Consultation on uncapped variable monetary penalties and their proposed application to environmental permitting

England and Wales

Until 15 May 2023, the Department for Environment, Food and Rural Affairs (“DEFRA”) is consulting on (i) removing the existing cap on variable monetary penalties (“VMPs”) for non compliance with existing environmental laws to which the sanction may apply and (ii) empowering the Environment Agency (“EA”) to impose VMPs for alleged breaches of the Environmental Permitting Regulations (the “EPR”).

The statutory context

The Environmental Civil Sanctions (England) Order 2010 (the “2010 Order”) invested the EA with the power to impose various civil sanctions for a range of specific environment law offences, including VMPs (currently capped at £250,000). VMPs can be issued by the EA for serious offences, including:

  • when there is evidence of negligence or mismanagement;
  • when there is an environmental impact;
  • to remove an identifiable financial gain or saving attributable to the breach; and
  • where it is not in the public interest to prosecute.

VMPs presently are not a sanction applicable to the EPR which govern a range of industrial activities including food and drink, minerals, waste management, combustion processes, chemical activities and discharges to watercourses.

The proposals

DEFRA has advanced two proposals:

1. Reviewing the existing £250,000 cap on VMPs within the 2010 Order so that VMPs are either:

  1. Limited to £25 million;
  2. Limited to £250 million;
  3. Unlimited; or
  4. Kept the same. 

The existing legislation to which VMPs may be applied includes for example certain offences under the Wildlife and Countryside Act 1981, the Environmental Protection Act 1990, the Water Resources Act 1991, the Water Industry Act 1991, the Environment Act 1995;  The Control of Pollution (Oil Storage) (England) Regulations 2001; The Hazardous Waste (England and Wales) Regulations 2005; The Producer Responsibility Obligations (Packaging Waste) Regulations 2007; The Transfrontier Shipment of Waste Regulations 2007 and The Nitrate Pollution Prevention Regulations 2015.

2. Introducing the ability to apply VMPs to the EPR.

DEFRA note that the second proposal would affect the following broad ranges of activities: waste operations; water discharge activities; flood risk activities; nuclear, process industry activities, including: Cement and Minerals, Chemicals, Combustion, Energy from Waste (EfW),  Food & Drink; Intensive agriculture (Pigs and Poultry); Landfill; Metals; Oil and Gas; Paper and textiles and Refineries & Fuel.

The stated rationale

Higher ranges for VMPs would allow the EA to impose more stringent financial penalties which can provide more alternatives to criminal prosecutions.

Likewise, introducing VMPs into the environmental permitting regime would allow the EA to impose significant monetary penalties for a wider range of perceived non-compliances. Whilst prior announcements foreshadowing the consultation had referred to water companies, the proposals impact on a vast number of regulated sectors and activities.

Next steps

DEFRA has confirmed that it will respond to the consultation to confirm its final proposals and will then lay a draft statutory instrument to give effect to those proposals. We recommend tracking this closely.


There is no information in the consultation documents on how VMPs have been applied in practice to date as opposed to other sanctions both criminal or civil.

There are some significant points arising in the application of VMPs without a financial cap or with a significant range of £25m or £250m such as:-

  1. Scrutiny of how the penalty would be calculated – reference is made to the Sentencing Guideline for Specified Environmental Offences and the published VMP methodology. The Sentencing Guideline was purposefully created for the independent judiciary (with proposed training in the application of the guidelines) and applies post conviction aligned with sentencing principles on plea and totality. It is unclear what additional training is going to be provided to the EA in the potential exercise of any uncapped powers in applying VMPs. Whilst the EA can presently determine enforcement undertaking offers the key difference is that, unlike a VMP, an enforcement undertaking offer can only be made voluntarily and cannot be imposed on anyone. 
  2. Importantly, if convicted by a court, the Sentencing Guideline states that there should be consideration for reduction in sentence for a guilty plea (which can be upto one third off the level of fine which would otherwise have been imposed by the independent court). The VMP methodology does not take this into account as there is “no plea”.
  3. The appeal process – on many occasions there is a difference of opinion in relation to whether there is a non compliance with an environmental permit condition. This is sometimes because technical requirements apply but can be for a range of reasons including interpretation. The VMP process follows a notice of intent to issue a VMP with a representation period and then a VMP if issued, may be appealed to the First-tier Tribunal. The First-tier Tribunal was intended to be a less formal forum than the criminal courts and accessible to those without legal representation but it is now suggested that it should be arbiters of up to or over £250m VMPs.
  4. It is unclear whether similar powers will be sought separately by the Welsh Government for Natural Resources Body for Wales which has presently a similar ability to the EA in applying VMPs. The main environmental regulators in Scotland and Northern Ireland have different powers and the Sentencing Guideline does not apply.   
  5. Parity onshore and offshore – There is an ability for VMPs to be applied by different regulators for certain offshore regulatory enforcement which is capped at £50,000.

All those potentially affected, including those under the EPR, should consider the position carefully so that any relevant representations of dealing with VMPs in practice or any unintended consequences or safeguards are considered actively as part of the consultation process.