Draft Nature Restoration Levy regulations 2026

I beg to move, That the Committee has considered the draft Nature Restoration Levy Regulations 2026. It is a pleasure to serve with you in the Chair, Sir Alec. The draft regulations were laid before the House on 18 June. When it comes to development and the environment, this Government have been clear that we want to unlock a win-win for the economy and for nature. To that end, we legislated through the Planning and Infrastructure Act 2025 to introduce a nature restoration fund that will unlock and accelerate development, going beyond simply offsetting harm to unlock the positive impact that development can have in driving nature recovery. The purpose of the NRF is simple: to end the current suboptimal approach to discharging environmental obligations, in which developers are required to pay for localised and often costly mitigation measures, only to maintain the environmental status quo; and to replace that with a more strategic approach that will streamline delivery of new homes and infrastructure, while efficiently delivering improved environmental outcomes by leveraging economies of scale and reducing need for costly project-level assessments. As hon. Members are aware, the core principles and purpose of the NRF were subject to extensive scrutiny by both Houses. Relevant clauses of the original Bill were strengthened in a number of important ways during its passage to provide further reassurance that the fund will deliver the improved outcomes for nature that are at the core of the model. It would not be appropriate to relitigate the lengthy debates that took place in the Bill Committee, but I take this opportunity to emphasise that strong safeguards were built into the 2025 Act to ensure that the fund will restore, not harm, nature. Those include a binding overall improvement test, monitoring and back-up measures, remedial action and the ability to amend or revoke plans if necessary. Shifting to a strategic approach requires positive planning, which is why the creation of environmental delivery plans sits at the heart of the model. EDPs will be developed by Natural England, the Government’s adviser in respect of the natural environment, and will demonstrate how the proposed package of conservation measures delivered by the EDP will materially outweigh one or more impacts of development on a protected site or species. Those conservation measures will then be deployed by Natural England where they will have the greatest environmental benefit. Each EDP will be subject to public consultation, providing an opportunity for stakeholders to scrutinise the evidence presented by Natural England before an EDP can be made. At the conclusion of that process, the Secretary of State will consider whether the EDP meets the overall improvement test established under the Act before they formally make the EDP. Where an EDP is in place, developers will have the option to pay the nature restoration levy to discharge the relevant environmental obligations that the EDP covers. That levy is the subject of the draft regulations that we are considering. The draft nature restoration levy regulations set out how the levy mechanism will work in practice. They will provide the statutory framework for key elements of the levy’s operation, including how liability to pay the levy may be assumed, imposed or transferred, and they explain how the amount of the levy will be calculated, when payment will be due, and the enforcement mechanisms available to Natural England when obligations are not met. The purpose of the nature restoration levy is to enable the delivery, management, maintenance and monitoring of the conservation measures identified in the relevant EDP. The draft regulations therefore provide clear safeguards to support the effective delivery of such measures. They ensure that payments from developers are sufficient to meet the costs of the relevant conservation measures, are properly recovered in a timely manner, and are aligned with the commercial realities of development. Levy rates will be set through individual EDP charging schedules, which will form part of the EDP, which is consulted on. Those charging schedules will be based primarily on the cost of delivering the conservation measures needed to materially outweigh the development impacts. At times during the passage of the Planning and Infrastructure Act, concerns were expressed that funds collected through the NRF might be diverted to pay for other, unrelated priorities. I assure hon. Members that the draft regulations will ensure that levy funds can be used only for the delivery of the conservation measures set out in the relevant EDP and for the administrative expenses connected with that EDP. Clear reporting requirements on how levy receipts are spent will further enable the NRF to operate transparently and with appropriate scrutiny. I stress that levy receipts are subject to a statutory ringfence and must be used to deliver the EDP for which they were collected. Only costs reasonably attributable to that EDP can be funded through levy income. I am also aware of concerns regarding the potential impacts of EDPs on development viability. I want to make it clear, however, that we have put in place important safeguards to protect developers who choose to use the NRF from unjustified costs. Public consultation and rigorous Secretary of State scrutiny of each EDP will ensure that proposed levy rates are carefully considered before any EDP is made. It is also worth reiterating—we debated this issue at length in Committee—that in almost all cases EDPs will be voluntary and developers will have the option to meet obligations through existing routes if they do not believe that discharging their obligations through the NRF represents good value for money. Although the levy regulations are a key part of the new system, we recognise that users will need proper support to navigate the NRF. I am pleased to say that initial guidance has now been published by the Ministry of Housing, Communities and Local Government, the Department for Environment, Food and Rural Affairs, and Natural England to support the implementation of the first EDPs. The guidance sets out the key steps for NRF users and explains the core operational processes that will underpin the NRF system. We will continue to work with stakeholders to identify further areas where guidance might assist as we work to roll out the NRF. To conclude, the regulations will support the effective implementation of the NRF by ensuring that the levy operates effectively, transparently and fairly so that we can build the homes and infrastructure our country needs while improving our natural environment for future generations. I commend the regulations to the Committee.

It is a pleasure to serve under your chairmanship, Sir Alec. As the Minister set out in his introduction, there was extensive debate during the Committee on the Bill that has brought this set of regulations to life. There was certainly a lot of cross-party debate about the provision; that reflects the public interest in the impact that development can have on nature and wildlife in particular. Although there was a degree of political disagreement about the policy itself, I think we all shared the objective: having a more functional system. That is clearly the Government’s objective, so we will not seek to divide the Committee this afternoon. However, I have some questions for the Minister. When we debated the issue in Committee, he was clear that in due course this legislation would come forward and there would be an opportunity to look at the points of detail that Members had raised. My first question is about any assessment that he has undertaken of Natural England’s capacity to administer the process. We heard in the Committee evidence sessions from different development organisations that talked about how difficult it sometimes was to get a decision from Natural England because of its lack of capacity when a development had been approved but there remained elements that Natural England needed to sign off. Clearly, this legislation envisages a significant role for Natural England in the planning process—much larger than it currently occupies, and one that it said in evidence to the Committee it would welcome. But making those decisions and the financial underpinning will come at a significant cost, in terms of both people and skills. Will the Minister set out what assessments have been undertaken to ensure that the provision does not lead to further delays through the administration of the levy scheme? The second question relates to a point that we touched on in Committee and is not, as far as I can see, fully addressed in the papers: the treatment of levy payments in kind. We heard examples of when developers had said that, rather than make a cash contribution, they would seek to offer another site where they would create an appropriate wetland habitat, habitat for birds or whatever, which would have a value attached to it. In the normal course of events, the Government already negotiate to determine whether a financial contribution can be made in the form of an asset that has a value, rather than in cash. It is not immediately clear how that type of situation would be handled, especially given that Natural England will be separate from the planning authority making the decision on the scheme. It would be helpful if the Minister told us how the Government envisage dealing with that. Finally, in Committee a point was raised that I do not think the papers entirely address: how the policy will operate where we are talking about cumulative impacts. It is straightforward for a developer that has needed to raze a woodland to demonstrate that it is financing an alternative site, to be managed by Natural England, that will recreate that habitat elsewhere. But what about developers with numerous smaller sites? How will their accumulated contribution be used to ensure that there is appropriate remediation? When those sites are in different planning authorities, how can there be an appropriate negotiation so that things are not held up because one planning authority is trying to determine the impact and another has a separate application, but the contributions from both are key to ensure that the remediation is sufficient?

It is an honour to serve with you in the Chair, Sir Alec. I will try to keep my questions brief. I want to be clear from the outset: I am not here to oppose the principle of the regulations—indeed, I agree with the Minister that they must work for the sake of nature restoration. However, some serious concerns have been raised with me about how they are drafted, perhaps because they have not gone through a formal consultation process. I will focus on one key point. As I understand it, there is no third-party oversight to ensure that the levy is calculated at the right amount to secure the objectives of the environmental delivery plans, although I understand that there is third-party oversight within comparable regulations for the community infrastructure levy. That matters because I understand that a key element of the primary legislation is that the overall improvement test should be based on whether the EDP, if delivered in full, would secure an overall improvement in the environmental feature in question. Although the EDP might be sound, if the nature restoration fund levy amount is not set at an appropriate level there is a risk that the overall improvement test could be null and void because there would not be the right amount of funding. I also understand that the regulations allow the Secretary of State to change the levy rate at any time without notice. That presumably creates considerable jeopardy for developers who do not have a legal route to exit once they have committed. It would also seem to create an avenue for a lot of political pressure to be brought to bear to reduce the amount of the levy—possibly to improve the viability of certain development schemes. I would welcome the Minister’s response to those concerns and encourage him to consider how they might be addressed before the regulations come into effect.

I thank both my hon. Friend the Member for North East Hertfordshire and the shadow Minister for those questions. Let me deal with them each in turn. It may be useful if I set out in plainer terms how an EDP will be made and how the levy will be set. The shadow Minister asked first about Natural England capacity. We debated that at length during the passage of the Bill: we believe that Natural England is the appropriate delivery body for the NRF, given its internal expertise and ability to operate effectively across the whole of England. It is also worth saying that when carrying out its functions under the nature restoration fund, Natural England remains bound by its wider statutory duties and general purposes, as set out in the Natural Environment and Rural Communities Act 2026. Those include promoting nature conservation and protecting biodiversity. We think that Natural England is the appropriate body. It will be supported to take strategic action to deliver the conservation measures set out within individual EDPs, using income from the nature restoration levy. This is a really important point: the levy is based on full cost recovery. As I made clear in my opening remarks, the levy can be used to support administrative duties tied to the EDP, but is primarily to fund conservation measures that EDPs will bring forward, on a full cost-recovery basis. The regulations also enable targeted use of levy funding to cover management, maintenance and other things. That will enable Natural England to build and maintain the capacity and capability needed to design, implement and monitor EDPs effectively. The important point to convey to the Committee is that each EDP will be subject to public consultation. In line with the commitment we made in the other place, we have been working for many months with Natural England and DEFRA on the first EDP, which deals solely with nutrient pollution; we thought that was the best constraint to take the first EDP forward on. In bringing forward an EDP, Natural England will have to project and estimate the maximum amount of development that that EDP can cater for and set a levy rate based on what is necessary to deliver the conservation measures required to discharge and meet that overall improvement test; I will come back to that in a second. Natural England will set a levy for each individual EDP. That will be subject to public consultation. Environmental groups, local residents, local authorities and developers will each have a say on the particular levy being consulted on. That gives the public a chance to have input into what is taken forward.

The Minister has helpfully set out how we expect the EDP process to work in practice. When he was talking about how it would be financed, he described what could be extensive and lengthy public consultation, requiring expert input in designing habitats and so forth. Clearly, that will come at a significant cost. Will the cost to Natural England of administering the scheme be paid for out of the levy income itself or is there a separate funding mechanism that will enable Natural England to carry out that work?

That is an appropriate question. The shadow Minister may recall that during the passage of the Bill we committed to some upfront funding for Natural England. However, we have come to the regulations before us: the point is that the levy is designed to operate on a full cost-recovery basis. Rates are required to reflect the cost of delivering the necessary conservation measures, as well as covering the costs of monitoring and maintenance activities. Some of the levy can be used on the cost of setting up and consulting on an EDP but it is primarily for bringing the conservation measures forward. The shadow Minister also asked about payments in lieu—off-site payments, as I took it. The regulations do not provide for that. That is not the assumption that we are working on. I come back to what an EDP means in practice. Let us take the case of nutrient pollution, which will be the first we consult on. Natural England will have put together a suite of conservation measures across a designated area that it can call on to ensure that the overall improvement test is met. As I said in my opening remarks, each individual developer can still decide to discharge relevant environmental obligations under current arrangements if they do not feel that the levy rate provides value for money. However, we hope that the workings of the EDP will show that it is a very effective, efficient way to discharge those obligations. We hope that more developers will come in. As the levy payments come in, Natural England will begin to draw on the suite of conservation measures available to it. We are taking forward separate regulations on the prioritisation of conservation measures: as part of an EDP, Natural England will have to set out in general terms a prioritisation and sequencing of conservation measures. Those are not mutually exclusive; some might be relevant and used in different instances. This is about what it brings forward to meet those requirements. As more developers come within the given area where the EDP is operating, Natural England will be able to leverage economies of scale. That is the big win here: allowing those economies of scale and that strategic approach. The regulations are not designed for payments in lieu. I hope that I have dealt with the cumulative impact. When it comes to individual planning applications, developers will have to indicate that they wish to discharge their obligations through the EDP. At that point, there will be a commitment to pay on the part of Natural England. The developer can then use that commitment to take that through the relevant planning process. The planning process may not be successful, but if it is, the liability to pay is ensured and there will be payment into the scheme. In terms of cumulative impact, a particular developer may seek to discharge its obligations on a site-by-site, project-level basis, using EDPs only on some sites in the catchment—again, we would hope not; we want as many developers to be using EDPs as possible. That is probably unlikely if developers see that EDPs are working for them as an efficient way to discharge the obligations. I am sure that developers will start to make better use of the scheme. Let me address the points that my hon. Friend the Member for North East Hertfordshire raised, including on changing the levy without consultation. The Planning and Infrastructure Act 2025 sets out the circumstances where reconsultation on an EDP is required, such as where new conservation measures are proposed or the amount of development coverage is increased. There are a couple of scenarios where that might work. Say the projected development of homes or infrastructure increases; there might be a need to amend the EDP. Alternatively, additional conservation measures might be required. Under the powers in the Act, the Secretary of State may direct Natural England to reconsult when there are changes to the EDP’s charging schedule. That allows the levy rate to change to meet the cost of the EDP, in line with the overall improvement test, but it does not require reconsultation in all circumstances. We would not want a wholesale public consultation on minor changes to the levy rate; when there are significant changes, the Secretary of State has the power to do that. The levy rate for developers is set at the point where Natural England accepts the commitment to pay. If the levy rate subsequently needs to be increased to ensure that the required conservation measures can be delivered, the new rate will take effect only for future requests made to the EDP. In terms of independent oversight, EDPs will not be black-box exercises; as we said, they are subject to public consultation. In the very near future we will launch the consultation on the first EDP, which is on nutrient neutrality. Before an EDP can take effect, local authorities, environmental groups and others will have a chance to scrutinise it in its entirety. Natural England must then consider the consultation responses before finalising the EDP and the Secretary of State retains statutory oversight through the approval of the EDP itself and whether it meets the overall improvement test. I do not want to relitigate the extensive debates in Committee, but that overall improvement test is the test that must be met. In the case of the first EDP that we bring forward, it will be the DEFRA Secretary of State who makes the judgment on whether the EDP is to be made following consultation. I have covered whether the levy funds are not required to meet costs in full. My hon. Friend the Member for North East Hertfordshire raised the absence of a legal route to exit a commitment if circumstances change, but we have designed the draft regulations to accommodate the changing circumstances that developers might face. The regulations allow for levy-related commitments to be cancelled in specified scenarios, ensuring that the system can respond when a development does not proceed as anticipated. That reflects a proportionate approach to provide certainty for Natural England in delivering the necessary conservation measures, while recognising that plans can change over the lifetime of a development.

I want to test the Minister’s thinking on that point. As constituency MPs, many of us have heard about section 106, where a significant number of contributions may be attached to school places, road improvements or whatever it may be. When the money is not spent within a specified period of time, the developer can reclaim it so that it cannot be redirected to other purposes, depending on what is in the agreement. Another challenge is what happens when developers in a new town, for example, prefer to pay the levy, but the total of all the payments exceeds the value of the work that Natural England is undertaking because of the extent of the development, so something else needs to be substituted. Will the Minister set out briefly how the Government propose to address such issues so that the legislation does not, in practice, turn out to be a bit of a bureaucratic nightmare for many of the communities involved?

I thank the shadow Minister for his question. That brings me back to my point about how the levy is set and how it is tested through public consultation. It will be for Natural England to judge the quantum of development to be taken forward and to divide the individual charge on a per-hectare or per-dwelling basis in the most appropriate way. However, at the point when the developer seeks to discharge its environmental obligations through the use of the levy it will have consented to pay that levy amount. We will test the levy amount through public consultation, but the test of whether the levy is set effectively is that it allows for the conservation measures to be deployed. There is a statutory ringfence on the funds, so it is not as if the funds could be diverted to other uses. As we made clear repeatedly throughout the passage of the Bill, EDPs will be based on the best scientific evidence available and on all the expertise in Natural England to allow it to judge whether it has the levy rate right. As I said, that will be tested in consultation. To answer the shadow Minister’s point, I should say that the value should not be exceeded. I think I have responded to all the points. I thank Members for their questions. To be clear, this draft statutory instrument sets out a framework for the nature restoration levy and provides Natural England with the tools it needs to implement the nature restoration fund effectively. The draft regs are a necessary precursor to that first consultation, which as I have made clear will concern nutrient pollution only. That is the commitment that we gave. We will return to the House with an evaluation of how that consultation worked before we proceed, although Natural England and DEFRA are working on the early stages of the EDPs for other interventions—great crested newts are a priority for colleagues in DEFRA. I hope that the draft regulations will be welcomed by the Committee and I commend them to it. Question put and agreed to.