Planning and Infrastructure Bill

Lord Fuller Excerpts

Committee stage
Wednesday 17th September 2025 Lords Chamber

[Baroness Parminter (LD)]

My Lords, in the absence of the noble Lord, Lord Teverson, who had to go back to Cornwall this afternoon, I speak to his Amendment 301A, which is very simple and straightforward. It basically makes the point that the money that the developers pay should go to the schemes that they are expecting to come to fruition and should not be used by the Government, as too often happened in the past, to reduce the core funding of the department or, in particular, that of Natural England.

The noble Lord, Lord Teverson, was hoping that the Minister might be able to give from the Dispatch Box some reassurances that that would not be the case, and equally—although I know the Government cannot ring-fence—that the Treasury will not try to claw back any of the additional money that has gone to Natural England for funding of the delivery of the EDP, when developers had given it in good faith.

The noble Lord very much wanted to support Amendment 309, in the name of the noble Lord, Lord Gascoigne. I do so too—and not just because I am a resident of Surrey.

[Lord Fuller (Con)]

My Lords, we are really getting under the bonnet here, looking at the minutiae of the EDP, and we are missing the bigger picture.

I speak in support of the noble Lord, Lord Cromwell, on Amendment 307A, and Amendment 256, in the name of the noble Lord, Lord Roborough. We find ourselves in this situation because the organisations with the statutory duties, powers, staff, income and systems to clean up our rivers, in so far as nutrient neutrality is concerned, have not been doing so. Defra, the Environment Agency, Natural England, the water companies in particular and the drainage boards are all in scope. They have got their job, but they have not been doing it.

I am concerned about the levy. We are talking about how we are going to charge this levy, but we are not really talking about where the money is coming from to deliver the EDPs. In effect, Part 3 lets these statutory undertakings off the hook. Instead, it falls to those people who do not have the powers or responsibilities, such as councils and local developers. If my noble friend Lady Neville-Rolfe was in her place, I am sure she would intervene and tell us that it will also fall to the small builders and small companies that spend money in local supply chains and so on. Here, we have the ultimate moral hazard; it is the reward for failure.

I do not deny that the costs of these EDPs could be apportioned appropriately across the canvas that is required for the purposes of the EDP and in proportion to the number of units it is going to sell. However, I am disappointed that the Bill does not require those with the responsibilities—Defra, the Environment Agency and so forth—to have the first pull. It is an omission, and one we should place on the record and return to later on Report.

I want to question the noble Lord, Lord Cromwell. He talks about the surplus. In a previous group, I explained how I have been involved in this for some time. There will be no surplus, because we are talking about 80-year tail liabilities. The money that is ponied up front to deliver an environmental improvement is going to have to be jam-spread over 80 years, in the case of nutrient neutrality, or 30 years, in the case of biodiversity net gain, and whatever other regulations come along. We are not going to know whether there is enough money in the kitty until year 79. I do not think this is fully understood.

Other noble Lords in previous groups have given numbers. Earlier, the noble Earl, Lord Caithness, spoke about £1,900 versus £2,300, and he was concerned—on the current account, if you like, or this year’s P&L—what the extra margin might be. But there has been a fundamental misunderstanding of how the accountancy works. That is why I wanted to explain it in an earlier group, and why I will talk about it in a later group when we get to private involvement. We need to have proper accounting standards for how we will approach accounting for these 80-year tail liabilities.

Nevertheless, until we do, when we are setting this levy it should be on the basis that those who are required to and paid to do this work should carry the first burden. Otherwise, small family building businesses will be cross-subsidising the large water companies which raise business water rates and should be upgrading their own sewage plants. Instead, the owners and purchasers of new homes—young families trying to get their foot on the ladder—are, in effect, going to be cross-subsidising. EDPs should be explicit in asking those who are paid and have the duty to do this work to do it first, and then, if there is any requirement left over thereafter, that has to be apportioned to the developers and, in due course, passed on to the purchasers of new homes.

In this group we have really only scratched the surface as regards the costs, accountancies and financial models. We need to do a lot more work on this, otherwise the money will run out in year 42 or 52. It does not really matter when, because we are not going to get to year 80, and, in the meantime, the costs of EDP and annual inspections, renewals and accountancy and everything else have not been factored in at all. This is not at all straightforward. As we get to Report, we will have to dig much more deeply into who pays, who should pay, and how we are going to value these tail liabilities. It is almost an actuarial problem. Until we do that, there will be no money to go back to anybody.

[Lord Cromwell (CB)]

Very briefly, I found that a fascinating exposition and would happily discuss it further outside the Chamber with the noble Lord. The logical corollary of it is that it is therefore almost impossible to calculate what the levy should be, because you are dealing with unknowns into an 80-year period. But let us not discuss it now—let us move on.

--- Later in debate ---

[Lord Cromwell (CB)]

I think that the Minister has just confirmed exactly what I said, which is that if there is any money left over, it will be spent on some other good stuff. That is rather unfair on the developer who has paid for something, and now the excess that was not spent is being used on something else.

[Lord Fuller (Con)]

I have listened very carefully. The developer knows what he has paid for. The developer has bought something. The developer has purchased an 80-year project, but he has not bought anything until year 79. I We have to get our heads around the money side and the financials—we are not going to know. I will dwell on this a bit more on a later group. The suggestion that someone has bought something and it is done and dusted on day one is a false premise; we have to understand that.

[Lord Cromwell (CB)]

The noble Lord and I are starting to repeat ourselves, so perhaps we can talk about it outside. However, that is not the reply that the Minister has given me.

--- Later in debate ---

[Lord Fuller (Con)]

My Lords, I am greatly concerned that the Bill potentially freezes out the role for private sector providers, thus stopping the flow of investment into nature. That said, I was mildly reassured by the letter that came this morning. Nevertheless, I am anxious that the proposition is that Natural England will become a monopoly consolidator and provider of mitigation solutions—with the dead hand of the state. This Bill should define how private operators can work alongside Natural England to address the market for mitigation.

In an earlier grouping, I explained the distinction between permitting and licensing. In my view, licensing is the way to go for the EDPs, not least because it will prevent the derivatives—secondary markets that enrich speculators at the expense of delivering the outcome. We cannot afford to create a new milk quota disaster with the creation of a collateralised asset class that has everything to do with speculation and nothing to do with nature recovery. That is not an argument against private involvement; it is an argument for channelling and regulating what is a fast-developing industry.

I support Amendments 258 and 268 because they seek to put in place how we deal with private industry and how Natural England is required to engage with it. This Bill should set the terms of trade. How will those 80-year-tail liabilities be secured? What step-in rights will there be in the event of the provider going bankrupt? Will the obligations be characterised as in Section 106 or as a land charge at the Land Registry? The Section 106 route has criminal and prosecution routes in the event of non-compliance, but a land charge is an unenforceable civil matter subject to litigation. How we deal with these will be very important and needs to be in the Bill.

I spoke about these tail liabilities. I have some experience with this, as I declared earlier. I am a director of Norfolk Environmental Credits Ltd, the device through which the local councils in Norfolk manage environmental credits. We are subject to international accounting standards. We need to take into account our covenant strength. I do not believe that this has been thought through at all. We made about £5 million-worth of sales of credits to local developers, but the balance sheet value was nil because we had to discount that income over an 80-year tail. I see my noble friend Lord Mackinlay nodding. He is a tax man and understands these things.

The interplay between the P&L and the balance sheet is something that the Bill has not contemplated at all—and it must. Unless we include sensible benchmarking accounting standards to value the upfront contributions against those tail liabilities, we will never give confidence and clarity so that schemes can be consistently compared. None of this essential detail is contemplated by the Bill but it should be.

This is before we get to private industry having a role in the pricing, and the heroic assumption that Natural England, as is anticipated, will be able to deliver mitigation more efficiently than a competitive, healthy private sector. Given the monopolistic nature of the state-owned mechanism for charging, and the speed at which the large bureaucratic organisations operate, this completely unqualified assumption seems tenuous. There are obvious conflicts of interest and susceptibility to legal challenges through those conflicts. How is Natural England going to kitemark private proposals? What protections would private operators have against predatory pricing or the loading of legal contractor inspection costs on to innovative solutions, with the only opportunity for these private operators to appeal being against the organisation that is trying to eat their lunch?

We need the innovation of private providers so that we avoid muddled thinking. I am delighted to see the noble Lord, Lord Hunt of Kings Heath, in his place. He characterises as eco-zealots those who order the use of bat bridges, the eye-wateringly expensive bat tunnels—each of which was a colossal waste of money —or the sloppiness of the designation of land at Ebbsfleet as unfavourable when it was not unfavourable.

We need a streamlined process where developers can work with landowners to propose and have certified good schemes delivered in local markets at sensible prices—especially now that we contemplate that hundreds of these EDPs may be produced. While Natural England is focused on its own proposals, we need to give comfort to private operators that their applications will be dealt with promptly rather than them submitting the ideas and not having them taken seriously by Natural England. That is no way to proceed. We need to establish contract certainty, the legal basis and the enforceability of these projects, with the assurance that the mitigations will be delivered over the liability period.

Failure looks like packaging and collateralisation of these schemes into another subprime crisis. We must guard against that. The private sector has a role and can and should work in tandem with Natural England. But all this counts for nothing unless the terms of trade are set.

I have other things to say but, given the time, I will stop there. The Bill needs to state explicitly that the private sector has a role to play. But Natural England should have a statutory duty to actively assist competition in this space in a prompt and timely manner, even if it is at the expense of its own proposals.

[Lord Inglewood (CB)]

My Lords, as I listened to this debate, I thought that everybody was talking about it from the perspective of the person who does the work. The prime focus of what we are discussing should be the best outcome for nature. The most choice available to help nature is the route we should go down. Therefore, we should not exclude any possibility of all kinds of commercial arrangements that may surround this, some of which, particularly given the points drawn to our attention by the noble Lord, Lord Fuller, we may not yet even have thought of. We should keep every option open to ensure that the outcome for nature is ultimately the prime consideration.

[Lord Fuller (Con)]

I thank the noble Lord. He makes a point that I missed when I turned a page in my notes. Essentially, we are creating financial instruments with muddy wellingtons attached. We need to think about that balance as we contemplate how the Bill will work in practice, with those 80-year requirements to keep and maintain these projects contemplated by the EDP. It needs a change of thought.

Certainly, international accounting standards will be at the front of our mind. This is the sort of question that actuaries at life insurance companies are employed to handle. They know that they have a liability and what sum of money is needed up front to deal with it. That is not contemplated at all in Clause 59. It needs to be. That is the point I am trying to make. The state cannot do it itself—it needs a flow of private money coming into this space to benefit nature, but one that has its feet on the ground and where the numbers add up.

[Lord Roborough (Con)]

My Lords, my Amendment 318ZA seeks to ensure that farmers and farmer cluster groups are permitted by Natural England to apply to the nature restoration fund and actively participate in the delivery of conservation measures required under EDPs. This is a straightforward but essential point. Farmers are not just stewards of the countryside. In many cases, they are the very people who are best placed to implement and sustain long-term environmental outcomes.

If we are serious about delivering the ambitions of the Bill, we must make full use of the capacity, expertise and local knowledge of the farming community. Allowing them access to the nature restoration fund is not only fair but practical, efficient and better for nature and, to the point made by the noble Lord, Lord Inglewood, expands choice.

One of the many concerns that I and others have expressed about Part 3 of the Bill is that it disenfranchises the private sector, which has been developing BNGs to aid developers with the mitigation hierarchy. I appreciate that the Minister has suggested, and probably will again, that EDPs are intended to operate alongside the existing structures and to engage with the private landowner and farming community. But it is far from clear how that will work and it does not appear to be in the Bill. However, this amendment encourages Natural England to define the EDP that it is seeking to deliver and allows the private sector to offer solutions on commercial terms. The amendment has very considerable merit, as it guarantees the involvement of the private sector and takes pressure off the underresourced NE to design the EDP and deliver it. At a time when budgetary pressure and government decisions are seeing funding to the rural economy reduced in real terms, I hope the Minister will welcome this or any similar amendment.

Amendments 258, 268 and 353, in the name of the noble Lord, Lord Curry of Kirkharle, aim to ensure that private market solutions can play a meaningful role in the implementation of Part 3 of the Bill, including through on-site mitigation by developers and investment in nature recovery through market mechanisms. We support the sentiment behind these amendments. They are thoughtful, interesting, pragmatic and right. The noble Lord rightly identifies that if we are to achieve our environmental targets, we must unlock private capital alongside public investment. That includes enabling developers to deliver effective biodiversity net gain directly where appropriate and giving confidence to investors that their participation in ecosystem markets will be valued and secure.

Amendments 318B, 320B and 325ZA, in the name of the noble Lord, Lord Cromwell, would strengthen the obligation on Natural England to use private markets in delivering EDPs and introduce a clearer hierarchy for Natural England’s direct involvement. These amendments point to a real concern—notably the risk of crowding out private sector delivery by overly centralised or bureaucratic processes. They would also introduce a limitation on Natural England’s ability to compulsorily acquire land, requiring Secretary of State authorisation and evidence that land cannot be bought at market value. This too is an important addition to amendments we have already put down and debated trying to restrict Natural England’s power to compulsory purchase land at will.