24 Mar 2023
It’s been a whole year since Natural England sent shockwaves through the housebuilding industry across England, including those 12 local authorities within the catchment of the River Tees, by increasing the number of catchments and authorities that are subject to its advice in respect of nutrient neutrality. Over that period, nutrient neutrality has been a hot topic in the North East with the advice of Natural England being that planning permission, including for reserved matters and where conditions still need to be discharged, cannot be legally granted for residential developments unless they are able to demonstrate nitrate or phosphate neutrality.
The Tees catchment is experiencing high housing pressure with more than 500 dwellings needed per annum. The HBF estimate that the delivery of 21,420 homes within the North East have been held up by the announcement last year. In the light of this level of need and the fact that the River Tees is only subject to Nitrogen problems (some other catchments have Phosphorous or both which require more land to mitigate), the catchment has been selected as the location to test the proposed credit system.
Natural England is set to launch its nutrient credit bank later this month and this blog examines the proposed application process and allocation system and what this means for development proposals that are currently being held up by nutrient neutrality.
How are credits established?
There are requirements in the Levelling Up and Regeneration Bill (LURB) for all waste water treatment works that serve a population of more than 2,000 in the affected catchment areas to be upgraded to the highest technically achievable limits by 2030. In the meantime, Natural England has identified temporary mitigation measures to bridge the gap until the new requirements are in placebetween now and 2030 (and continue post 2030 given that Natural England and Northumbrian Water believe that upgrades to treatment works will only negate two thirds of the need).
The topography and geography of the Tees catchment makes the reversion of arable land the most suitable temporary mitigation method and will generate the highest number of credits in the shortest time. This is followed by the creation of wetlands, although these can take three years to establish. So far, Natural England has been able to fallow enough agricultural land to generate 1,600 credits to be made available for mitigation within the Tees Valley catchment over the next 12 months.
What is the current position on occupancy rates?
The 12 local authorities that fall within the Tees catchment have commissioned an independent study into the occupancy rates that are to be used within the credit calculations. The report is expected to be published and made available before the end of March.
Whilst Darlington Borough Council have confirmed they will be using a figure of 0.8 residents per household, it is still to be confirmed as to the other 11 local authorities as each are dependent on their own demographic data. Figures are based on a calculation of net additional increase in the local population as a result of new development, as well as the declining size in the average household, and so the average occupancy rate used for credit calculations differing from the figure of 2.4 residents per household that is applied by Natural England in its nutrient calculator currently. This figure is based on the national average household assumption that all residents would be new to the area, even though Natural England has accepted that some people would move locally and would therefore not result in any additional nutrient impact within the defined catchment.
How will the credit bank system work?
Applications for credits will be open once a Quarter, with the first batch released at 9am on 31 March 2023. Guidance on what to include in the application will be released on 27 March via the gov.uk website in order for applicants to prepare the necessary information and calculations.
Initially, there will be 400 credits available in each batch with any that are not claimed rolling over to the next batch. Natural England is confident that more credits will be unlocked if the revenue is returned quickly to enable it to invest in more sites and make more credits available.
The process of applying will be online via the gov.uk website. If an application is successful, a 10% deposit will be immediately payable. Natural England will then issue a certificate that can be submitted with a planning application. The certificate will have a 36-week expiration date from being issued; Natural England believe that this will stop credit banking. Should planning permission not be granted after 36 weeks then the credits will be returned to the ‘credit bank’. However, it is expected that there may be some flex in this should there be any undue delays that are out of the applicant’s control, such as a deferred planning committee. Should planning permission be granted, then the balance of the payment for the credits will be due within 12 weeks of determination. The full certificate will then be issued which can be used to discharge any pre-occupancy conditions relating to nutrient neutrality.
It has been confirmed that the deposit will be refundable should the application get refused, however it is uncertain if this will happen if the certificate expires.
The credits will be allocated on a first come, first served basis through the application process. Whilst this will inevitably lead to some inconsistency it was determined that it was crucial to keep the process simple and this was the best approach to balance with fairness.
Applications will be divided into major (over 50 dwellings) and minor (fewer than 50 dwellings) applications (albeit the credits will be issued based on the size of the site rather than the applicant). In order to assist SME builders, the credits will be allocated over a 40:60 split, meaning there will be 160 credits available for major applications and 240 credits available for minor applications in the first batch. Any credits allocated for minor applications that are not allocated can be transferred for use by major applications. Natural England estimate that the first batch of credits for major applications will cover approximately 3 large developments (over 50 dwellings) across the Tees catchment.
Subsequent batches will be released every three months as follows:
Batch 2 – 30 June 2023
Batch 3 – 30 September 2023
Batch 4 – 8 January 2024
Natural England confirmed that the price per credit would be £1,825. Using the occupancy rate of 0.8 that is to be applied by Darlington Council it is estimated by Natural England that an average of 1.14 credits will be required for each dwelling. It therefore estimates that the cost per dwelling will be around £2,100 (1.27% of the average house price in Darlington).
As it stands, the credit calculator does not anticipate the upgrading of water treatment works in 2030 as the LURB has not yet received royal assent. However, as soon as this takes place, the calculator will need to be updated to take this into consideration.
What does this mean for current and future applications?
Whilst this is a positive step towards achieving a solution for nutrient neutrality, it will create some uncertainty for developers as to the realistic timescales in which credits can be obtained via the nutrient credit bank. Applications are only open once a Quarter and the first come first served approach means that the majority of applications will miss out initially.
Natural England has chosen not to prioritise applications that have already been submitted and are ready to be determined (following a resolution on nutrient credits). This may hold up housing that can come forward for delivery now. Instead, they have taken the approach they have in order to offer a ‘fair’ opportunity for all applications.
There is also still uncertainty about applications that only need to mitigate for part of the site, where on-site mitigation can be provided for some of the site. For example, if a site of over 50 units applies for credits through Natural England it would be considered as a major application (where the demand for credits is greatest). However, on-site mitigation may negate the need for a portion of the site, leaving fewer than 50 units to be mitigated for through the credit bank. Although the application would only be requesting credits for less than 50 dwellings, the scale of the development would still be considered under a major application. Natural England suggest they would consider this on a case-by-case basis.
Natural England is keen for this initiative to be successful and is encouraging a high uptake in using its credit bank in order to unlock more revenue to further increase the supply of credits (thus lowering the demand and competitiveness). In time and as more land is unlocked, this will create stability and Natural England claim that their £30m investment has the potential to generate £80m which will be used to improve the offering. However, until this stability is established, and the backlog of applications starts to clear, it is likely that there will be an extremely high demand for an inadequate supply of credits.
Lichfields will be continuing to closely monitor the situation with nutrient neutrality and would be more than happy to assist with credit applications once the new credit bank has launched for the Tees catchment. Please get in touch if you have any queries or need any assistance with calculations or any advice on projects that may be caught up in this process.
Gayle Black & Nicki Mableson
23 Mar 2023
The Environment Act 2021 set a clear commitment to clean up the country’s air, restore natural habitats, increase biodiversity and halt the decline in species by 2030. St Patrick’s Day delivered a milestone moment in this journey with the publication of a long awaited consultation on the Government’s proposals for replacing the process of Environmental Impact Assessment and Strategic Environmental Assessment. The consultation – which runs to 9 June 2023 - seeks to provide more detail on the suggested creation of ‘Environmental Outcome Reports’ which are referenced in the Levelling Up and Regeneration Bill (‘LURB’) as the proposed new domestic framework for environmental assessment post Brexit. The paper sets out a vision for:-
“…assessment to be more effective as a tool for managing the effects of development on the natural environment, supporting better, faster and greener delivery of the infrastructure and development we need.”
So does the paper achieve its aim of clarifying its proposed approach? To an extent – yes – and we welcome the wide ranging questions upon which the consultation seeks a response and the clear intent to engage with the industry over the coming weeks and months. However, there is a lot to digest and consider and to that end we summarise some of the highlights below. Key will be ensuring that, in bringing forward changes, the proposals do actually retain the very real value of the existing assessment system which ensures environmental considerations are at the heart of bringing forward the largest developments in this country. In other words, let’s make sure we’re not throwing the baby out with the bathwater.
We’ve summarised below some of the main proposals which we, along with doubtless the rest of the industry, will be reviewing over the coming weeks.
The consultation establishes more on what the Government proposes regarding environmental ‘outcomes’ which would be ‘high level’, established in secondary legislation and subject to parliamentary scrutiny and public consultation. The consultation explains it is intended that outcomes would be measurable and designed by environmental experts who have experience and knowledge of sectors. An organisation will be assigned to monitor the overall progress of a specific outcome and they will be reviewed on a regular basis to ensure relevancy.
The LURB places a duty on the Secretary of State to ensure that an outcomes-based approach does not reduce the overall level of environmental protection provided by existing environmental law. The Secretary of State can also consider other relevant material when setting outcomes, such as the Clean Air Strategy.
Based on the Environment Act 2021, outcomes would be backed up by a number of indicators which can be used to measure how a development contributes to the delivery of each relevant outcome. Indicators will be data sets based on underlying technical work and analysis, such as physical surveys and population counts, and will measure the expected change resulting from a development against the baseline condition. The consultation importantly recognises that for some outcomes a more qualitative assessment may be required. This sounds very similar to the current approach and one would hope that this could help assessors get up to speed with the new system quickly.
Guiding principles for outcomes
The consultation proposes a list of topics (focused on the elements of the Government’s Environmental Improvement Plan) which could be reflected as outcomes, as well as referencing the potential to consider how EORs could achieve health related outcomes. The list proposed will be familiar to those involved in environmental assessment already and includes biodiversity, air quality, landscape and seascape, geodiversity, soil and sediment, noise and vibration, water, waste, cultural heritage and archaeology. The consultation notes that further consideration is being given to how the outcomes-based approach can best support efforts to adapt to the effects of climate change.
The consultation suggests that there will be an attempt to try to avoid duplication between policy and assessment.
It is proposed that different environmental assessment regimes can develop their own tailored approach to assessment. For assessments within the Town and Country Planning and Nationally Significant Infrastructure regimes it is suggested that the approach could be to assess against all relevant outcomes; but to adopt a proportionate approach with only limited review where outcomes are not or are less relevant to a particular site.
Reporting on outcomes
The consultation proposes that the core component of the EOR is drastically shorter and easy to navigate for consultees. A suggested structure of an EOR within the planning regime notes it could include:-
An introduction which cross refers to the project description provided in a separate planning statement;
A short and high level summary of the reasonable alternatives and the mitigation hierarchy considered;
An assessment of the contribution of the project towards achieving an outcome, including residual effects identified through technical work, current baseline data, commentary on levels of uncertainty, proposed mitigation and monitoring; and
A summary of the cumulative effects of the project on the outcomes.
It is suggested that the technical analysis would be provided in separate and standalone reports rather than ‘buried in appendices’.
The consultation reinforces the Government’s commitment to seeking digitisation of planning services and identifies proposals to provide better access to all to data secured through the environmental assessment process.
Need for outcomes reporting
The consultation identifies that the screening process would be strengthened to minimise ambiguity; noting that determining when assessment is required carries the highest risk of legal challenge in the current regime. It is proposed to establish regulations which will ‘narrow the scope for discussion’ when borderline cases are reviewed which may or may not require assessment. A further review will take place on how this ‘narrowing’ may be best expressed. However the consultation suggests the distance to a sensitive receptor or the presence of a defined impact pathway could be used to screen, which, it considers, would place “protecting sensitive sites and species at the heart of all screening activity”, with the size of the project as the “secondary consideration”.
Strengthening Approach to Mitigation and Monitoring
The consultation records that “ensuring that all steps are taken to avoid damage and mitigate the impact of development is central to these reforms” and aims to do this by setting the ‘mitigation hierarchy’ of avoidance, mitigation and compensation directly into legislation for the first time. This could give more ‘bite’ to the current practice of seeking to embed mitigation during the design development stage. It is suggested that EORs will need to report how adverse impacts on the environment have been avoided during the design stages.
In an attempt to address ineffective mitigation, the consultation proposes an ‘adaptive management’ approach which allows mitigation to be adjusted following implementation where monitoring shows that progress towards an environmental outcome is not as expected. The consultation asks for comments on the challenges in implementation of this approach and it is easy to see how this is likely to generate considerable interest from the development industry.
The consultation explains that Government will be given powers to ensure any mitigation measures proposed will be monitored to ensure they are delivering the level of environmental protection envisaged in the EOR. Where expected outcomes are not met, remediation would be pursued and enforced.
Reporting against performance
The consultation concludes on the topic of reporting against performance, explaining that public authorities will be required to report on performance against specified environmental outcomes, helping to build a country wide picture on the effectiveness of environmental assessment.
Over the coming weeks we’ll be speaking with our clients and co-consultants to gather their ideas on how the reforms might revolutionise the process of environmental assessment and we’ll take a deeper look into the key issues raised by each of the Government’s questions. If you’d like to discuss the consultation and its potential implications with us, please contact a member of our EIA team.