National Audit Office: Environmental regulation reform requires strategic approach

• The Department for Environment Food and Rural Affairs (Defra) and environmental regulators are working to improve how they regulate, balancing the government's environmental goals with enabling economic growth. 

• The regulators – the Environment Agency (EA) and Natural England (NE) – have faced challenges including the constraints of the legislative framework they operate within, limited strategic support from Defra, data limitations and outdated IT systems 

• The NAO outlines a series of recommendations to ensure a coherent, whole-system approach to maximise the benefits of these reforms

As Defra and the two largest environmental regulators, the Environment Agency (EA) and Natural England (NE), embark on a period of reform they face several challenges, and success will depend on a joined-up, strategic approach, says the National Audit Office (NAO) in a new report.  

Over the past two years, Defra and the regulators have increased their focus on improving how they regulate and have set up a series of reform programmes. Three recent major reviews1 have added momentum for reform.   

In total, the three reviews make 149 recommendations to Defra or its arm's-length bodies. Alongside responding to these recommendations, Defra and its arm's-length bodies are responsible for more than 3,000 pieces of legislation, leading to complexity for both regulators and regulated businesses.  

The NAO's report, Environmental Regulation, highlights this complexity and the challenges that face Defra and the regulators as they embark on their reforms.  

The report says that an overly cautious and risk-averse culture in Defra and the regulators has developed, in part due to the potential for legal challenge, and this has restricted some efforts to innovate and embrace new approaches.  

Defra's approach to environmental regulation in recent years has been shaped by the 2021 Environment Act targets and 2023 Environmental Improvement Plan commitments, however at times it has been reactive rather than based on a clear strategy, focusing on short-term priorities or high-profile issues.  

This has sometimes led to Defra being slow to act when the regulators suggest regulatory changes or system improvements that would produce better outcomes or cut costs.   

The regulators have introduced some joint-working projects effectively, where they have similar areas of regulatory responsibility. But Defra and the regulators have not rolled this approach out more widely, mainly due to systemic barriers including legislative requirements, data protection issues and cultural differences between regulators. 

The ability of EA and NE to regulate in a consistent and well-targeted way has been constrained in part by outdated IT systems. While Defra is working to improve its digital technologies, it has been slow to modernise its systems and it is only part-way through a programme to do so, for which it received a further £300 million in the 2025 Spending Review to invest between 2026-27 and 2028-29.  

To address the issues raised in the recent reviews, Defra needs to balance ‘quick win' recommendations that are easier to implement with the more structural changes that will take longer but have greatest potential for impact.    

The NAO report recommends that upon embarking on their period of potentially significant reform, Defra and the regulators should take a focused and integrated approach to the changes needed. The recommendations include: 

• Setting a plan for how existing change programmes and new reforms – including digital change – will link together, so they are planned and delivered in a coherent way 

• More effectively using information to target limited resources on the areas where there is greatest risk to the environment 

• Defining risk appetite to support a culture of change and innovation. 

Gareth Davies, head of the NAO, said:

“The government intends for the regulatory system to both protect the environment and enable economic growth, but it is not working as effectively as it could. The current system is complex and outdated.

“Defra and the regulators are working to improve how they regulate, including in response to recent major reviews. Success will depend on taking a sufficiently strategic approach and sticking to the course set.”   

ENDS
Notes to editors

1. Delivering economic growth and nature recovery: An independent review of Defra's regulatory landscape, Dan Corry

Independent Water Commission: review of the water sector, Sir Jon Cunliffe

Optimising Delivery Review, Heather Hancock (unpublished)