity (NPPF paragraph 180).

Neither appeal could satisfy the BNG policy requirements onsite. In both appeals, the Council sought a contribution into a ring-fenced fund for the sole purpose of funding long term conservation projects in the Borough to deliver offsite BNG' (the BNG Offset Fund).

BNG offset funds

Under regulation 122 of the CIL Regulations, a planning obligation for a financial payment may only constitute a reason for granting planning permission if the obligation is:

1. necessary to make the development acceptable in planning terms;
2. directly related to the development; and
3. fairly and reasonably related in scale and kind to the development.

Both Inspectors both found that the obligations to pay into the BNG Offset Fund fell foul of regulation 122. The Council had explained that the contribution to the BNG Offset Fund was based on a tariff paid in proportion to the shortfall in habitat units via a payment of £40,000 per habitat unit. Even though there was a Supplementary Planning Document which suggested that a Council-owned BNG scheme was expected to be created, neither Inspector was given any specific details of the BNG schemes proposed to be created through the BNG Offset Fund. Because there was no link between the BNG Offset Fund and specified works that would enhance or increase biodiversity, neither Inspector weighed the planning obligation to pay into the BNG Offset Fund into the planning balance.

Legal BNG and BNG offset funds

Both appeals concerned development which was legally exempt from the new statutory BNG requirement. The decisions are still relevant for understanding when planning obligations to pay into a BNG offset fund can lawfully satisfy the legal requirement to deliver 10% BNG.

A Council wishing to set up a BNG offset fund under the current statutory BNG regime will need to ensure:

• that obligation to pay into the BNG offset fund will comply with the CIL Regulations;
• the BNG offset fund directly supports the creation of specified habitat creation and enhancement works;
• the habitat creation and enhancement works create biodiversity units as measured by the Statutory Biodiversity Metric;
• the habitat creation and enhancement works are secured by a s.106 agreement (with a Council SPV) or by conservation covenant with a responsible body (whether that be an approved Council-owned SPV or otherwise); and
• the land where the habitat enhancement works will be carried out is registered by Natural England at the Biodiversity Gain Site Register.

Developer certainty

In exchange for its contribution into the BNG offset fund, the developer under the new statutory regime would want to guarantee that the Council will allocate the required biodiversity gain units to the development via the Biodiversity Gain Site Register. The developer would then be free to demonstrate this allocation has been made when it submits its biodiversity gain plan for the Council's approval prior to commencing development.

When approving a biodiversity gain plan and discharging the statutory BNG condition, Councils should also ensure that the Council-owned offset fund would generate biodiversity units of the correct distinctiveness category.

Additional support

Dentons has extensive experience advising local authorities on how they can comply with their new duties under the new BNG statutory regime. See our BNG solutions page for more information on our expertise.