Alongside the Chancellor’s budget on Wednesday (28 October 2026) were two interesting documents for those involved with data centre proposals.
The first was the long awaited draft national policy statement for data centres that are promoted as nationally significant infrastructure projects (those where the promoter has secured a direction from the Secretary of State that its proposal should proceed as an NSIP, being of national significance and usually at least 100MW in operating capacity). The document was accompanied by a sustainability appraisal and a habitats regulations assessment.
But I want to focus here on the second document: The Data Centre Covenant, published by HM Treasury.
The Covenant sets out five “new tests all data centres are encouraged to meet, and which strategic data centres must meet to qualify for additional government action”.
- “Lower electricity bills”
“Data centres will … be expected to make credible commitments for the grid capacity they request, support security of supply, investment in clean power and net zero, use resources responsibly and support an efficient, flexible, and resilient energy system.”
- “Invest in improving local communities”
“Communities that host nationally important infrastructure should share directly in the rewards. Strategic data centres should agree a Local Benefit Plan that commits to substantial investment, developed with the local community and linked to the development’s size. This can be spent on local priorities, like transport, parks and town centres.
The construction and maintenance of AI data centres will increase local employment, open opportunities for local suppliers and support investment in skills and training. But communities hosting major developments should also see clear, lasting improvements to their local area. Developers must already meet planning requirements such as Section 106 and the Community Infrastructure Levy, which fund local infrastructure needs like transport networks and other community assets. Strategic data centre developers will be required to go further, including working with the local area on a Local Benefit Plan for investment in the local community, linked to the development’s size. Communities should have a meaningful say in how these benefits are designed and allocated.”
- “Adhere to the highest environmental standards”
“Protect nature, minimise water use and publish annual energy and water consumption reports. They should also capture the heat they produce for nearby homes, schools, hospitals or businesses wherever practical, rather than letting it go to waste.
They should use energy and water efficiently, with new facilities designed to achieve a Power Usage Effectiveness of 1.3 or better and minimise demand for public water supplies by using technologies such as closed loop water systems. Additionally, developers should design projects to capture and reuse waste heat where there is a viable local user. Strategic data centres should report annually on their energy and water use, efficiency, emissions, heat reuse and participation in flexibility services, and we will strongly encourage existing operators to do the same.”
- “Create jobs, apprenticeships, and drive reindustrialisation”
“Create local jobs and invest in paid apprenticeships and training places, supporting young people into the AI, digital and infrastructure jobs of the future. They should also prioritise UK suppliers and technologies and make a meaningful contribution to the development and deployment of British AI hardware.
Developers should create good, well-paid jobs that last beyond construction. They should recruit locally where possible and invest in apprenticeships, colleges and universities. Where roles cannot currently be filled locally, they should invest in education and training to enable more local people to access these opportunities in the future.
Data centres are expected to help build capability in strategically important supply chains. They should also partner with UK researchers and innovative companies, and provide access to compute where appropriate, to accelerate innovation and strengthen national capability. The most strategically important data centres will be expected to make a meaningful contribution to the development and deployment of British AI hardware in the UK.”
- “Strengthen Britain’s security”
“Provide secure and reliable access to compute the UK needs, including for our NHS and other public services. They should work with the relevant national technical authorities, including the National Cyber Security Centre, to enhance resilience against cyber and hybrid threats beyond baseline requirements.
Data centres should provide secure, resilient UK access to compute for critical services and national priorities. As critical national infrastructure, operators should share relevant information with government and technical agencies, meet current and future cyber resilience standards and work with the relevant national technical authorities to strengthen security and resilience further. They should also plan with critical suppliers for foreseeable disruption and participate in government exercises to test arrangements for prioritising essential services.”
Given that all of this is simply by encouragement rather than legal prescription, what is the carrot?
“In return for meeting these tests, the government will establish a new Ministerial Control Centre for considering supportive action for strategic data centres. This will be chaired by the Minister for AI, supported by the Exchequer Secretary to the Treasury and relevant ministers from the Department for Energy Security and Net Zero and other departments. It will use the power of the state to accelerate time to power and speed up the planning process for the most strategic data centres.”
The document also sets out additional assistance that the government will provide, by way of facilitating access to power capacity, for sites that demonstrate sufficient strategic value (“The government will set out further details in due course on the definition of strategic data centres and the additional criteria such projects will be expected to meet”).
That second test (“invest in improving local communities”) piqued my interest. The question of how to secure community benefits that go beyond what is necessary to mitigate the effects of development raises its head with so many categories of development where local communities may perceive that they will suffer adverse impacts for what policy determines to be the greater wider, public, good. Where is the dividing line between good practice and, in effect, “buying a planning permission”? The lack of clarity is difficult for all concerned. I wrote about this in my 2 June 2018 blog post Community Benefits.
As I noted back then, the Housing and Planning Act 2016 introduced a new section 75ZA into the Town and Country Planning Act that would perhaps assist, if it is ever brought into force. “Financial benefits information” would need to be included in officers’ reports, including “a list of any financial benefits (whether or not material to the application) which are local finance considerations or benefits of a prescribed description, and which appear to the person making the report to be likely to be obtained” by the authority or third parties within a description to be prescribed, as a result of the proposed development, together with “in relation to each listed financial benefit, a statement of the opinion of the person making the report as to whether the benefit is material to the application” as well as any other prescribed information about each listed financial benefit.
10 years on now, section 75ZA still hasn’t been brought into force. Might now be a convenient moment?
Simon Ricketts, 30 October 2026
Personal views, et cetera
