Project Nutcracker: Bat shed crazy - can Starmer really bulldoze the environmental blockers to growth?

Donald Trump and Keir Starmer: a problem shared…

If Donald Trump and Keir Starmer are looking for a topic of conversation to bond over when they next speak, I have one for them: the regulatory bureaucracy holding back growth. This speech by Trump in January 2020, could be made almost word for word by Starmer, Reeves or Miliband today. In his last presidency Trump was frustrated by the failure of civil servants to implement his demands for more radical reform of environmental protections. This time round, if he follows through on his campaign promises, he and Elon Musk will sack as many as 50,000 civil servants, replacing them with political appointees who will presumably have little understanding of, nevermind respect for, the principles of law which held their predecessors back.

Starmer's big "Plan for Change" speech suggested his own frustrations with the civil service. Channelling a bit of Trump, he said: "I don’t think there’s a swamp to be drained here… But I do think too many people in Whitehall are comfortable in the tepid bath of managed decline". His plan, he says, "will land on desks across Whitehall with the heavy thud of a gauntlet being thrown down".

In a recent Opinion piece in the FT, Starmer referred to the rapid review of regulators that was under way to root out "the bureaucracy that stifles growth", but acknowledged that this "involves detailed, often painstaking work" – a statement somewhat at odds with his comment in the same article that he has "ambitious plans to bulldoze through [..] barriers".

As a planning lawyer, I have sympathy with the Government's frustrations, but also with those civil servants who have the unhappy job of explaining the limits of what can be done, even post-Brexit, to unshackle ourselves from what is essentially EU law. In this article I summarise the conclusions of my own painstaking analysis of the scope the UK has to bulldoze environmental legislation.

I focus in particular on the Conservation of Habitats and Species Regulations 2017 ("Habitats Regulations"), because they are some of the most onerous environmental regulations connected to the consenting of new development – and one much discussed following HS2's £100m bat shed hitting the press. This famous bat shed got another mention in Starmer's speech. The points I make, however, apply more generally to any reforms which change environmental protections.

I know that environmentalists are bracing themselves for the Planning and Infrastructure Bill, having been warned to expect a radical shake up some months ago in Angela Raynor's open letter to nature conservation organisations. As many predicted, it seems that the big idea for this is an onshore version of the "strategic compensation" provided for offshore wind. Details are set out in the recent joint MHCLG/DEFRA working paper on Nature Recovery. It's billed as a "win-win" for developers and nature, but making it work in practice will be challenging, for reasons discussed later.

If the Government is serious about growth, they may need to face up to allowing politicians to grant consent for projects where the requirements of the Habitats Regulations are not met but wider national and international priorities need to be delivered.

Why are the Habitats Regulations a problem for growth?

The Habitats Regulations are the UK's enactment of the EU's Habitats Directive. They apply where there is a risk of an "adverse effect on the integrity" of any sites designated as protected European Sites. The Government's guidance on these Regulations can be found here for anyone interested in the detail. In a nutshell, where a planning decision-maker (the Secretary of State for nationally significant infrastructure projects^[1]) considers that a proposed project might give rise to this risk he/she cannot lawfully consent that project unless he/she is satisfied that:

1. there are 'imperative reasons of over-riding public interest' ("IROPI") why the project should go ahead; 
2. there is "no alternative"; and
3. measures are committed to which will compensate for the adverse effect.

To be clear, even if the Secretary of State considers the project in question to be the most important project in the world (and the IROPI test is therefore satisfied), he/she is unable to authorise it if the other two tests are not satisfied.

In coming to a decision on the risks to protected habitats, the Secretary of State relies on the advice of Natural England/Natural Resources Wales (their official adviser under the Regulations) and the Marine Management Organisation and Environment Agency. Collectively I refer to these organisations as the "statutory nature conservation bodies" ("SNCBs") or "environmental regulators" in this article.

In practice, how things work is that a developer who submits a development consent application which may affects a protected habitat submits a "shadow Habitats Regulations Assessment" compiled by their appointed ecologists, and the SNCBs interrogate this in order to advise the Secretary of State.

How much science is enough?

The biggest sticking point for developers is usually evidencing to the satisfaction of the SNCBs that: (i) there isn't in fact a risk of an adverse effect, either alone or in combination with other projects nearby; or (ii) that the compensatory measures they are proposing are going to be sufficiently effective. Often there won’t be a body of research sufficient to satisfy the SNCBs. While the developer's ecologists can and do carry out studies which they present to the SNCBs over a course of engagement across many months (or even years), short of carrying out a PhD or two it often isn't enough. Where the SNCBs deem there is uncertainty (in their reasonable scientific judgement) they are required by law to apply the "precautionary principle". This requires either a recommendation of refusal of the application, or a huge multiplier being applied to the amount of compensatory measures required. Developers cannot buy their way out of a problematic situation – monetary "compensation" is no good unless it can be shown it will be deployed in a way which directly deals with the impact.

Judge and jury: the SNCBs are more powerful than the Secretary of State

The law puts the SNCBs in an extremely powerful position. The Habitats Regulations set up a black and white test, and Natural England and Natural Resources Wales have a statutory duty under the Regulations to advise the Secretary of State as to whether it has been met in each case. The Environment Agency and (where relevant the Marine Management Organisation) feed into this recommendation too.

In principle, the Secretary of State could disagree with the judgement of these bodies. It is his/her decision, and the SNCBs are simply advisers. In many recent DCO applications we have, after all, seen the Secretary of State disagree with the Planning Inspectorate's recommendations to refuse consent, and go ahead to grant consent by weighing the benefits of the project more heavily than its impacts (for example the Sunnica solar DCO).

This is easy when the main adverse impact is something like landscape, heritage impact or glint and glare - where the Habitats Regulations don't bite and the Secretary of State can rationally take a different view from the Planning Inspectorate. In contrast, where the Habitats Regulations apply and the Secretary of State is faced with a recommendation to refuse (or to require vast packages of compensation measures) based on the scientific analysis of complex data, it is much more difficult for his/her civil servants to disagree with the recommendation. The only way through would be to get their own independent scientific experts involved. That is a rather awkward thing for a Secretary of State to do, when Natural England and Natural Resources Wales are by law his/her official advisers on these matters. However, unless robust grounds for disagreement with a recommendation can be found, any decision made by the Secretary of State is likely to be successfully challenged in the courts.

Unintended consequences of the reliance on science

The Habitat Regulations make the SNCBs the guardians of our most precious habitats and species. The Regulations are predicated on preventing politicians from exercising their judgement to override the scientific judgement of experts. That is the whole point of the way they are set up. So it is no surprise that politicians find them frustrating. Starmer might express dismay at HS2's £100m bat shed but, if in the reasonable scientific judgement of the developer's ecologists and/or the SNCBs that shed was the only way to compensate for an adverse effect on protected bat species, then the £100m will have been cheaper than rerouting the line to avoid the bats, and better than the HS2 Bill being incapable of being passed altogether.

The pressure on nature from other sources (intensive farming, pesticides, climate change and fishing in particular), is making the Regulations an increasing problem compared with years past – because so many habitats and species are already in an "unfavourable condition", that even a tiny impact from a single project is deemed by the SNCBs to be unacceptable – or unacceptable when added together with other nearby projects. This can seem ridiculous and unfair to individual developers, who in effect end up having to try to compensate for wider ecological problems not of their making. Combine this with the often excessive precaution of the SNCBs to assessing scale of harm and effectiveness of compensatory measures and you can see why it's a hard time to push through new development.

The question is whether the politicians are willing to take steps which, in some way, give politicians the power to exercise discretion which can override the scientific judgement of the SNCBs on habitat impacts. This is a big call, and there is no sign the Government is willing to do this. Nevertheless, as it may be what we need to get growth, we consider below what some such options might look like.

How could the legal tests in the Habitats Regulations be changed?

The tests under the Habitats Regulations could in principle be changed to make them easier to satisfy, or to give the Secretary of State more discretion. Options include:

• OPTION 1: making the ultimate test simply whether there are "imperative reasons of overriding public interest" why the project is needed (regardless of whether any compensatory measures fully address the impact); or
• OPTION 2: let the developer offer newly created habitats, in a different location perhaps or of a different type, rather than requiring the developer to provide direct compensation benefitting the particular protected site or species; or
• OPTION 3: bake in a duty on the SNCBs to weigh the urgent need to deal with climate change against immediate impacts on habitats when advising the Secretary of State on a green energy project; or
• OPTION 4: provide for "strategic compensation" under a regime like that for offshore wind brought in under the Energy Act 2023, but to deal with onshore habitats issues including the nutrient neutrality problem blocking housing. This is the suggestion in the recently published Nature Recovery working paper.

Some combination of Options 1, 2 and 3 would give the Secretary of State the ability to override habitat impacts based on bigger priorities. However, for reasons I explain below, this would be likely to put us in breach of a number of international treaties, as well as The Trade and Cooperation Agreement ("TCA") entered into by the UK and the European Union in April 2021 to govern post Brexit relations.

Option 4 is an attempt to have our cake and eat it – the "win-win" option as the working paper calls it. The question is whether that is viable in practice.

International treaties which would be breached

It's hard to see how a change to the Habitats Regulations along the lines of Option 1, 2 or 3 could avoid breaching one or more international treaties on environmental protection, namely: the Berne Convention, the Rio Declaration and the Convention of Biological Diversity (summary of each below and links). These treaties are about protecting the existing special habitats and the protected species within them. They don’t contemplate it being acceptable to damage or remove existing habitats or species in exchange for providing a new unconnected habitat (however wonderful) somewhere else. They don't provide any get-out clause based on the urgent need to deal with climate change or other national imperatives.

Breach of the Trade and Cooperation Agreement

The TCA entered into by the UK and the European Union in April 2021 affirms the parties' right to regulate within their territories, while containing commitments to safeguard fair competition between the parties. The agreement is characterised by the principle of maintaining a "level playing field" between the parties.

The TCA explicitly notes the UK's commitment to the "precautionary approach" (better known as the "precautionary principle", see earlier). Article 391 includes a number of commitments the parties have made in relation to environmental law, including under international treaties: "The Parties affirm the right of each Party to set its policies and priorities in the areas covered by this Chapter, to determine the environmental levels of protection and climate level of protection it deems appropriate and to adopt or modify its law and policies in a manner consistent with each Party's international commitments, including those under this Chapter".

The same article of the TCA also states: "A Party shall not weaken or reduce, in a manner affecting trade or investment between the Parties, its environmental levels of protection or its climate level of protection below the levels that are in place at the end of the transition period, including by failing to effectively enforce its environmental law or climate level of protection."

It is difficult to envisage any meaningful changes to the Habitats Regulations (along the lines of Option 1, 2 or 3) which would not be interpreted as a "weakening" or "reduction" in the level of environmental protection, and one which would fail to maintain a level playing field.

Could environmental regulators be required to consider climate change?

This suggestion (Option 3) often comes up in discussions about how to get around the strictures of environmental regulation. The idea is that the test under the Habitats Regulations (and related regimes) could be modified to require the SNCBs to take into account the pressing need to deal with the climate emergency before giving their views as part of any consent process. The proponents of this idea hope it would, in effect, prevent these bodies from objecting to renewable energy projects, nuclear projects and grid connections. These projects are, after all, all part of mitigating climate change and therefore (so the argument goes) beneficial to protected habitats in the longer-term.

I'm afraid this just doesn't work. Natural England has a statutory duty under the Habitats Regulations to advise the Secretary of State as to whether a proposed project risks having an "adverse effect on the integrity" of a particular protected habitat, and whether that can be adequately compensated for. You can't reword the legislation to ask Natural England to come to a conclusion on that question but then weigh that against the importance of dealing with climate change…. and therefore report to the Secretary of State that there is no risk of an adverse effect. That would be a lie, as well as changing the test in a way which would be at odds with our duties under the TCA and international treaties. 

Equally, it's fallacious to say that the particular habitat and species in question (the Dee Estuary, say, and its Sandwich terns) would be adversely impacted by a new onshore wind farm, but overall they won't be because that wind farm will be part of addressing climate change which has a more important long-term benefit for that habitat and those birds. That windfarm won't stop climate change on its own, and therefore won't protect that habitat and those birds. It's a tiny part of a solution which relies on (highly uncertain) global co-operation. This sort of argument is therefore irrational and would not stand up to challenge. Besides which, even if it worked as its proponents intend, it would render assessment of such projects meaningless under the Habitats Regulations because presumably all net zero projects would trump any local effects. It would make the Habitats Regulations a rubber-stamping exercise for such projects.

If Government wants to reduce the development-blocking impact of the Habitats Regulations I'm afraid it can't use such trickery. It needs to be upfront, and expressly give the Secretary of State some sort of discretion for the wider good of the country and the climate.

Offshore wind's strategic compensation regime – how helpful is it?

Recognising the difficulties faced by offshore wind projects in seeking to provide compensatory measures sufficient to pass the tests under the Habitats Regulations,and given the desire for more offshore wind projects to be brought forward, the Energy Act 2023 enables the Secretary of State for Energy Security & Net Zero to make Regulations which change the application of the Habitats Regulations to offshore wind (as per Option 4). No such Regulations have yet been made.

Section 291 allows the Secretary of State to take into account (as compensation) any measures to be carried out by the Secretary of State him/herself - for example, restrictions the Secretary of State might place on fishing in a particular area, which a developer would not itself have the power to do.

Section 292 enables the Secretary of State to make regulations to provide for the establishment, operation and management of one or more "marine recovery funds" (the "MRF Regulations"). The MRFs would receive and spend funds on measures to compensate for adverse environmental effects of offshore wind activities. The MRF Regulations may specify conditions on how the funds may be spent to compensate for the adverse environmental effects of offshore wind activities, and that a payment to an MRF discharges a requirement to provide compensation for offshore wind activity. The pre-requisites for such a payment to be relied upon for Habitats Regulations purposes are to be set out in the MRF Regulations.

Since no Regulations have yet been made under the Act, and no offshore wind projects granted to date have relied upon these provisions, their utility and robustness to legal challenge have yet to be tested. To date, the only reference to them in a decision is the consent for the Sherringham Shoal windfarm DCO, which provides that if "strategic compensation" under the Energy Act 2023 becomes available the developer may seek the Secretary of State's approval to swap it for the project-specific compensation (kittiwake hotels etc) which enabled it to meet Habitats Regulations requirements and be granted consent.

When Regulations come forward giving details of how this type of strategic compensation is to work, they will need to meet the requirements of the international treaties and the TCA outlined above. There will therefore inevitably be a limit to how far they can stray from the principles of the Habitats Regulations and therefore how useful they can be. There will still need to be some direct causal link, scientifically evidenced, between the impact of the particular project (and cumulative impact with neighbouring wind projects) and the compensation measures that the money will be used to deliver/other measures the Secretary of State is committing to deliver him/herself.

The only measures currently approved as offshore wind strategic compensation are extensions of marine protection areas, mammal predator management for seabirds and artificial nesting structures for kittiwakes. It is likely that those measures will need to be in existence by the time the project's adverse effect arises in order for reliance to be placed on them for decision-making purposes under the Habitats Regulations rather than just promised. If the Regulations water down these requirements they could potentially be legally challenged, as could any consent decision which relies on this new mechanism. I imagine these complexities may be what is delaying the publication of the Regulations.

Limits of the strategic compensation model onshore

Although I'm slightly sceptical about how effective the concept of strategic compensation will be for offshore wind in practice, in principle it could work given enough time. It's more difficult to see it providing a solution to the Habitats Regulations problems onshore. However, this seems to be what the Government is putting forward in its new Nature Recovery working paper.

The rationale for "strategic compensation" in the context of offshore wind is that it is a more effective way to deal with the cumulative effects on protected species of multiple projects with similar impacts known to be coming forward near one another. A single, large-scale compensatory project seems more sensible than multiple separate measures put in place by individual developers.

This is not the situation faced by most infrastructure developers onshore, however, where the risk of an adverse effect on a protected habitat or species is usually caused by a single project, not a group of projects (for example, the HS2 bat shed was only required because of HS2).

It's going to be much harder for the Government to guess at the infrastructure projects coming forward in an area, their relative timings, and what their habitats impact might be. The concept of pooling funds for a grand compensation project which ticks the Habitats Regulations box for a number of projects onshore therefore seems challenging. It is certainly going to take a lot of time, effort and cost for the Government or regulators to think through what sort of onshore strategic compensation might need to be put in place, and then to deliver it. Can decisions be made in the meantime reliant on the promise that such compensation will come forward?

The Government is clearly pinning its hopes on unlocking more housing projects in the UK through strategic compensation (this is one of the specific examples given in the working paper).  It has already set up a Local Nutrient Neutrality Mitigation Fund which will provide seven local authorities with grant funding totalling up to £47 million "to unlock 28,000 nutrient neutrality stalled homes." Nutrient neutrality refers to a requirement for new housing developments located in certain areas not to add further "nutrient pollution" to the water catchment. It applies to areas with protected habitat sites which are already in an unfavourable condition due to existing nutrient pollution. In effect, the Habitats Regulations have therefore become a block on new housing development in many local authorities.

The hope is that the provision of collective habitats schemes across the country will compensate for this impact, thus allowing development to satisfy the tests under the Habitat Regulations. Local authorities are being asked to deliver high quality, locally-led mitigation schemes. However, as James Maurici KC points out in Reason 1 of his article Ten Reasons Why Labour Will Fail to Deliver 1.5 million homes, measures like this will take a lot of time to be delivered. Until they exist and are up and running there's a question as to whether they can be pointed to by developers as compensation that can be relied upon to tick the boxes under the Habitats Regulations. The previous Government tried to get through legislation that directed local authorities to assume that nutrient pollution wasn't a problem when making planning decisions (rather like declaring in law that Rwanda  is a safe country…). Again there is a question as to whether this would have breached the TCA and the various international treaties I refer to earlier. In the end it was defeated in the Lords by Labour.

Solutions?

As ever, there are no easy answers.  

If Government wants to get growth quickly, they need to consider changing the law to allow the Secretary of State discretion to grant consent despite there being a risk of an adverse effect on protected habitats that can't be fully compensated for (or not immediately). By all means, this could be limited to applications for housing or net zero infrastructure, and it could be coupled with requirements to provide funding for future nature recovery projects or to deliver new habitat. I don't under-estimate, however, the political difficulties this poses in terms of breaching our international commitments.

The idea of "strategic compensation" set out in the working paper is fine, but to make it useful (and quickly) it seems to me it would need to be accompanied by some sort of statutory presumption either that projects paying into it: (i) do not cause an adverse effect or (ii) that the statutory compensation will compensate for the adverse effect at the time it arises. I'm not quite clear, reading the working paper, if the Government intends to go this far. Without this, applicants will be left having to prove that some embryonic idea for strategic compensation will compensate for their particular adverse effects – with all the evidential burden this currently entails. Yet putting such presumptions into law will attract criticism and challenge no doubt. The paper does suggest several times that there will be no need to carry out "individual case-by-case assessment" where a project is covered by a strategic compensation scheme. This feels like a bold statement.

Short of these changes in law, the Government needs to substantially increase the pay of staff at the environmental regulators. We need to reduce the gulf with the private sector. This would enable some swapping between the public and private sectors which would surely lead to a little more pragmatism and on the part of regulators.

With relatively low pay the SNCBs struggle to recruit enough of the talented and senior staff they need. Those willing to sacrifice higher pay to work in these organisations are also more likely to be driven by ideological passions when it comes to protecting the environment. Admirable but not always rational in my experience, and certainly unhelpful if we want more development. I'm not an ecologist, but I work closely with many ecologists employed by my clients on major infrastructure projects. Time and again I see our ecologists baffled and frustrated by the excessively precautionary stance of the environmental regulators. The "precautionary principle" applied as the worst-case to every possible parameter ends up with some truly barmy assessments of potential harm. The case law is clear that the precautionary principle should be exercised on the basis of reasonable scientific judgement, but it often isn't.

Applicants for nationally significant infrastructure projects are now required to fully reimburse the costs of Natural England, the Environment Agency, the Marine Management Organisation and others in considering their projects. However, unless the pay scales at these organisations are increased, it will have limited benefit and might actually make things worse. Without higher salaries the regulators will still struggle to recruit. Instead they are likely to use the applicants' money to get help from private sector consultancies. My fear is that a pay-as-you-go model like this, funded on an open-ended basis by applicants, will give those consultancies little incentive to solve problems quickly and efficiently. Quite the opposite. I hope I'm wrong, but we must face the human and commercial factors at play, as well as the legal ones, in order to solve the environmental blockers to growth.