Environmental Law Update | December 2025

There are several key themes which emerge from the Government’s Budget which will have ramifications for nature conservation law and natural capital.

Reduced funding for Defra

First, the Budget confirms a real-terms reduction in the core funding for Defra. While Defra received new capital allocations for infrastructure and targeted schemes, its day-to-day operational budget is set to fall year on year from £5 billion in 2024-25 to £4.7 billion by 2028-29. 

Inevitably, this reduction will limit even further Defra’s ability to deliver for the environment or adequately fund its arm’s length bodies such as Natural England. This will likely mean less money for enforcing environmental regulations, protecting habitats or monitoring pollution. 

Although there are new project specific funds, such as targeted investment in land remediation and environmental clean-up financed through water company fines, this allocation of budget to specific projects will not offset likely cuts to core operations and staffing within Defra. Lower day-to-day funding will likely further hinder the Government’s ability to meet its statutory targets for nature, as set out under the Environment Act 2021.

Funding via the new Nature Restoration Fund

The Government are likely banking on the hope that the planned reduction in core funding for Natural England in particular will be made up for by the creation of the new Nature Restoration Fund (NRF) using powers under the Planning & Infrastructure Bill, which will shortly become law. This is because that Bill introduces a system in which developers will fund “nature restoration” through contributions into the NRF in accordance with conservation measures set out under Environmental Delivery Plans drafted by Natural England and approved by the Secretary of State. 

This means that rather than providing public investment to deliver environmental protection, the new approach implicitly relies on the planning system and private development to plug the funding gap. In this way, the state is shifting responsibility for environmental enhancement from taxpayers to developers.

That approach carries with it the significant risk that Natural England will become financially dependent on the very activity it was created to help regulate. This is because Natural England’s only hope for an increase in funding going forward will be if more development is brought forward and assessed as needing environmental mitigation under its Environmental Delivery Plans. In other words, the more development takes place that harms the environment the more funding Natural England will receive through the NRF. 

This will create the perverse incentive for Natural England to approve, or encourage, development-linked mitigation contributions because they will now represent their best hope for increased funding. It also incentivises Natural England to be overzealous in terms of saying that development needs mitigation which, on closer analysis of the impacts, may not actually be justified.

This obvious conflict of interest creates new tensions within the planning system, blurring roles and eroding public confidence. This could have been avoided had the Government properly consulted on these proposed changes in the law before publishing the draft Bill.

Nuclear development and nature conservation

Finally, the independent Nuclear Regulatory Review 2025 published last week specifically noted that the requirements under the Conservation of Habitats and Species Regulations 2017 has created significant barriers for new nuclear developments, including Hinkley Point C, by, in its view, imposing overlapping, highly precautionary, and often disproportionate requirements for environmental mitigation and compensation. The report highlighted that a strict interpretation of the Habitats Regulations has led to extensive delays and costs—such as the £700 million spent on fish protection measures at Hinkley Point C. To address these challenges, the Taskforce recommended a radical reset: introducing an alternative compliance pathway that allows developers to make a substantial upfront payment to a nature fund, streamlining assessments and focusing resources on meaningful nature recovery rather than exhaustive site-specific studies.

These recommendations have been taken up in the Budget, which explicitly references John Fingleton's report and “warmly welcomes it and endorses its approach, and accepts the principle of all the recommendations it has set out”. The Government has also committed to “…present a full implementation plan within three months, taking account of our international obligations, national security considerations, and planning, environmental and court processes”. 

It will be interesting to see what this implementation plan will say in the coming months. Read the Budget here.